Washington - US Federal Reserve Chairman Ben Bernanke was hopeful Monday that the country's economic recovery would continue beyond the "temporary factors" such as public spending that have driven growth in the last few months. The central bank head rejected the view of some economists that the United States was headed for another recession next year, but he warned that unemployment remained far too high and means a recovery will occur only at a modest pace.
"My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely," Bernanke told the Economic Club of New York.
"However, some important headwinds - in particular constrained bank lending and a weak job market - likely will prevent the expansion from being as robust as we would hope," he said.
The world's largest economy grew at an annual rate of 3.5 per cent in the third quarter, signalling that the US has emerged from its deepest recession in decades. But unemployment is still rising: The US jobless rate hit 10.2 per cent in October, the highest in 26 years.
"The best thing we can say about the labour market right now is that it may be getting worse more slowly," Bernanke said, adding that the jobless rate would likely remain high through the end of 2010.
The economic recovery has so far been driven by massive government spending - such as the popular cash-for-clunkers programme to boost car sales - and by private companies unloading excess inventories that were built up during the recession.
But Bernanke also pointed to signs of "fundamental improvements" in consumer spending, the housing market and financial conditions, which led him to believe the recovery will continue even once the temporary measures come to an end.
However, the financial sector's uneasy stabilization would continue to put pressure on the wider recovery. The credit crisis, which nearly brought Wall Street to collapse in September 2008, is still making banks reluctant to restart lending.
"Reduced bank lending may well slow the recovery by damping consumer spending, especially on durable goods, restricting the ability of some firms to finance their operations," Bernanke said.
Firms have started hiring temporary workers - a sign of recovery - but many were also finding ways to sharply boost their productivity with fewer employees.
Bernanke was confident that companies would be forced to start hiring again as consumer demand improves, but he warned the growth will not be fast enough to make a significant dent in the high unemployment rate.
