WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Tuesday the “technical” U.S. recession is most likely over.
The following is a verbatim transcript of his remarks on the economic outlook in answer to a question at an event sponsored by the Brookings Institution.
“Economic forecasting is not one of your most precise sciences ... and so we are forced, because policy must be forward looking, because policy has to take into account the lags of effects of monetary policy actions and so on, we have to do our very best to try to figure out what the most likely scenarios are, recognizing that day by day, as new information comes in, we may have to revise that.
“Now, having said that, I’ve seen some agreement among the forecasting community at this point that we are in a recovery, that we will see growth in the third quarter continuing and that growth will continue into 2010. But the general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession because of ongoing headwinds, including still ongoing financial and credit problems, deleveraging by households, the needs for adjustments in the economy, sectoral adjustments in the economy, the need for fiscal exit at some point -- many, many factors that will likely make the 2010 recovery moderate, and, in particular, not much faster than the underlying potential growth rate of the economy.
“And the arithmetic is that unless the economy grows significantly faster than its longer-term growth rate it will be relatively slow in creating jobs over and above those needed to employ those coming into the labor force and, therefore, the unemployment rate would tend to come down quite slowly.
“So, that’s a risk, that’s a possibility.
“Of course there are risks on both sides of that forecast. We could have a stronger recovery, we could have a weaker recovery. But if we do in fact see moderate growth, but not growth much more than the underlying potential growth rate, then unfortunately unemployment will be slow to come down. It will come down, but it may take some time.
“Obviously, that’s a very serious concern and that’s one reason why even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was. And so that’s a challenge for us and all policymakers going forward.”
Reporting by Washington bureau
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