ben s bernanke : current economic and financial conditions and the federal budget testimony by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on the budget, us house of representatives, washington dc, 3 june 2009. * * * chairman spratt, ranking member ryan, and other members of the committee, i am pleased to have this opportunity to offer my views on current economic and financial conditions and on issues pertaining to the federal budget. economic developments and outlook the u. s. economy has contracted sharply since last fall, with real gross domestic product ( gdp ) having dropped at an average annual rate of about 6 percent during the fourth quarter of 2008 and the first quarter of this year. among the enormous costs of the downturn is the loss of nearly 6 million jobs since the beginning of 2008. the most recent information on the labor market – the number of new and continuing claims for unemployment insurance through late may – suggests that sizable job losses and further increases in unemployment are likely over the next few months. however, the recent data also suggest that the pace of economic contraction may be slowing. notably, consumer spending, which dropped sharply in the second half of last year, has been roughly flat since the turn of the year, and consumer sentiment has improved. in coming months, households'spending power will be boosted by the fiscal stimulus program. nonetheless, a number of factors are likely to continue to weigh on consumer spending, among them the weak labor market, the declines in equity and housing wealth that households have experienced over the past two years, and still - tight credit conditions. activity in the housing market, after a long period of decline, has also shown some signs of bottoming. sales of existing homes have been fairly stable since late last year, and sales of new homes seem to have flattened out in the past couple of monthly readings, though both remain at depressed levels. meanwhile, construction of new homes has been sufficiently restrained to allow the backlog of unsold new homes to decline – a precondition for any recovery in homebuilding. businesses remain very cautious and continue to reduce their workforces and capital investments. on a more positive note, firms are making progress in shedding the unwanted inventories that they accumulated following last fall's sharp downturn in sales. the commerce department estimates that the pace of inventory liquidation quickened in the first quarter, accounting for a sizable portion of the reported decline in real gdp in that

coen teulings and richard baldwin, eds., secular stagnation : facts, causes, and cures. london : cepr press, pp. 83 – 89. pinto, eugenio p., and stacey tevlin ( 2014 ). “ perspectives on the recent weakness in investment, " feds notes, no. 2014 – 05 - 21. solow, robert m. ( 1957 ). “ technical change and the aggregate production function, " review of economics and statistics, vol. 39 ( august ), pp. 312 – 20. united states. bureau of the census ( 1975 ). historical statistics of the united states, colonial times to 1970. washington : us department of commerce, bureau of the census, september,. 1 one needs also to recognize that changes in either the average workweek or the employment to population ratio may damp or augment the effect of labor productivity on gdp per capita. 2 byrne, fernald, and reinsdorf ( 2016 ) discuss known measurement challenges and conclude they cannot explain the deceleration of productivity. 3 gordon ( 2014, p. 25 ) enumerates the inventions of the information age — the personal computer, the internet, mobile phones, and so on — and notes that for innovation to continue at such a pace, “ the achievements of the past 40 years set a hurdle that is dauntingly high. " 4 mokyr ( 2014, p. 83 ) considers advances in research methods and tools and concludes that “ the indirect effects of science on productivity through the tools it provides scientific research may dwarf the direct effects in the long run. " 5 david ( 1990 ) cautions that the effect of general - purpose technologies, such as electricity and electronic computing, can take decades to fully unfold. brynjolfsson and hitt ( 2000 ) consider the process followed by firms in leveraging innovations in it equipment and emphasize the role of complementary investment in intangible assets like business reorganization. 6 mohnen and hall ( 2013 ) survey the empirical literature pointing to a link between r & d and productivity. 7 decker and others ( 2016 ) highlight the decline in entrepreneurship and worker mobility ; andrews, criscuolo, and gal ( 2015 ) emphasizes that productivity for firms at the global frontier continues to advance rapidly even as global aggregate productivity growth has slowed. 8 pinto and tevlin ( 2014 ) note that in the context of a long - run growth model, a slow pace of investment is not surprising