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Bernanke: US on a broad recovery, but job losses too high
Published in Saudi Press Agency on 16 - 11 - 2009

US Federal Reserve Chairman Ben Bernanke was hopeful Monday that the country"s economic recovery would continue
beyond the "temporary factors" such as public spending that have
driven growth in the last few months, reported the dpa.
The central bank head rejected the view of some economists that
the United States was headed for another recession next year, but he
warned that unemployment remained far too high and means a recovery
will occur only at a modest pace.
"My own view is that the recent pickup reflects more than purely
temporary factors and that continued growth next year is likely,"
Bernanke told the Economic Club of New York.
"However, some important headwinds - in particular constrained
bank lending and a weak job market - likely will prevent the
expansion from being as robust as we would hope," he said.
The world"s largest economy grew at an annual rate of 3.5 per cent
in the third quarter, signalling that the US has emerged from its
deepest recession in decades. But unemployment is still rising: The
US jobless rate hit 10.2 per cent in October, the highest in 26
years.
"The best thing we can say about the labour market right now is
that it may be getting worse more slowly," Bernanke said, adding that
the jobless rate would likely remain high through the end of 2010.
The economic recovery has so far been driven by massive government
spending - such as the popular cash-for-clunkers programme to boost
car sales - and by private companies unloading excess inventories
that were built up during the recession.
But Bernanke also pointed to signs of "fundamental improvements"
in consumer spending, the housing market and financial conditions,
which led him to believe the recovery will continue even once the
temporary measures come to an end.
However, the financial sector"s uneasy stabilization would
continue to put pressure on the wider recovery. The credit crisis,
which nearly brought Wall Street to collapse in September 2008, is
still making banks reluctant to restart lending.
"Reduced bank lending may well slow the recovery by damping
consumer spending, especially on durable goods, restricting the
ability of some firms to finance their operations," Bernanke said.
Firms have started hiring temporary workers - a sign of recovery -
but many were also finding ways to sharply boost their productivity
with fewer employees.
Bernanke was confident that companies would be forced to start
hiring again as consumer demand improves, but he warned the growth
will not be fast enough to make a significant dent in the high
unemployment rate.
--SPA


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