10 June 2010

U.S. Economy Continues Growing at Moderate Pace

Federal Reserve Chairman Ben Bernanke testified June 9 before the House Budget Committee on the health of the U.S. economy.

By Merle David Kellerhals Jr.
Staff Writer

Washington — The U.S. economy continues to grow at a moderate pace, but the unemployment rate will likely see only a “slow reduction” over time, Federal Reserve Chairman Ben Bernanke says.

Testifying before the House of Representatives Budget Committee June 9, Bernanke said the gross domestic product, the broadest measure of national economic activity, is expected to grow at a rate of approximately 3.5 percent in 2010 and at a somewhat faster pace in 2011, based on calculations made by the Federal Reserve Board and the nation’s Reserve Bank presidents. The U.S. Federal Reserve, with headquarters in Washington, is the nation’s central bank, and there are 12 Federal Reserve district banks across the United States.

“The economy … appears to be on track to continue to expand through this year and next,” Bernanke said. In the wake of the steepest recession since the Great Depression of the 1930s, he said, the economy has been supported by stimulative monetary policy and concerted efforts by the federal government to stabilize the financial system.

As the support to economic growth from government stimulus policies diminishes during 2010, overall economic activity should sustain the recovery that began in the middle of 2009, Bernanke said.

However, he said that growth pegged at 3.5 percent over 2010 will not be sufficient to stimulate a broad recovery in the nation’s unemployment rate, which now stands at 9.7 percent, with approximately 15 million unemployed Americans. According to the Labor Department’s latest monthly employment report, private companies in May added only 41,000 new jobs, the fewest since the start of the year. The largest increase in employment occurred because the federal government is providing temporary jobs for census takers nationwide.

Bernanke told committee members that since late last year the financial markets have been concerned by the ability of Greece and a number of other euro-area countries to manage their sizable budget deficits and high levels of public debt. European leaders have instituted a broad range of strong corrective measures, he said.

“If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest,” Bernanke said.

On the federal budget deficit, Bernanke warned Congress that over the long term the federal budget appears to be on an unsustainable path.

“To avoid sharp, disruptive shifts in spending programs and tax policies in the future, and to retain the confidence of the public and the markets, we should be planning now how we will meet these looming budgetary challenges,” Bernanke said. “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.”

(This is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://www.america.gov)