Can Quicken Loans save Detroit?

Can Quicken Loans save Detroit?

Forbes: “Dan Gilbert is saving Detroit to help his business”

Suspect arrested in case of missing Arkansas Realtor

No word on Beverly Carter; suspect is on parole for theft

Monday Morning Cup of Coffee: Love or loathe – Reverse mortgages, Holder’s legacy

Plus, a week of critical housing and mortgage finance metrics ahoy
W S

Bernanke thinks jobs growth still years away

/ Print / Reprints /
| Share More
/ Text Size+
Despite admitting growth in the jobs market is still a few years away, Federal Reserve Chairman Ben Bernanke expects a moderately stronger pace in the economic recovery this year. Speaking before the Senate Budget Committee, Bernanke said housing remains depressed "as the overhang of vacant houses continues to weigh heavily on both home prices and construction, and nonresidential construction is also quite weak." He said the economic recovery was strong in the latter half of 2009 and early last year because of a more stable financial system, expansion of monetary and fiscal policies and "a powerful inventory cycle." But growth slowed during the final six months of 2010, as the impact of the policy initiative slowed and the debt problems in the Euro zone increased volatility in markets worldwide. Bernanke said the Federal Open Markets Committee expects U.S. unemployment to remain elevated and be near 8% in 2013. "At this rate it could take four to five more years for the job market to normalize fully," he told the senators. Earlier Friday, the Labor Department's Bureau of Labor Statistics said the economy added 103,000 nonfarm payroll jobs in December, well below most analysts' estimates that called for gains of about 200,000. Although the unemployment rate fell to 9.4%, which is the lowest level since May 2009 and down from 9.8% the in November. Bernanke said normally when unemployment is so high with expectations calling for it to remain elevated and inflation is unusually low, the FOMC would lower the federal funds rate. But that rate has been next to nothing for two years, so the Fed "has been using alternative tools to provide additional monetary accommodation." That is the $1.7 trillion bond buying program that's become known as QE2, which some members of congress and other market participants bemoan as ineffective. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, has consistently voted against the FOMC decision for months and believes QE2, in addition to handcuffing the committee's ability to make changes in monetary policy, can also eventually lead to inflation. Still, Bernanke said the "committee remains unwaveringly committed to price stability and, in particular, to maintaining inflation at a level consistent with" the Fed's dual mandate of stable inflation and maximum employment. "In that regard, it bears emphasizing that the Federal Reserve has all the tools it needs to ensure that it will be able to smoothly and effectively exit from this program at the appropriate time," Bernanke said. One analyst thinks Bernanke is answering some critics of QE2 with those remarks, and the Fed chairman has hinted at the FOMC problems communicating its policy decisions clearly in the past. "He is keen to improve the somewhat strained relations between the central bank and the new influx of Republican lawmakers," according to Paul Ashworth, chief U.S. economist with Capital Economics. "Bernanke was also pretty blunt about the challenges facing Congress." The Fed chairman urged the senators to act quickly to adopt programs to reduce the deficit. "It is widely understood that the federal government is on an unsustainable fiscal path," Bernanke said. "Yet, as a nation, we have done little to address this critical threat to our economy...I hope that, in addressing our long-term fiscal challenges, the Congress will seek reforms to the government's tax policies and spending priorities that serve not only to reduce the deficit but also to enhance the long-term growth potential of our economy." Write to Jason Philyaw.

Recent Articles by Jason Philyaw

Comments powered by Disqus