Another jobless recovery?

Wednesday, July 22
Posted 11 a.m. Eastern

Fed Chairman Ben Bernanke’s appearance before the House Financial Services Committee yesterday lacked any unexpected revelations. One point in his prepared remarks did catch my attention, however.

“Although the unemployment rate is projected to peak at the end of this year, the projected declines in 2010 and 2011 would still leave unemployment well above FOMC participants’ views of the longer-run sustainable rate.”

Reading between the lines, Bernanke seems to suggest we’re in for another jobless recovery. My own opinion is that it will be the mother of all jobless recoveries. Sure hope I’m wrong.

Regarding the economy: On July 31, the initial estimate of second quarter economic output, affectionately known as Gross Domestic Product, or GDP, will be released. There is a possibility that the economy, either based on initial estimates or subsequent revisions, will eke out some growth.

Now, let’s not get too far out over our skis but be cautious about interpreting this if it should come to pass. Here’s why: Any growth posted by the U.S. economy will largely be due to a shrinking trade deficit, as imports (what we buy) have fallen much faster than exports (what we sell). So bottom line, any growth in the U.S. economy during the second quarter is more testament to the resilience of foreign consumers than it is American consumers.

For more of Greg McBride’s posts, go to: Fed Blog: Making sense of the Federal Reserve.