Washington — Federal Reserve Chairman Ben Bernanke says the U.S. economy is recovering and long-term prospects remain strong despite reports showing slower-than-expected growth for the first half of 2011.
“Although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years,” Bernanke said. He added that while it may take time, the United States can “reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals.”
The chairman spoke August 26 at a conference of central bank leaders from around the world held each year in Jackson Hole, Wyoming. His remarks followed the Commerce Department’s report earlier in the day that growth in the U.S. economy from April to June came in at an annual rate of just 1 percent, a downward revision from the government’s previous 1.3 percent growth estimate.
Increases in fixed investment, exports and federal government spending contributed to second-quarter growth, according to the report. Gains were partly offset by drops in state and local government spending, private investment and an increase in imports.
The lowered second-quarter figures follow a July revision of first-quarter growth down from 1.9 percent to 0.4 percent, indicating a near stagnation of the U.S. economy.
Growth of the economy is a primary indicator of economic health and is measured by the gross domestic product (GDP), or the country’s total output of goods and services.
Bernanke said that although he maintains a positive long-term outlook for the U.S. economy, it is clear that the economic recovery has been “much less robust than we had hoped.”
He said the latest comprehensive revisions and the most recent estimates of growth for the first half of 2011 show the economic crisis was deeper — and the recovery weaker — than economists predicted. He said production in the United States still has not returned to pre-crisis levels and that growth has been too slow to replace jobs lost in the economic downturn.
In its latest report, the Commerce Department said the U.S. economy added 117,000 new jobs from June to July as the unemployment rate ticked down slightly to 9.1 percent. Bernanke said the United States is suffering from an “extraordinarily high level of long-term unemployment,” with nearly half of the unemployed having been out of work for more than six months. He called on policymakers to make putting Americans back to work a top priority, as “minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.”
For its part, Bernanke said, the Federal Reserve will continue to monitor economic conditions and carefully adjust its policies accordingly. He said the Federal Open Market Committee, the policymaking arm of the Federal Reserve, will meet in late September to discuss all options to support economic growth.
The committee last met August 9 when it announced it would keep the target range for the federal funds rate — the rate banks are charged for overnight loans — at 0 percent to 0.25 percent. The committee said the decision was in response to increased threats to the economy and fluctuating inflation rates.
Bernanke did not indicate whether the committee would take additional measures to stabilize the economy.