Bernanke: More Bad News for Job Market

Fed Chief Ben Bernanke came to Capitol Hill Tuesday with good news and bad news. He got to the bad news first, telling the House Financial Services Committee that although the rate of job losses in America is slowing, the job market has not yet hit rock bottom and will get worse until the end of this year.

In his testimony to the committee, Bernanke said, "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 (Federal Open Market Committee) participants' views of the longer-run sustainable rate."

Rep. Adam Putnam (R-Fla.) asked if the U.S. should brace for a "jobless recovery," when the stock markets and companies' balance sheets recover, but jobs do not return. Bernanke wouldn't call it a "jobless recovery," but said, "We expect positive job creation end of this year, but it should take some time for the employment market to return to normal."

Bernanke later said that the cost of health care must be cut to prevent it from outstripping Americans' income and savings in the future.

Bernanke was asked if he agrees with the head of the Congressional Budget Office that the Democrats' health care proposals will make the overall economy weaker. He did not comment specifically on the plans, but did say, "If fiscal policy stays on an unsustainable path, I do agree with it. Yes."

The news wasn't all bad this morning. Bernanke said that even though the federal government has significantly increased its borrowing, families have increased their personal savings rate so much that American borrowing from abroad had actually decreased this year.

Rep. Ed Perlmutter (D-Colo.) asked if Americans' new sense of thrift could inadvertently hurt the country's economic recovery. Said Bernanke: "The economy doesn't grow as fast (with a higher savings rate), but I would not advise families to worry about that. They need to worry about their own finances."