The US has a long way to go before the economy returns to full health, despite hopeful signs, Ben Bernanke told the House budget committee today. “Recovery will only gradually gain momentum and that economic slack will diminish slowly,” the Fed chairman said. With businesses cautious, “the unemployment rate is likely to rise for a time, even after economic growth resumes”—which he still believes could happen at year’s end, CNNMoney reports.
Weights on consumer spending include “the weak labor market, the declines in equity and housing wealth that households have experienced over the past two years, and still-tight credit conditions,” Bernanke said. He pointed to the long-term picture: America must “begin planning now for the restoration of fiscal balance,” he said. “Near-term challenges must not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances.”