Economy Watch: Bernanke Bemoans Economy, Warns of Drastic Federal Budget Cuts

By Dees Stribling, Contributing Editor

Federal Reserve Chairman Ben Bernanke, speaking at the International Monetary Conference in Atlanta on Tuesday, acknowledged that the U.S. economy has been tepid lately, frustratingly so, but also said not to worry about inflation. “So far at least, there is not much evidence that inflation is becoming broad-based or ingrained in our economy; indeed, increases in the price of a single product–gasoline–account for the bulk of the recent increase in consumer price inflation,” the chairman asserted.

Regarding the federal budget deficit and its related ills, Bernanke pointed out that cutting too much too fast out of the federal budget would be a sucker punch to the “still-fragile” recovery. “The solution to this dilemma, I believe, lies in recognizing that our nation’s fiscal problems are inherently long-term in nature,” he said. “Consequently, the appropriate response is to move quickly to enact a credible, long-term plan for fiscal consolidation.”

Alas, “long-term” is not usually part of congressional vocabulary. The speech came two weeks ahead of the next Fed meeting on interest rates and monetary policy. During that meeting, there might be some jawboning about the effectiveness of QE2, which saw the purchase of $600 billion in Treasuries and which will wrap up at the end of this month. But will there be a QE3? It isn’t considered likely, and Bernanke didn’t seem to mention it on Tuesday, but then again Fed tea leaves can be a little hard to read even after the chairman makes a speech.

JOLT says job postings took a dip

Less than a week after brining glum tidings about the job market in May, the U.S. Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (or JOLT; more government stats need that kind of snappy acronym) on Tuesday. The report says that the number of job openings in April was 3 million, a little less than the 3.1 million total in March. After increasing in February, job openings have been essentially flat since then, reflecting employers’ loss of appetite for bringing more workers on board.

In April, the “hires rate” was essentially unchanged at 3 percent. In BLS parlance, the hires rate is “number of hires during the month divided by the number of employees who worked during or received pay for the pay period that includes the 12th of the month.” At 4 million in April, the number of hires has increased from 3.6 million in October 2009 (the most recent trough) but remains below the 5 million hires in December 2007, when the recession began.

The total separations, or turnover, rate was unchanged at 2.9 percent, the BLS adds. The “quits rate”–which can serve as a measure of workers’ willingness or ability to change jobs–was also essentially unchanged in April. The total of 1.9 million quits during the month remained well below the 2.8 million quits in December 2007.

Consumer borrowing sees April uptick

Borrowing by consumers was up 3.1 percent in April compared with the same month last year, the Federal Reserve said on Tuesday. The increase was $7.2 billion, bringing the annualized rate of U.S. consumer borrowing to $2.43 trillion.

The report covers most consumer debt, except for mortgages and other real estate-related loans. The main drivers of consumer borrowing in April were student and auto loans, but not so much credit cards, which are still in disfavor in the minds of many Americans, as the aftershocks of the Great Recession continue to reverberate.

Investors were feeling a little less grumpy on Tuesday after nearly a week of declines, but even so the declines didn’t quite end. The Dow Jones Industrial Average declined by a scant 19.15 points, or 0.16 percent, while the S&P 500 was off 0.1 percent. The Nasdaq practically broke even, losing only 0.04 percent.