Federal Reserve Chairman Ben Bernanke said Monday that the labor market remains "quite weak," despite a recent run of strong employment data that appears "out of sync" with some broader problems facing the economy.
Noting that the number of people working and the hours worked still linger well below pre-crisis levels, Bernanke described the current job market as "far from normal," throwing some cold water on any nascent notion that the economy had fully recovered from the financial meltdown of 2008.
As the population grows, there are still 5 million fewer jobs in the U.S. economy than before the crisis. The unemployment rate is still three percentage points above the average over the last two decades, and many of the recent gains were thanks to reduced layoffs, not expanding business, which is not the recipe for sustainable improvement in the labor market, according to Bernanke.
In particular, he said it was "something of a puzzle" that the job market could show such strong gains recently — an average of 250,000 jobs were created in each of the last three months — despite at best middling economic growth. The Commerce Department has reported the economy grew an average of just 1.7 percent in 2011.
Bernanke offered a number of theories for this conundrum. It could just be "statistical noise," and future revisions could show the economy actually grew at a much stronger rate than initially found. Or the unemployment rate could be dropping because the frustrated jobless are no longer looking for work, and as a result are no longer included in the data. Or the recent spike in hiring could be a natural response to the "extraordinary" layoffs that came during the recession.
"We may be seeing now ... the flip side of the fear-driven layoffs that occurred during the worst part of the recession, as firms have become sufficiently confident," he said.
On a more positive note, Bernanke argued that the challenges facing the labor market are still a cyclical result of the recent recession, rather than a fundamental structural change to the nation's economy that would mean high long-term unemployment is the new norm.
Regardless of the cause, the economy needs to pick up steam if the country can expect to hold onto its recent job gains, Bernanke said. The Fed's highly accommodative monetary policy, with near-zero rates being held until the end of 2014, is the central bank's effort to keep the recovery moving, he added.