Secret Commerce Department Report Shows the Economy May be Faltering by Dean Baker

In short, this is an unambiguously bad report. My view is that it is probably an anomaly. We will perhaps see upward revisions in the second report for January or a big bounceback in the February numbers. But, this report definitely deserved some attention. It might seem rude to spoil the celebrations over our 3.0 percent growth rate last quarter, but that is what reporters are supposed to do.

E.U. Leaders Challenged by Rise in Joblessness

The jobless rate in the 17 euro zone countries rose in January to 10.7 percent, from 10.6 percent in December. It reached the highest level since 1999, when the euro was introduced, according to Eurostat, the European Union’s statistics agency. Flagging economies like Italy and Greece were responsible for much of the increase. For all 27 E.U. countries, the rate ticked up to 10.1 percent in January from 10.0 percent in December.  

European countries nonetheless diverged widely: Spain again topped the list with a 23.3 percent jobless rate, followed by Greece, at 19.9 percent in November. That compared with 4 percent unemployment in Austria and 5 percent in the Netherlands.

Federal Reserve Chairman Sees Modest Growth by Binyamin Appelbaum

But the Fed has remained cautious, and Mr. Bernanke repeated a familiar list of reasons for that stance, including the depressed housing market and turbulence in Europe. The Fed also has overestimated the pace of recovery several times in recent years.

“The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards,” Mr. Bernanke said. He noted that the Fed did not expect “further substantial declines” in the unemployment rate this year.

As a result, he said the Fed remained committed to continuing its economic stimulus efforts, keeping short-term interest rates near zero and maintaining a large portfolio of Treasuries and mortgage bonds to further reduce long-term rates, holding down borrowing costs for businesses and consumers.

Mr. Bernanke gave no indication that the Fed was considering new efforts, like increasing its holdings of mortgage-backed securities to bolster the housing market. Indeed, his remarks suggested that the Fed’s attention was shifting to the possibility that the recovery is outpacing its expectations.