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U.S. Economic Recovery Continues, Job Rates Improve

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The U.S. economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually, Federal Reserve Chairman Ben Bernanke says.

“I am very confident that in the long run, the U.S. will return to being the most productive, one of the fastest-growing and dynamic economies in the world. It hasn’t lost any of the basic characteristics that made it the preeminent economy in the world before the crisis, and I think we will return to that status as we recover,” Bernanke said April 27 in a news conference on the economy. The press event marks the first time a Federal Reserve chairman, the country’s central banker, has taken questions from the media immediately following monetary policy decisions.

Bernanke highlighted improving conditions in the labor market: The unemployment rate decreased and employment increased in March.

“New claims for unemployment insurance and indicators of hiring plans are also consistent with continued improvement,” he said.

Bernanke said the unemployment rate for 2011 is now expected to come in between 8.4 percent and 8.7 percent, down from earlier projections that it would remain between 8.8 percent and 9.0 percent.

The chairman said he believes the rate of financial recovery will also continue to improve. He said that while household spending and investment has expanded, supporting the recovery, nonresidential spending is still weak and the housing sector remains depressed.

Bernanke spoke after meeting with the Federal Open Market Committee, the Federal Reserve’s monetary policy decisionmaking body. The committee announced earlier April 27 that it will maintain its policy of reinvesting principal payments from its securities holdings and said it will complete its planned purchases of $600 billion of long-term Treasury securities by the end of June.

“Looking ahead, committee participants expect a moderate recovery to continue through 2011, with some acceleration of growth projected for 2012 and 2013,” Bernanke said. Specifically, he said the committee’s projections for output growth are between 3.1 percent and 3.3 percent for 2011, rising to between 3.5 percent and 4.2 percent for 2012 and 2013.

But projections for gross domestic product estimates, the broadest measure of the nation’s economic health, have dropped from earlier estimates. The committee now expects the GDP to grow between 3.1 percent and 3.3 percent in 2011, down from its January estimate of between 3.4 percent and 3.9 percent growth for 2011.

Bernanke said the lowered projections reflect a slower than anticipated rate of growth in the first quarter of 2011. But he said the slower growth appears to be “transitory,” attributing it to lower defense spending, weaker exports and a lack of momentum in construction.

Additionally, Bernanke said the recent rise in commodity prices, such as gasoline, is likely to be temporary, with inflation to decline toward acceptable levels as the recent increases begin to ease.

In a statement released April 27, the Open Market Committee said it will “continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery,” including helping to ensure that inflation rates remain within the standard range.