Federal Reserve Chairman Ben Bernanke rained on the recovery parade Monday, warning that it is still too soon to know if the recovery is sustainable. He also predicted that the job market will continue to be weak heading into next year, despite a positive jobs reading on Friday.
The economy is still facing resistance on many levels, most notably the weak jobs market and cautious consumers Bernanke said.
On Friday a report showed that employers shed 11,000 jobs just in the month of November: the fewest since the recession began two years ago, and a much better reading than the 125,000 that economists expected.
But even though it seems employment may be at a tipping point, the Fed stuck by their forecast that employment will hover in the 9.3 to 9.7 percent range in 2010, and it could take five to six years for levels to return to normal.
For this reason, Benanke said he is still committed to keeping the fed funds rate at near zero levels for an “extended period” until the recovery has taken hold.
Many economists fear however, that as federal stimulus begins to dry up near the end of 2010, that a “double dip” recession could occur. Without the crutch of federal spending, the economy could again slip back into a recession, a worse nightmare scenario for policy makers. Bernanke could not guarantee that it would not happen again, saying a “vigorous snapback” was not likely.