Federal Reserve chairman warns that US job market remains fragile and says Fed is prepared to step in to help recovery
The Dow Jones closed up 160 points after his comments on Monday and continued to rise early Tuesday. Photograph: Andrew Burton/Getty Images
US stock markets have been boosted after Federal Reserve chairman Ben Bernanke said low interest rates are still needed to support the fragile recovery in the job market.
Despite a decline in home prices and consumer confidence, the US markets continued to hold their rally early on Tuesday as investors cheered a Bernanke speech in which he emphasised the Fed's determination to continue supporting the recovery.
At a a speech to the National Association for Business Economics on Monday, Bernanke warned that the job market remained fragile, despite official reports showing consistent improvement in recent months.
The US economy has added an average 245,000 jobs over the past three months, and the number of people applying for initial unemployment benefits slipped to a four-year low last week.
The recovery has been seen as a major boost to president Barack Obama's re-election campaign. But Bernanke warned there may be trouble ahead, and said the Fed was prepared to step in to help the recovery.
"We have seen some positive signs on the jobs front recently, including a pick-up in monthly payroll gains and a notable decline in the unemployment rate. That is good news. At the same time, some key questions are unresolved," Bernanke said.
"Further significant improvements in the unemployment rate," he said, "will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies."
The Dow Jones industrial average closed up 160 points after his comments on Monday and continued to rise early Tuesday.
The rally continued despite figures that showed US home prices fell in January from a month earlier. The average home price is now back to early 2003 levels, according to Standard & Poor's Case-Shiller home-price index.
A widely watched measure of consumer confidence also fell. The Conference Board index of consumer attitudes fell to 70.2 in March from 71.6 the month before.
Overall, Bernanke painted a somewhat gloomy picture of the recovery in the US jobs market. He said the recent positive jobs numbers seemed "somewhat out of sync" with the overall pace of economic expansion, and that a close look revealed some worrying trends.
The number of people working and total hours worked are still significantly below pre-crisis peaks, said Bernanke. He said he was particularly concerned by the large number of people who have been unemployed for more than six months.
"Notwithstanding these welcome recent signs, the job market remains quite weak relative to historical norms," he said. "After nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak."
What's your take on the US job market? Is the recovery really here or are we headed for another downturn? Whether your unemployed, recently employed or have had a job for a while, we want to hear from you in our latest people's panel.
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