Ahead of President Obama's big job speech tonight, Federal Reserve Chairman has just finished delivering a speech on the state of the U.S. economy. CNNMoney notes that Bernanke sounded "a bit like a broken record" in emphasizing, as he did in late August, that lawmakers should not imperil the recovery by dramatically slashing government spending in the near term. "The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus," Bernanke stated without specifying what those tools might be, adding that the Fed "now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the June meeting". U.S. stocks are falling in the wake of Bernanke's address. 

While Bernanke's remarks (which you can read in full here) didn't include a lot of new information, the Fed chairman did have some interesting things to say about the flagging housing and household sectors at the heart of the sluggish economic recovery:

One striking aspect of the recovery is the unusual weakness in household spending. After contracting very sharply during the recession, consumer spending expanded moderately through 2010, only to decelerate in the first half of 2011 ... Even taking into account the many financial pressures they face, households seem exceptionally cautious. Indeed, readings on consumer confidence have fallen substantially in recent months as people have become more pessimistic about both economic conditions and their own financial prospects ...

Notably, the housing sector has been a significant driver of recovery from most recessions in the United States since World War II, but this time--with an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines--the rate of new home construction has remained at less than one-third of its pre-crisis peak ... The weak housing market has in turn adversely affected financial markets and the flow of credit.

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Uri Friedman