Janet Yellen on the economy

• As painful as this recession has been, I believe that we succeeded in avoiding the second Great Depression that seemed to be a real possibility.
• I regret to say that I expect the recovery to be tepid.
• Even if the economy grows as I expect, things won’t feel very good for some time to come. In particular, the unemployment rate will remain elevated for a few more years, meaning hardship for millions of workers.
• My own forecast envisions a far less robust recovery, one that would look more like the letter U than V. A large body of evidence supports this guarded outlook.
• Unfortunately, more credit losses are in store even as the economy improves and overall financial conditions ease.
• Certainly, households remain stressed. In the face of high and rising unemployment, delinquencies and foreclosures are showing no sign of turning around. Even recent-vintage loans are experiencing rising delinquency rates.
• The chances are slim for a robust rebound in consumer spending, which represents around 70 percent of economic activity. Consumers are getting a boost from the fiscal stimulus package. But this program is temporary.
  
• It may well be that we are witnessing the start of a new era for consumers following the traumatic financial blows they have endured. While certainly sensible from the standpoint of individual households, this retreat from debt-fueled consumption could reduce the growth rate of consumer spending for years.
• My business contacts indicate that they will be very reluctant to hire again until they see clear evidence of a sustained recovery, and that suggests we could see another so-called jobless recovery in which employment growth lags the improvement in overall output.

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