Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that a host of indicators show the U.S. economic recovery began in the second half of last year, but joblessness will grind on for some time.
Improvements in consumer spending, rising capital spending and healthier financial markets suggest that growth in private demand will be enough to maintain an expansion even as the support from government fiscal policy diminishes, the fed chief said.
"On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters," Bernanke testified before the U.S. Congress Joint Economic Committee.
Consumer spending increased in the first two months of this year, Bernanke said, and going forward it should be aided by a gradual pickup in jobs and earnings, as well as the recovery in household wealth and some improvement in the availability of credit. Also encouraging, business spending on capital equipment and software increased at a solid pace again in the first quarter.
However, the nation's unemployment rate, currently at 9.7%, will remain elevated, Bernanke said. "If the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8.5 million jobs that were lost during the past two years," he said. "I am particularly concerned about the fact that, in March, 44% of the unemployed had been without a job for six months or more."
Significant drags on economic recovery continue to be the weak housing and construction markets, as well as "the poor fiscal condition" of many state and local governments, Bernanke said.
The fed chief also urged lawmakers move decisively on reining in runaway budget deficits. Said Bernanke: "Addressing the country's fiscal problems will require difficult choices, but postponing them will only make them more difficult."