“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”
Federal Reserve Chairman Ben Bernanke, February 9, Before the Committee on the Budget, U.S. House of Representatives

Bernanke painted a relatively good picture of the economy as he testified before Congress today. He said that GDP moved higher in the second half of 2009 and would probably do so in early 2010. He added that inflation was tame.

Bernanke promoted the value of his $600 billion QE2 program. He has begun to face resistance to the plan from several other Fed members who believe it is an unnecesary use of capital which, combined with low rates, could cause new asset bubbles. Bernanke argued to the contrary that the purchase of securities has not caused upward pressure on prices. It is necessary, however, to sustain the recovery.

Bernanke’s only strong warning was about jobs. In the recent past, most of his public concern has been about the nation debt. He set that aside today to address a more pressing issue.

Bernanke clearly does not believe that a sustained recovery can be indefinitely jobless. The economy would need to add at least 250,000 private sector jobs to begin to replace those lost during the recession. Public sector jobs are likely to shrink as troubled states and municipalities cut personnel to close deficits. That means the 250,000 figure could be inadequate.

Bernanke said last month that it might take two years for the unemployment situation to substantial improve. Between the lines, the Fed chief is warning that any complete and robust recovery will not be evident until 2013.

Douglas A. McIntyre

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