Federal Reserve Chairman Ben S. Bernanke told lawmakers Wednesday that even with some good economic activity recently, the economy would be slow for a few years and unemployment will most likely stay high, according to the Washington Post.
Bernanke told the House Financial Services Committee that he recognizes the unemployment rate of 8.3 percent went down quicker than people thought it would. But there are multiple factors that will most likely push the economy down.
Consumer earnings are stagnant, borrowers are struggling to get loans, there is financial turmoil in Europe, and state and local governments continue to lay off employees, Bernanke said in his testimony, according to the Washington Post.
These challenges, and others, "have weighed on financial conditions and global economic growth, and problems in U.S. housing and mortgage markets have continued to hold down not only construction and related industries, but also household wealth and confidence," Bernanke said in his testimony.
Bernanke also noted the increasingly higher cost of gasoline is likely to impact the economy in the short term, according to the Wall Street Journal. The rise in prices at the pump could temporarily lead to higher inflation, which would diminish consumers spending. Oil prices have gone up as of late, partially due to tensions with Iran.
While the central bank will continue to keep a watchful eye on energy markets, its longer-term expectations seem to be consistent with the view that inflation will continue to be controlled, Bernanke said.
The stock market was affected negatively by Bernanke's testimony as stocks were up before his comments, but quickly went into negative territory afterward, according to CNBC.
"We're seeing a more optimistic mood about the economy, but there are still potential potholes," John Prestbo, editor and executive director of the Dow Jones Indexes, told CNBC. "The market takes two steps forward, one step back, so people will soon start to notice the progress and will be back in the frame of mind that things are getting better, which will translate into optimism."