THE ECONOMY – Another perspective

WASHINGTON (Reuters) 9-15-09 – Federal Reserve Chairman Ben Bernanke said on Tuesday that the worst U.S. recession since the Great Depression was probably over, but the recovery would be slow and it would take time to create new jobs.
“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,” Bernanke said at the Brookings Institution, a Washington think tank.
In declaring the recession over, Bernanke sounded a slightly more upbeat tone than in late August when he had said simply that prospects for a return to growth were good.  However, he cautioned that growth next year would probably be sluggish and that unemployment would only fall slowly.
“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,” Bernanke said, citing tight credit conditions and other economic restraints.
He spoke on the one-year anniversary of the collapse of Lehman Brothers investment bank, an event that sparked a global financial panic, and a week before Fed officials meet to review their policy options.
The Fed — the U.S. central bank — slashed benchmark interest rates to near zero in December and has been buying mortgage-related securities and longer-term U.S. Treasury debt to give the economy a lift. Bernanke, in a nod to recent relatively upbeat economic signals, said it was possible the recovery could be stronger than expected, but cautioned that it could also be weaker.
“There are risks on both sides of that forecast,” he said. “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.”
Bernanke’s comments implicitly acknowledged the possibility of a stronger-than-expected “V-shaped” U.S. recovery. The latest Blue Chip survey of economists predicts that growth will expand by a brisk 3 percent annual rate in the third quarter.