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This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.
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More evidence today that the economic recovery is running out of gas. The government released a new estimate for growth in April, May and June, saying the economy expanded at an annual rate of just 1.6 percent. And today, Federal Reserve Chairman Ben Bernanke acknowledged the recovery has weakened more than expected.
In a much-anticipated speech, he said the Fed stands ready to take additional action, if necessary. But as NPR's John Ydstie reports, he gave no indication that new action by the Fed is imminent.
JOHN YDSTIE: Bernanke spoke at the Fed's annual summer retreat in Jackson Hole, Wyoming. No video or audio recording of his speech was allowed. But in it, Bernanke acknowledged the economy's weakness, saying that growth has been quote: less vigorous than expected. But he also rejected the growing notion that the economy is headed to a double-dip recession, saying, quote: I expect the economy to continue to expand in the second half of this year, albeit at a relatively slow pace. He did outline several options the Fed has to support the economy, if necessary.
John Silvia, chief economist at Wells Fargo, says those looking for immediate Fed action were probably disappointed.
Mr. JOHN SILVIA (Chief Economist, Wells Fargo): There was a lot of buildup to this, and I think expectations were too high that the Fed would take immediate action to pump up the economy.
YDSTIE: One of those who was disappointed was economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington.
Mr. DEAN BAKER (Co-Director, Center for Economic and Policy Research): This is really a pretty awful situation, and that's what I just don't think he seems to appreciate. I mean, we're looking at 9.5 percent unemployment - most likely rising through the rest of this year, and certainly not coming down anytime soon.
YDSTIE: Baker says the slowdown in growth could even morph into a contraction in the economy in the coming months - the so-called double dip. But John Silvia says the dire predictions we've been hearing lately are unlikely to materialize.
Mr. SILVIA: I understand that there are some people who think the economy really is deteriorating rapidly, going into a double dip or, you know, basically a depression. I hear those voices. I don't think that reflects the evidence.
YDSTIE: Silvia acknowledges the slowdown in growth this spring, to a 1.6 percent annual pace, is disappointing. But he says there's evidence in today's GDP report of steady growth in demand that will keep the worst fears for the economy from being realized. But Baker says growth this slow still presents big problems.
Mr. BAKER: This isn't fast enough to even create jobs. We have to grow about 2 percent close to 2 percent - just to create any jobs, and probably at least 2 and a half to keep the unemployment rate from rising. So we're really going the wrong way here.
YDSTIE: Baker says that he was disappointed that during his speech, Chairman Bernanke took off the table the idea of the Fed setting a higher target for inflation. Baker argues that could boost business investment and wages, and ultimately reduce household debt over the next three to four years.
While he's not as gloomy as Baker, John Silvia agrees the Fed will decide this fall that growth is too slow, and take action to speed things up after the November election. Silvia thinks the Fed will use one of the three options Bernanke outlined in his speech this morning - namely, putting money into the economy through the purchase of securities like government treasuries or mortgage-backed bonds.
Silvia says part of the reason the Fed is hesitant to act now is that it doesn't want to appear to be panicked into a move.
Mr. SILVIA: But I think the more reasonable view is that the Fed is there. They are ready. They do understand that there's a problem, and they will act some time in the future. And I think that helps to, you know, get the market back on track.
YDSTIE: Indeed, after a brief sell-off initially, the stock market surged following Bernanke's speech. And the bond market reflected greater confidence that the economic recovery will continue.
John Ydstie, NPR News, Washington.
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