Bernanke: Economic outlook murky

U.S. Federal Reserve Chairman Ben Bernanke gave no hint Thursday whether interest rates will continue to drop. But in a speech in Charlotte, he said the nation's economic outlook is murky, given ongoing stress from the credit crunch and rising fuel prices.
Bernanke discussed the economy during a presentation at the Charlotte Chamber's annual meeting. The chamber also honored him with the organization's Citizen of the Carolinas Award.
The chamber presents the award annually to an individual who has brought positive recognition to the Carolinas. Bernanke is a native of Dillon, S.C., about 120 miles southeast of Charlotte. He was sworn in as Fed chairman in early 2006, replacing Alan Greenspan.
About 2,400 people attended Thursday night's chamber event, held at the Charlotte Convention Center.
The Fed's Open Market Committee, which sets monetary policy and considers raising or lowering interest rates, will meet next on Dec. 11. The committee cut the federal funds rate to 4.75 percent in September and to 4.5 percent Oct. 31. Banks use the federal funds rate to determine the interest they charge on overnight loans to each other.
"How has the economic picture changed in the month since that meeting?" Bernanke said. "As is often the case, the incoming economic data have been mixed."
Several key indicators, such as home construction, remain weak, he said. Household income will continue to grow but at a slower rate.
A combination of high gas prices, the weak housing market, tight credit conditions and declines in stock prices seem likely "to create some headwinds for the consumer in the months ahead," Bernanke said.
On the bright side, the Fed chairman said the labor market remains solid, with the unemployment rate staying at 4.7 percent last month. That's important for maintaining the economic expansion, he said.
At the Fed panel's Dec. 11 meeting, the committee will "have to judge whether the outlook for the economy or the balance of risks have shifted materially," Bernanke said. The Fed will remain "exceptionally alert and flexible as we continue to assess how best to promote sustainable economic growth and price stability."
Bernanke also discussed the Charlotte region's growth and how the area has changed since the days when he would visit his paternal grandparents here 40 years ago. The couple lived on Cumberland Avenue in the Myers Park community.
He said Carolinians are facing the same challenge confronting other areas of the country: replacing jobs in old-line manufacturing industries by creating employment in services such as health care and hospitality. Meanwhile, the region is adapting to globalization and advancing technology, he said.
Work-force quality is the most important factor in an economy's success, Bernanke said. "In a rapidly changing world, economically valuable skills can be maintained only through learning that extends beyond traditional schooling to encompass training and retraining well into the middle years of life."
Charlotte has benefited from its emergence as a financial-services center during the last 10 years, he noted. And an average of 39,000 residents have moved here each year since 1997.
"Thus, like many other vibrant regions of the country, the Charlotte area has grown by developing a high-productivity service economy," Bernanke said.
He cited the construction of the N.C. Research Campus on the site of the former Pillowtex Inc. headquarters and manufacturing site in Kannapolis -- where more than 4,000 workers lost their jobs when the company closed in 2003 -- as an example of the transition.
While Charlotte will continue to woo highly educated and skilled employees from other regions, Bernanke said it remains crucial to improve the skills of other local workers, especially those displaced by declining industries such as textiles.
"Education and skills must be provided flexibly and to people of any age," he said.
Reflecting on his visits here as a child, Bernanke recalled how his "Grandpa Friedman" would take him to Freedom Park to feed the ducks. At the time, the youngster thought the area's name was "Friedman Park."
"I was suitably impressed by the honor the city authorities had apparently given my grandparents," he quipped.
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