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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

February 29, 2012 at 9:58 AM

What Ben said to worry the bulls

Looking through Federal Reserve Chairman Ben Bernanke’s remarks to the House Financial Services Committee this morning, here’s the cheat sheet you need to know:

“The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high.”

“…the fundamentals that support (household) spending continue to be weak: Real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers. Consumer sentiment, which dropped sharply last summer, has since rebounded but remains relatively low.”

“In the housing sector, affordability has increased dramatically as a result of the decline in house prices and historically low interest rates on conventional mortgages. Unfortunately, many potential buyers lack the down payment and credit history required to qualify for loans; others are reluctant to buy a house now because of concerns about their income, employment prospects, and the future path of home prices. On the supply side of the market, about 30 percent of recent home sales have consisted of foreclosed or distressed properties, and home vacancy rates remain high, putting downward pressure on house prices. “

“…real export growth, while remaining solid, slowed somewhat over the same period as foreign economic activity decelerated, particularly in Europe.”

“The members of the Board and the presidents of the Federal Reserve Banks recently projected that economic activity in 2012 will expand at or somewhat above the pace registered in the second half of last year…These forecasts were considerably lower than the projections they made last June.”

“With output growth in 2012 projected to remain close to its longer-run trend, participants did not anticipate further substantial declines in the unemployment rate over the course of this year.”

“…critical fiscal and financial challenges remain for the euro zone, the resolution of which will require concerted action on the part of European authorities. Further steps will also be required to boost growth and competitiveness in a number of countries.”

Bernanke acknowledged what he sees as a temporary bump in inflation, and also implied that the central bank had everything under control. I doubt this will stampede the bulls, but his points about continued slow growth and risks are enough to make the markets pause.

And Don’t Miss: Why China will have an economic crisis || Time

Today’s Econ Haiku:

ECB bailout

Gives billions to euro banks

Euro poor, tough luck

Comments | More in Federal Reserve, Stock market


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