The U.S. economy is likely to continue to grow in 2010 — even though constrained bank lending and a weak job market could prevent the expansion from “being as robust as we would hope,” Federal Reserve Chairman Ben Bernanke said.
“I expect moderate economic growth to continue next year,” Mr. Bernanke said today in a prepared text of a speech to the Economic Club of New York.
Among the positive signs the Fed chief cited is that manufacturing activity has been expanding and should be helped by the continuing strength of the recovery in emerging market economies, particularly in Asia.
“As the recovery takes hold, enhanced business confidence, together with the low cost of capital for firms with access to public capital markets, should lead to a pickup in business spending on equipment and software, which has already shown signs of stabilizing,” Mr. Bernanke said in the text of the speech.
Nonetheless, Mr. Bernanke said the reluctance of banks to lend will limit the ability of some businesses to expand.
“I expect this situation to normalize gradually, as improving economic conditions strengthen bank balance sheets and reduce uncertainty,” he said.
Mr. Bernanke also said jobs are likely to remain scarce for some time, keeping a damper on household spending.
“As the recovery becomes established, however, payrolls should begin to grow again, at a pace that increases over time,” Mr. Bernanke said. “Nevertheless, as net gains of roughly 100,000 jobs per month are needed just to absorb new entrants to the labor force, the unemployment rate likely will decline only slowly if economic growth remains moderate, as I expect.”