Storms start to move out of Minnesota, continue for western Wisconsin

MPR News helps you turn down the noise and build shared understanding. Turn up your support for this public resource and keep trusted journalism accessible to all. 

Turn Up Your Support

Federal Reserve Chairman Ben Bernanke said
Tuesday the worst recession since the 1930s is probably over,
although he cautioned that pain -- especially for the nearly 15
million unemployed Americans -- will persist.


      Bernanke said the economy likely is growing now, but he warned
that won't be sufficient to prevent the unemployment rate, now at a
26-year high of 9.7 percent, from rising.


      "From a technical perspective, the recession is very likely
over at this point," Bernanke said in responding to questions at
the Brookings Institution. "It's still going to feel like a very
weak economy for some time because many people will still find that
their job security and their employment status is not what they
wish it was."


      The recession, which started in December 2007, has claimed a net
total of 6.9 million jobs.


      With expectations for a lethargic recovery, the Fed predicts
that unemployment will top 10 percent this year. The post-World War
II high was 10.8 percent at the end of 1982.


      Some economists say it will take at least four years for the
jobless rate to drop down to a more normal range of 5 percent.


      Even if the economy logs "moderate" growth in 2010,
unemployment is likely to stay elevated, Bernanke suggested.


      "Unfortunately, unemployment will be slow to come down. It will
come down but it may take some time," he said. "Obviously, that's
a very serious concern."


      Drugmaker Eli Lilly & Co. said Monday that it will cut 5,500
jobs over the next two years, 14 percent of its work force, as it
restructures the company into five units.


      Still, Bernanke's declaration that the recession likely ended
marked his most optimistic assessment yet of the economy. And his
remarks came on the same day that the government report that retail
sales jumped 2.7 percent in August, the most in more than three
years.


      Last month, Bernanke told a Fed conference in Wyoming that
economic activity appears to be "leveling out" after declining
sharply at the end of last year and into the beginning of this
year. He also said that the global economy was just "beginning to
emerge" from recession.


      Bernanke's speech to at Brookings was identical to the one he
delivered at the Fed conference.


      Analysts predict the U.S. economy is growing in the current
quarter, which ends Sept. 30, at an annual rate of 3 to 4 percent.
It shrank at a 1 percent pace in the second quarter, much slower
than in previous quarters.


      Bernanke said the economy is coping with "ongoing headwinds,"
including hard-to-get-credit for consumers and businesses, and
households saving more, spending less and trimming their debt.
Those forces can weigh down the recovery, he said.
     

 Other analysts worry that falling house prices could hamper the
broader rebound, especially if they cause consumers to tighten
their belts.


      While many on Wall Street have been encouraged by early signs of
stabilization in U.S. home prices and hope the housing market may
have hit bottom, others aren't so sure.


      Deutsche Bank analyst Karen Weaver on Tuesday predicted that
national home prices won't stop sliding until next summer and
likely will fall another 10.5 percent from this summer's levels.


Bigger declines are expected in cites like New York, Salt Lake
City, Fort Lauderdale, Fla., and Baltimore.


      Against that backdrop, Michael Williams, dean of Touro College's
Graduate School of Business, disagreed with Bernanke's assessment
that the recession probably ended. Williams maintains that troubles
in both the residential and commercial real-estate markets are
prolonging the downturn.


      Williams believes the economy is still shrinking and won't turn
around until later next year. "This recession lingers," he said.


      Meanwhile, Bernanke said he is optimistic that Congress will
enact a revamp of the nation's financial rule book to prevent a
future crisis from happening.


      "I feel quite confident that a comprehensive reform will be
forthcoming," Bernanke said.


      President Barack Obama on Monday urged Congress to enact
legislation this year.


      "This has just been too big a calamity and too serious a
problem" over the past year, with the near meltdown of the U.S.
financial system, for Congress not to take action, Bernanke added.


      He spoke one year after Lehman Brothers filed for bankruptcy,
the largest in U.S. history. Its collapse roiled financial markets
worldwide, nearly halted the flow of credit and almost brought down
the entire U.S. financial system.

Gallery

Obama lectures Wall St. on Lehman anniversary

Economists try to sketch out Minnesota's job future

Nation's unemployment rate hits highest point since 1983

Federal Reserve Chairman Ben Bernanke said
Tuesday that the worst recession since the 1930s is probably over.

Bernanke: Recession is 'very likely over'

Go Deeper.

Like this?