What Bernanke actually said at Brookings

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After writing my post yesterday wondering why it was news that Ben Bernanke thinks the recession is over, I discovered that the Brookings Institution has online a transcript of the Q&A in which Bernanke said it. In context, he sounds awfully unbullish. Not bearish either, but …

Bernanke’s words came in response to a question from Brookings president (and former TIME guy) Strobe Talbott. Here’s the full exchange, complete with some lame think-tank humor:

MR. TALBOTT: Mr. Chairman, I’m going to take the privilege of asking the last question and it’s about employment, or more to the point, unemployment. I do so because we’re told to expect an improvement in job statistics to be at the trailing edge of our recovery, and also, when you return to this podium a year from now to keynote our follow-up discussion, we’ll be less than two months away from the 2010 election. So could you say a little bit about the implications that you draw from our current and past experience on the employment front?

MR. BERNANKE: Well, let me just first say that economic forecasting is not one of your most precise sciences, and so everything –

MR. TALBOTT: Even here at Brookings.

MR. BERNANKE: Even here at Brookings, and so we are forced – because policy must be forward looking, because policy has to take into account the lags of effects of monetary policy actions and so on, we have to do our very best to try to figure out what the most likely scenarios are, recognizing that day by day, as new information comes in, we may have to revise that.

Having said that, I’ve seen some agreement among the forecasting community at this point that we are in a recovery, that we will see growth in the third quarter continuing, and that growth will continue into 2010.

But the general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession, because of ongoing headwinds, including still ongoing financial and credit problems, you know, deleveraging by households, the needs for adjustments in the economy, sectoral adjustments in the economy, the need for a fiscal exit at some point, many, many factors that will likely, at least based on current information, make the 2010 recovery moderate, and in particular, not much faster than sort of the underlying potential growth rate of the economy. And the arithmetic is that unless the economy grows, you know, significantly faster than its longer term growth rate, it’ll be relatively slow in creating jobs over and above those needed to employ people coming into the labor force, and therefore, the unemployment rate would tend to come down quite slowly. So that’s a risk, that’s a possibility.

Of course, there is on both sides of that forecast; we could have a stronger recovery, we could have a weaker recovery, but if we do, in fact, see moderate growth, but not growth much more than the underlying potential growth rate, then, unfortunately, unemployment will be slow to come down. It will come down, but it may take some time.