Bernanke: Economy “Very Likely” In Recovery

Fed Chairman Ben Bernanke said earlier this week that the recession is “very likely over.” From the WaPost:

With consumers flooding auto dealerships to take advantage of the “Cash for Clunkers” program, total retail sales rose 2.7 percent over the previous month, the Commerce Department said. What surprised analysts was that even excluding auto sales and gasoline, retail sales rose a solid 0.7 percent.

That eased fears, shared by many economists, that the bump in auto sales would come at the expense of spending on other goods and services. In August, at least, people did not scrimp on other purchases even while buying new automobiles.

Bernanke, meanwhile, acknowledged what a growing chorus of analysts has concluded: That the economy bottomed out this summer and is now expanding, at least as measured by gross domestic product. Many forecasters say the nation’s output of goods and services is now rising at an annual rate of 3 percent or higher. But the Fed chairman also described continued weakness in the job market.

“Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time, as many people will still find that their job security and their employment status is not what they wish it was,” Bernanke said in response to a question after a speech at the Brookings Institution.

I agree that a lot of signs point towards a recovering economy. I don’t think auto sales are the sign to point to though, since the Cash for Clunkers program distorted real demand in the marketplace. Spending from the stimulus will also distort the GDP numbers. So real growth, when it’s all said and done, will likely be significant below 3 percent.