Federal Reserve Chairman Ben Bernanke went to Capitol Hill today and confirmed the darker side of the rosy scenario. Economic activity could "turn up later this year," he said. And then:
Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes.
Bernanke's full testimony is up at the Federal Reserve. Calculated Risk runs the factcheck on Bernanke's remarks about real estate — the chairman does all right.