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WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the sharp drop in unemployment over the last two months is encouraging but cautioned that it will take several years for hiring to return to normal.
In prepared testimony before the House Budget Committee, Bernanke also warned that failing to forge a plan to reduce the government's $1 trillion-plus deficits over the long term could eventually hurt the economy.
The unemployment rate was 9 percent in January after the fastest two-month decline in 53 years. Those declines "provide some grounds for optimism on the employment front," Bernanke said.
Bernanke is making his first appearance before the House since Republicans took control last month. He is expected to face tough questions from them, despite being a member of the party.
The Fed chief said the economy is strengthening, helped by more spending by consumers and businesses. However, the economic recovery won't be assured until companies step up hiring on a consistent basis.
Bernanke's remarks suggest the Fed will stick with its plan to buy $600 billion worth of Treasury debt by the end of June. The program is aimed to invigorate spending and the economy by lowering rates on loans and by boosting prices on stocks.
Despite rising prices for gasoline and for many industrial and agricultural commodities, Bernanke said inflation remains "quite low." He blamed the higher prices on strong demand from fast-growing countries such as China — not the Fed's stimulus policies.
The committee's chairman, Rep. Paul Ryan, R-Wis., worries that the Fed's stimulus policies, including debt purchases, could trigger inflation or fuel speculative buying of stocks or other assets.
"Many of us fear monetary policy is on a difficult track," Ryan said.
However, Ryan expressed more concerns about the nation's exploding government deficits. If left unchecked, it will eventually hurt the economy. Ryan favors budget cuts to get the deficits under control.