Bernanke talks up prospects for US recovery despite weak jobs data

Fed chief Ben Bernanke sounded a more upbeat note on the US economy today even as employment figures continued to point to a difficult road to recovery. Bernanke told a Senate committee that there was more evidence that a "self-sustaining recovery" in consumer and business spending may be taking hold – a more optimistic assessment than his recent public remarks. The US economy added 103,000 jobs last month – far below economists' expectations of 175,000 – but the unemployment rate still dropped to its lowest in more than 18 months. Private hiring climbed by 113,000 while government employment fell by 10,000. The retail sector created 12,000 jobs, after a shock 19,400 slump in November despite bumper retail sales. The dollar fell back against the euro and the yen after the figures were released. Earlier it rose to a four-month high against the euro on expectations of a strong report. The non-farm payrolls revealed that employment in October and November was revised to show 70,000 more job gains than previously reported. This pushed the jobless rate down to 9.4%, the lowest since May 2009, from 9.8% in November. "The labour market is still way slower than what everybody would hope for," said Harm Bandholz, chief US economist at UniCredit research in New York. Rob Carnell, at ING in London, said: "This data is a mess. Our best guess is that the labour market is recovering more in line with what the household survey is telling us than the payrolls figures. But the market still tends to focus on the non-farm payrolls numbers. "Consequently, the market response to this figure will be one of disappointment – despite the genuine elements of good news it contains." In his testimony to the Senate budget committee, which was submitted to Congress before the jobs data, Bernanke defended the Fed's bond purchases by highlighting the weakness in employment and what he saw as the risks associated with very low rates of inflation. "Persistently high unemployment, by damping household income and confidence, could threaten the strength and sustainability of the recovery," Bernanke said. "The 103,000 gain in payroll employment in December was very disappointing after the spectacular 297,000 gain touted by the ADP survey," said Paul Dales, senior US economist at Capital Economics. "Admittedly, the drop in the unemployment rate, from 9.8% in November to a 19-month low of 9.4%, is more encouraging. But it is still roughly double the rate seen before the recession."