Despite recent gains, Federal Reserve Chairman Ben Bernanke has addressed what he refers to as the “significant economic challenges” that remain today in a speech to the Economic Club of New York today. “Headwinds” from reduced bank lending and the ailing labor market will continue to slow the rate of economic recovery and drive down borrowing costs.
“The flow of credit remains constrained, economic activity weak and unemployment much too high. Future setbacks are possible.” Bernanke did not give a definitive prediction of what to expect, choosing instead to present either side of the argument.
Beyond obvious concerns regarding unemployment and the unwillingness of banks to hand out loans, Bernanke discussed the possibility of the dissolution of temporary programs as a potential threat. “How the economy will evolve in 2010 and beyond is less certain,” he said “On the one hand, those who see further weakness or even a relapse into recession next year point out that some of the sources of the recent pickup--including a reduced pace of inventory liquidation and limited-time policies such as the "cash for clunkers" program--are likely to provide only temporary support to the economy.”
For now they appear to have done their job. Outside the devastated job market many signs have been in favor of recovery. Stocks which have been trading high due in part to the low interest rate that Bernanke says can be expected to continue. A government report today indicated October retail sales exceeding expectation with a 1.4% rise and manufacturing and demand for automobiles on the up and up.
Signs are pointing in the right directions; however, Bernanke is urging Americans not to get too comfortable, as our Nation remains in a volatile, transitional period and continues to face extraordinary challenges in our recovery.
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