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Bernanke Says U.s. Recovery On Track But Jobs To Lag

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http://uk.reuters.com/article/idUKTRE65837120100609

Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. economic recovery was on a solid footing but cautioned it could be years before the jobs lost during the deep recession of 2008-2009 are restored.

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"Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the demand in economic recovery," Bernanke told the House of Representatives Budget Committee.

While Bernanke said the economy had made an "important transition" where it was in less need of government support, his emphasis on the struggles of the U.S. jobs market suggested the central bank was in no rush to raise interest rates.

U.S. stocks extended gains on his remarks by midday.

The Fed slashed short term interest rates to near zero and pumped more than $1 trillion (685 billion pounds) into the financial system to pull the economy through its worst recession since the 1930s. It has promised to hold borrowing costs exceptionally low for an extended period and most analysts do not expect rate rises until 2011.

"Concern No. 1 -- and it far outstrips everything else -- is the labour market" Abby Joseph Cohen, president of Goldman Sachs' Global Market Institute, said at the Reuters Investment Outlook Summit in New York.

Bernanke told the lawmakers weak housing and commercial property markets, and budget cutting by states, were among the "significant restraints" holding back the recovery, and he said the unemployment rate would only decline slowly.

"A significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009," he said. "In this environment, inflation is likely to remain subdued."

Employers added 431,000 jobs in May but only 41,000 of those positions came from the private sector. The unemployment rate dropped but to a still-high 9.7 percent.

EYES ON EUROPE

Bernanke said the Fed is keeping a close watch on the European debt crisis for any spillover to the U.S. economy. Actions taken by European leaders show a firm commitment to calming strains and restoring stability, he said.

"If markets continue to stabilise, then the effects of the crisis on economic growth in the United States seem likely to be modest," he said.

Another drag on the U.S. recovery is the housing market, which has faltered with the expiry of federal tax credits for purchases, Bernanke said. Weekly mortgage loan data released on Wednesday showed mortgage applications slumping in the most recent week to a fresh 13-year low.

Bernanke renewed his warning that as the U.S. population ages, government pension and health care obligations to retirees put the U.S. budget on an unsustainable path.

"We should be planning now on how we meet these looming budgetary challenges," he said. However, he said now was not the time to tighten the U.S. budget, because the economy was still in need of support.

Years or decades before the jobs are recovered?

He's still calling for more govt spending as that's what's propping up the US GDP.

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http://www.nytimes.com/2010/06/10/business/economy/10fed.html?ref=business

The chairman of the Federal Reserve, Ben S. Bernanke, warned on Wednesday that “the federal budget appears to be on an unsustainable path,” but also recognized that the “exceptional increase” in the deficit had been necessary to ease the recession.

Mr. Bernanke’s comments, at a hearing of the House Budget Committee, reiterated his view that the economic recovery would most likely be slow and painful for many Americans. The Fed projects gross domestic product, the broadest measure of economic activity, to rise about 3.5 percent this year — a pace barely above that needed to keep pace with the growth in the labor force.

Mr. Bernanke noted some improvements in consumer spending, particularly on durable goods, and in business investments in software and equipment, but also cautioned that “underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down, in part, by a large inventory of distressed or vacant existing houses and by the difficulties of many builders in obtaining credit.”

The chairman offered a somewhat positive assessment of the debt crisis in Europe.

“If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest,” he said. “Although the recent fall in equity prices and weaker economic prospects in Europe will leave some imprint on the U.S. economy, offsetting factors include declines in interest rates on Treasury bonds and home mortgages as well as lower prices for oil and some other globally traded commodities.”

In response to a question, Mr. Bernanke said that he expected to the economy to grow at a “modest pace” this year .

But what is likely to be the most closely watched part of Mr. Bernanke’s testimony, on fiscal policy and his comments about the budget, will offer little comfort to either Democrats or Republicans.

“A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy,” Mr. Bernanke said, “show a structural budget gap that is both large relative to the size of the economy and increasing over time.”

During nearly two hours of questioning, Mr. Bernanke parried efforts by members of both parties to score political points, seeming to disappoint both sides. After saying “the budget deficit should narrow over the next few years,” he refused to make policy recommendations on how to do so, though he did caution against reacting hastily.

“This very moment is not the time to radically reduce our spending or raise our taxes, because the economy is still in a recovery mode and needs that support,” Mr. Bernanke told Representative Bob Etheridge, Democrat of North Carolina.

The federal deficit is screwed, in Greenspan's book his plan for the retiring babyboomers was to borrow $1tr to cover it. That plan appears to have a fatal floor not least the growth to ensure it was only $1tr appears not to be there.

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http://market-ticker.denninger.net/archives/2388-Obviously-We-Cant-Run-Deficits-Of-10%25-of-GDP-Forever.html

So said Bernanke this morning - more than once.

Oh really Ben?

Bernanke also said:

“Achieving long-term fiscal sustainability will be difficult,” Bernanke said today. “But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth.”

And...

Responding to a question, Bernanke said the recovery appears to have made an “important transition” from relying on government support and inventory rebuilding to private demand.

Uh, where?

Note that the fiscal deficit spending never decreased after 2001 - and that it was simply "stepped up" to more than double the 2003-2007 level when this last crisis hit.

Bernanke says that the primary deficit needs to be reduced to ~2%. Ok, again, how? We never got there from 2002 onward, so what sort of "credible" plan do you think will be presented to do it now?

To get the deficit down to that figure we would have to increase tax collections (not rates) or cut spending in a combined $1.1 trillion.

It'll never happen until the "someones" who are loaning us money shred Treasury's credit card, and when that happens the result will be an instantaneous cut-off of the entitlement tit to which a full 30% of the government has become habituated.

Good luck.

See link for chart.

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I think the 10-15 million jobs that disappeared are gone and never coming back. Nor are new jobs going to come and fill their place.

But the good news is the game goes on! The economy is growing again. Its just a game with 140 million players instead of 155 million players.

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A recovery without new jobs isn't a recovery at all.

Everyone knows they can (and do) manipulate the GDP figure to some extent by money printing / government spending, so GDP apparently growing while people are still being sacked ain't fooling anyone.

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Bernanke is past caring...he knows the truth. he just lies. you could see it in his eyes.

BP must be upsetting a lot of Bilderberg directions.

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I think the 10-15 million jobs that disappeared are gone and never coming back. Nor are new jobs going to come and fill their place.

But the good news is the game goes on! The economy is growing again. Its just a game with 140 million players instead of 155 million players.

The US has to create 1.5m additional jobs a year just to keep pace with rising demographics

Figures for April 2010 (last i have seen) show broad measure unemployment rate of 17.1% :o

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Bernanke is a complete loony. Here is a selection of his words of wisdom ...

March 28, 2007: “The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”

May 17, 2007: “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

Feb. 28, 2008, on the potential for bank failures: “Among the largest banks, the capital ratios remain good and I don’t expect any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.”

June 9, 2008: “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

July 16, 2008: Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.”

Question: Why does anyone listen to this guy anymore? He has zero credibility.

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The US has to create 1.5m additional jobs a year just to keep pace with rising demographics

Figures for April 2010 (last i have seen) show broad measure unemployment rate of 17.1% :o

Yes, that demographics has to be factored in. I think the days of the US adding net jobs is over. The aughties were the first decade in American history where they went out the decade with less jobs than they went in.

The population grew from ~280 million to ~308 million during the decade but at the end there was less jobs.

My prediction for the new decade the teens is the number of full time equivalent jobs will decline by 10%. From 140 million to ~125 million. While the population increases to ~335 million.

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  • 260 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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