Economic Storm Continues: Bernanke Says ‘Recovery Even Weaker Than We Had Thought’

August 27, 2011 - 2:04 PM

( - Speaking in Jackson Hole, Wyo., yesterday at an economic symposium sponsored by the Federal Reserve Bank of Kansas City, Federal Reserve Chairman Ben Bernanke said that the economic recovery in the United States had proved to be “even weaker” than the Federal Open Market Committee had originally thought it was.

Bernanke also reiterated that the committee had recently lowered its expectations for economic growth in the coming quarters.

“[I]t is clear that the recovery from the crisis has been much less robust than we had hoped,” Bernanke said. “From the latest comprehensive revisions to the national accounts as well as the most recent estimates of growth in the first half of this year, we have learned that the recession was even deeper and the recovery even weaker than we had thought; indeed, aggregate output in the United States still has not returned to the level that it attained before the crisis. Importantly, economic growth has for the most part been at rates insufficient to achieve sustained reductions in unemployment, which has recently been fluctuating a bit above 9 percent.”

In the first quarter of this year, according to the federal government’s Bureau of Economic Analysis, Gross Domestic Product grew at only 0.4 percent. In the second quarter it grew at only 1.0 percent.

Bernanke reiterated the conclusion the Federal Open Market Committee announced after its August 9 meeting that it believed economic growth in the near future would not be as strong as it had previously expected.

“As I mentioned earlier, the recent data have indicated that economic growth during the first half of this year was considerably slower than the Federal Open Market Committee had been expecting, and that temporary factors can account for only a portion of the economic weakness that we have observed,” said Bernanke. “Consequently, although we expect a moderate recovery to continue and indeed to strengthen over time, the Committee has marked down its outlook for the likely pace of growth over coming quarters.”

After its Aug. 9 meeting, the Federal Open Market Committee issued a statement that it expected the economy to recover at a “slower pace” than it had previously anticipated and that the “downside risks” to the U.S. economy had increased.

“The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate,” the FMOC said in its Aug. 9 statement. “Moreover, downside risks to the economic outlook have increased."