Is Ben Bernanke starting to under-promise and over-deliver? You know the approach: Say you'll have something done in a week, then deliver it in five days. In the case of the Federal Reserve Chairman, he appears keen to play down some of the recent upbeat economic news by insisting that unemployment remains the big sticking point for the economic recovery.
He reiterated this point in a speech on Thursday afternoon: "[With]output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established."
If investors weren't already focused on the jobs report from the U.S. Department of Labour, due out on Friday, they certainly will be now. Economists are currently expecting private sector job gains of about 140,000, but a stronger-than-expected reading on non-manufacturing activity in January from the Institute for Supply Management is consistent with a higher figure.
However, despite pointing out the slow pace of employment growth, Mr. Bernanke actually sounded upbeat about the economy. He noted in his speech that the recovery appears to have strengthened in recent months. He even used the words "self-sustaining" - music to bullish investors' ears - to describe what might be taking hold with consumer and business spending. This is a big deal, given that consumer spending alone represents about 70 per cent of U.S. economic activity.
"Notably, we learned last week that households increased their spending in the fourth quarter, in real terms, at an annual rate of more than 4 per cent," Mr. Bernanke said. "Although a significant portion of this pickup reflected strong sales of motor vehicles, the recent gains in consumer spending look to have been reasonably broad based."
Mr. Bernanke also played down inflation concerns, arguing that while commodity prices have risen, overall inflation remains low. Over the past 12 months, ending in December, prices for all the goods and services purchased by households increased by just 1.2 per cent. Meanwhile, the core rate of inflation, which leaves out volatile food and energy items, sits at just 0.7 per cent, down from 2.5 per cent before the recession.
As a result, the Fed's stimulative monetary policy isn't going to end anytime soon.
"In sum, although economic growth will probably increase this year, we expect the unemployment rate to remain stubbornly above, and inflation to remain persistently below, the levels that Federal Reserve policy makers have judged to be consistent over the longer term with our mandate from the Congress to foster maximum employment and price stability," he said.
"Under such conditions, the Federal Reserve would typically ease monetary policy by reducing the target for its short-term policy interest rate, the federal funds rate. However, the target range for the funds rate has been near zero since December, 2008, and the Federal Reserve has indicated that economic conditions are likely to warrant an exceptionally low target rate for an extended period. As a result, for the past two years we have been using alternative tools to provide additional monetary accommodation."