Browse by Tags

Federal Reserve Chair Ben Bernanke 's appearance before Congress yesterday seems to have had an effect on markets in the US and abroad . With the US economy as it now stands, Bernanke spoke in measured terms about recovery, with jobs and consumer spending as leading reasons for the üncertain"future": An important drag on household spending is the slow recovery in the labor market and the attendant uncertainty about job prospects. After two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, a pace insufficient to reduce the unemployment rate materially. In all likelihood, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. Moreover, nearly half of the unemployed have been out of work for longer than six months. Long-term unemployment not only imposes exceptional near-term hardships on workers and their families, it also erodes skills and may have long-lasting effects on workers' employment and earnings prospects. In the business sector, investment in equipment and software appears to have increased rapidly in the first half of the year, in part reflecting capital outlays that had been deferred during the downturn and the need of many businesses to replace aging equipment. In contrast, spending on nonresidential structures--weighed down by high vacancy rates and tight credit--has continued to contract, though some indicators suggest that the rate of decline may be slowing. Both U.S. exports and U.S. imports have been expanding, reflecting growth in the global economy and the recovery of world trade. Stronger exports have in turn helped foster growth in the U.S. manufacturing sector. Inflation has remained low. The price index for personal consumption expenditures appears to have risen at an annual rate of less than 1 percent in the first half of the year. Although overall inflation has fluctuated, partly reflecting changes in energy prices, by a number of measures underlying inflation has trended down over the past two years. The slack in labor and product markets has damped wage and price pressures, and rapid increases in productivity have further reduced producers' unit labor costs. Read the full speech here .

Fed Chair Ben Bernanke took to Capitol Hill yesterday to defend his record as the nation's top central banker. The White House nominated Bernanke for another term, and the Senate banking committee is his first stop in getting confirmation for another term by the Senate. He took a series of shots from Senators across the political spectrum. Jim Bunning (R-KY) told Bernanke "your time as Fed chairman has been a failure." Bernanke defended his record, and told the committee that the Fed's actions helped the nation avoid a much larger economic catastrophe: We played a central role in efforts to quell the financial turmoil, for example, through our joint efforts with other agencies and foreign authorities to avert a collapse of the global banking system last fall; by ensuring financial institutions adequate access to short-term funding when private funding sources dried up; and through our leadership of the comprehensive assessment of large U.S. banks conducted this past spring, an exercise that significantly increased public confidence in the banking system. We also created targeted lending programs that have helped to restart the flow of credit in a number of critical markets, including the commercial paper market and the market for securities backed by loans to households and small businesses. Indeed, we estimate that one of the targeted programs--the Term Asset-Backed Securities Loan Facility--has thus far helped finance 3.3 million loans to households (excluding credit card accounts), more than 100 million credit card accounts, 480,000 loans to small businesses, and 100,000 loans to larger businesses. And our purchases of longer-term securities have provided support to private credit markets and helped to reduce longer-term interest rates, such as mortgage rates. Taken together, the Federal Reserve’s actions have contributed substantially to the significant improvement in financial conditions and to what now appear to be the beginnings of a turnaround in both the U.S. and foreign economies. David Wessel , economics editor for the Wall Street Journal, has spent the last few years studying the Fed closely for his book, In Fed We Trust: Ben Bernanke’s War on the Great Panic. In a recent interview with Big Think , he spoke about how the Fed's response to the global economic crisis has largely worked, but still contains some risk and uncertainty: You can watch the full interview with Wessel here . And you can watch yesterday's Senate hearings here .