10 Jun 2010

Years before lost US jobs restored - Bernanke

11:02 am on 10 June 2010

Federal Reserve chairman Ben Bernanke says the US economic recovery is on a solid footing, but cautioned it could be years before the jobs lost during the recession are restored.

Dr Bernanke says the recovery's reliance on government spending will probably diminish over time, while increasing private demand would take over the job of stimulating growth.

In the last two years, 8.5 million jobs were lost in the United States.

Dr Bernanke said it would take time for the jobless rate, now 9.7%, to reduce.

He indicated the Fed would be in no rush to raise interest rates.

The Fed predicts that the US economy will grow by 3.5% this year.

Dr Bernanke also said he was confident the United States would emerge relatively unscathed from the debt problems in Greece, Portugal and elsewhere in Europe.

If markets continue to stabilise, he said the effects of the crisis on economic growth in the US seem likely to be "modest".

Dr Bernanke also urged Congress and the White House to begin planning to trim the US budget deficit - which reached $US1.4 trillion last year.

He said not doing so could dent the economy in the long term and added that Europe's debt problem was a reminder of the need for countries to get their finances under control.

Beige book

Meanwhile, the Fed's "beige book", an anecdotal report on economic conditions in 12 regions, says the economy strengthened modestly last month in all areas studied, even as worries about Europe's debt crisis dented confidence.

The BBC reports it is the first time this has happened since December 2007, just before the recession began.

Manufacturing and retail sales improved while tourism also grew.

However, the commercial property market remained weak and job market conditions improved only "slightly".