Skip to Content

Bernanke between the lines: We're in for the mother of all jobless recoveries

Text SizeAAA

Filed under: Economy

More

Given all the crazy, extraordinary stuff the Federal Reserve has been dragooned into doing in the last year ("quantitative easing," anyone?), it's easy to forget that it has only two, very simple mandates: price stability and full employment. Reading between the lines of Federal Reserve Chairman Ben Bernanke's speech Monday, it's clear the Fed will utterly fail on the second part of its directive for years to come.

In other words, we're in for the mother of all jobless recoveries. Indeed, the best thing Bernanke could say about the unemployment situation is that it "may be getting worse more slowly."

Give the Fed chief this, however: He is remarkably consistent. That's not a knock on the guy -- no one wants a bipolar central banker -- but the more Bernanke makes the same points again and again, the more it's clear U.S. workers are doomed for a good long while.

Here are some of the distressing points Bernanke made again Monday at The Economic Club of New York: The official unemployment rate stands at 10.2%. (It's more like 17.5%, by the way, if you count the people who've given up looking for work.) About 8 million folks have seen their jobs in the private sector go poof in the last two years. And worst of all, gross domestic product needs to grow 2.5% a year just to absorb the 100,000 people entering the job market every month.

Now put that in the context of this forecast: Economists, on average, expect GDP to grow just 2.9% in all of 2010, according to The Wall Street Journal's economic forecasting survey. That's what Bernanke means when he says growth looks to be "moderate" next year.

No wonder the unemployment rate is forecast at 10.3% by the end of this year at still be 9.8% at the end of next year. Super-bear David Rosenberg, chief economist and strategist for Canada's Gluskin Sheff, sees unemployment perhaps topping out at, gulp, 13%.

Bernanke said the economy should continue to grow in 2010, but "important headwinds" will restrain the recovery, namely, the weak job market and continued tight credit for small businesses and households. Foreclosure rates will remain high, as well.

As Bernanke likes to say, employment gains may be "modest" early in the expansion. It seems the New Normal is also rewriting the dictionary. "Modest" now serves as a synonym for "near hopeless," too.

Reader Comments (Page 1 of 7)

Add your comments

Please keep your comments relevant to this blog entry. Email addresses are never displayed, but they are required to confirm your comments.

When you enter your name and email address, you'll be sent a link to confirm your comment, and a password. To leave another comment, just use that password.

To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br /> tags.

Interest Rates

5/1 ARM4.06%APR: 3.75%
30 Yr.
Fixed Mort.
5.03%APR: 5.16%
$30K
HELOC
8.00%APR: 0.00%
30 Mo
New Car Loan
6.77%APR: 0.00%
1 Yr. CD1.57%APR: 1.58%
DailyFinance Writers
Melly Alazraki Melly Alazraki Financial writer and analyst
James Altucher James Altucher Financial columnist
Jeff Bercovici Jeff Bercovici Media columnist
Jonathan Berr Jonathan Berr Financial writer and media columnist
Mercedes Cardona Mercedes Cardona Retail reporter
Tim Catts Tim Catts Financial writer
Peter Cohan Peter Cohan Author, venture capitalist and financial writer
Carrie Coolidge Carrie Coolidge Financial writer
Lita Epstein Lita Epstein Financial writer
Sam Gustin Sam Gustin Technology Writer
Nikhil Hutheesing Nikhil Hutheesing Tech and investing editor
Joseph Lazzaro Joseph Lazzaro Markets and economics writer
Latif Lewis Michelle Leder Financial Columnist
Latif Lewis Latif Lewis Business news editor and management columnist
Anthony Massucci Anthony Massucci Senior writer and tech columnist
Doug McIntyre Doug McIntyre Business and investing news writer and editor
Michael Mercurio Michael Mercurio Managing Editor
Todd Pruzan Todd Pruzan Features editor
Michael Rainey Michael Rainey Editor and economics writer
Alex Salkever Alex Salkever Senior technology writer
David Schepp David Schepp Business News reporter
Matthew Scott Matthew Scott Investing reporter and editor
Dan Solin Daniel R. Solin Author, investment advisor and retirement expert
Amey Stone Amey Stone Executive editor
Bruce Watson Mark Svenvold Columnist, renewable energy
Russel Turk, M.D. Russell Turk, M.D. Healthcare policy columnist
Bruce Watson Bruce Watson Features Writer
my portfolios

Find out why more people track their portfolios on AOL Money & Finance than anywhere else.

Create a New Portfolio My Portfolios

Daily Finance Partners

More from the Weblogs Network