WASHINGTON - Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned, Federal Reserve Chairman Ben S. Bernanke said yesterday.
Addressing a Fed conference in Chatham, Mass., last night, Bernanke said a government report last week showing the jobless rate rising from 5 percent in April to 5.5 percent in May - the biggest one-month jump in two decades - was "unwelcome." However, he said other forces should "provide some offset to the headwinds that still face the economy."
The Fed's interest-rate cuts, the government's $168 billion stimulus package, further progress in the repair of problems in financial and credit markets, an easing of the drag from the deep housing slump, and still-solid demand for U.S. exports should help the economy over the remainder of this year, he said.
Although economic activity is "likely to be weak" during the current April-to-June quarter, Bernanke said, "the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."
On Friday, fears were rekindled that the country could be headed for a deep recession after the unemployment rate zoomed and oil prices registered their biggest single-day leap.