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

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.

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