What Bernanke Really Said

Joshua Zumbrun

Look again: The Fed chair's remarks were more pessimistic than headlines suggest.

WASHINGTON -- Fed Chairman Ben Bernanke made headlines Tuesday when, at a Q&A session in Washington, he observed the recession is "very likely over."

The headlines, however, were misleading. Bernanke was not expressing optimism.

The complete quote from Bernanke was: "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."

Bernanke was merely summarizing what forecasters have been saying for awhile, rather than adding insight of his own. Slightly over a month ago, the Federal Reserve Bank of Philadelphia's survey of forecasters said GDP would grow 2.4% in the third quarter and continue growing into 2009. The third quarter will be over in two weeks. Is it supposed to be major news that the Fed chairman is aware of major Fed surveys?

"While the headlines state that Bernanke has declared the recession over, his remarks were somewhat more guarded," says Michael Feroli, an economist with JPMorgan, in a note on the hubbub. "The remark came in the context of a question about the employment outlook where Bernanke offered that the unemployment rate will be slow to come down."

The beginning and end of recessions in the U.S. will eventually be determined by the National Bureau of Economic Research. The NBER (in which Bernanke has no official voice or role) looks at six key factors in making the technical determination of which Bernanke spoke: the gross domestic product, gross domestic income, real manufacturing and trade sales, real personal income (excluding transfers), and employment. "The first three indicators seem to be clearly growing, and the next two indicators show some tentative signs of growth," Feroli writes, but employment, which Bernanke "expressed concern over, is not expanding, though as the NBER has noted, this is not a precondition of an official recovery."