Chairman of the Federal Reserve Ben Bernanke told Rep. Paul Ryan’s (R-Wisc.) House Budget Committee Wednesday that the short-term economic outlook is very promising, but the future unemployment rate will not see such a positive trend and may, in fact, take several years to reach normal levels.
“Although the growth rate of economic activity appears likely to pick up this year, the unemployment rate probably will remain elevated for some time,” Bernanke said.
Bernanke said that although recent dippings in the unemployment rate in December and January have left the rate at 9 percent, the job market is improving at a slower rate than would be ideal in order to make substantial impacts on an unemployment rate that is widely considered one of the key indicators of a growing economy.
Citing that the private sector expanded its market by a little more than one million jobs, Bernanke conceded that “this gain was barely sufficient to accommodate the inflow of recent graduates and other new entrants to the labor force and, therefore, not enough to significantly erode the wide margin of slack that remains in our labor market.”
The decreases in the unemployment rate in the past two months are impressive and provide “some grounds for optimism” on the labor market, but Bernanke remained skeptical that the country would continue to see such significant drops.
“It will be several years before the unemployment rate has returned to a more normal level,” Bernanke said. “[But] until we see a sustained period of stronger job creation, we cannot consider the recovery to be fully established.”