March 1, 2012- On Wednesday, Ben Bernanke the Chairman of the Federal Reserve, warned the U.S. Congress that unless the growth in the economy speeds up, high unemployment would not continue to fall. However, he did not mention any further help from the Fed through bond purchases.
Bernanke said, “The jobs market is nowhere near normal.” He added, “Additional improvement will require better growth in production due to demand.”
The recent quick decline in the rate of unemployment in the country to 8.3%, the lowest in three years, has taken economists by surprise because of the soft performance of the economy.
“The rate of decline in unemployment in the last year has been more rapid than many expected, given that the economy’s growth during the same period was not that strong,” said Bernanke in his conversation to the Financial Service Committee in the U.S. House.
Because Bernanke’s remarks were not upbeat and he made no commitment to a third round of quantitative easing, U.S. stocks fell. Gold was also hit hard, as it slumped 4%, it biggest drop in one day this year.
Bernanke said the recent oil price increase could raise inflation for a period and cut consumption. He said, “Prices in gasoline have increased… which likely will move up inflation temporarily and at the same time reduce the purchasing power of consumers.”