Federal Reserve Chairman Ben Bernanke told Congress Tuesday that the U.S. economy should pull out of a recession and start growing again later this year.
But in prepared testimony to Congress' Joint Economic Committee, Bernanke warned that even after a recovery gets under way, economic activity is likely to be subpar. That means businesses will stay cautious about hiring, driving up the U.S. unemployment rate and causing "further sizable job losses" in the coming months, he said.
The recession, which started in December 2007, already has snatched a net total 5.1 million jobs.
The unemployment rate "could remain high for a time, even after economic growth resumes," Bernanke said.
Even with all the cautionary notes, the Fed chief offered a far less dour assessment of the economy.
"We continue to expect economic activity to bottom out, then to turn up later this year," he told lawmakers.
Recent data suggest the recession may be loosening its firm grip on the country, Bernanke said.
"The pace of contraction may be slowing," he said. It was similar to an observation the Fed made last week in deciding not to take any additional steps to shore up the economy.
The housing market, which has been in a slump for three years, has shown some signs of bottoming, he said. Consumer spending, which collapsed in the second half of last year, came back to life in the first quarter.
In the months ahead, consumer spending should be lifted by tax cuts contained in President Barack Obama's larger $787 billion stimulus package. Still, rising unemployment, sinking home values and cracked nest eggs will still weigh on consumers willingness to spend freely, Bernanke said.