Federal Reserve Chairman Ben S. Bernanke sounded an optimistic note Tuesday that economic growth will pick up in the summer and fall after softening this spring under the weight of high gasoline prices and disruptions from the Japanese earthquake.
“Growth seems likely to pick up somewhat in the second half of the year” from the sub-par 2 percent pace in the first half, he told an International Monetary Conference in Atlanta, “with the effects of the Japanese disaster on manufacturing output likely to dissipate in coming months, and with some moderation in gasoline prices in prospect.”
The Fed chairman said he expects job growth also to accelerate once again after weakening last month. Private employers created only 84,000 jobs in May after generating more robust employment growth over 200,000 in earlier months.
“I expect hiring to pick up from last month’s pace as growth strengthens in the second half of the year,” he said, although he added that the Fed is watching developments in the job market carefully and considers a strengthening of employment to be critical for the future of the economy.
Despite “gradual progress” at creating jobs, “the jobs situation remains far from normal, with unemployment remaining elevated” at 9.1 percent. That is contributing to a lack of confidence among consumers along with an extraordinarily depressed housing market, he said.
By contrast, “the business sector generally presents a more upbeat picture,” with U.S. manufacturers and service firms benefiting from strong growth in emerging markets such as China, India and Brazil as well as a revival of growth back home, he said.
Mr. Bernanke stressed that the surge in gas, oil, wheat and other commodity prices this year was driven largely by soaring growth in demand for those goods in the emerging markets, not by overheated demand in the U.S., where consumers have been curbing their purchases of fuel and food in response to the high prices.
The global commodity price surge already has topped out, he said, confirming the Fed’s belief that the run-up in fuel prices was temporary and will subside without any further harm to the economy and the inflation rate.
With the prospect for only moderate growth this year, Mr. Bernanke cautioned against expecting too much from either the economy or the central bank as the economy recuperates from a once-in-a-century collapse in 2008 and 2009.
“The U.S. economy is recovering from both the worst financial crisis and the most severe housing bust since the Great Depression, and it faces additional headwinds ranging from the effects of the Japanese disaster to global pressures in commodity markets,” he said.
“In this context, monetary policy cannot be a panacea,” he said, but he added that the Fed will continue to guard against either a debilitating uptick in inflation or a relapse into recession and rising joblessness.