Federal Reserve Chairman, Ben Bernanke, has had an unusual economic lexicon in the past year or so.
In early 2009 he gave us "greenshoots" as the recovery took hold, tentatively, then in April, the phrase "extended period" appeared in statements after the Fed’s Open Markets Committee meetings, a phrase that has come to dominate thinking on the US economy and interest rates.
(Such as define an “extended period,” it was at first a month or two, then a quarter, then six months, now it’s running at a year, and more according to some bears).
Overnight better than expected figures on home sales (down, but not by as much) and jobless (up, but not by as much) and some reasonable profits from the likes of 3M and UPS, saw Wall Street stage a big relief rally after falling off the back of Mr Bernanke’s testimony the day before.
What scared investors the day before was a new phrase from the Fed chairman to describe the US economic recovery; it was the Fed chairman told the US Senate’s Banking committee, "unusually uncertain".
In his prepared testimony for the Fed’s semi-annual report to Congress, Mr Bernanke also produced the most extensive look yet at the Fed’s plans for pulling money out of the US economy and raising short term rates, as the economy improves.
But that was all but ignored as the markets grabbed at the phrase "unusually uncertain".
So no quick escape from the Great Recession of the naughties, but a double dip?
Bernanke says that despite growing signs of new weakness in the nation’s economic recovery, the Fed (and himself) still expect "continued moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years".
The economic expansion that began in the middle of last year is proceeding at moderate pace, supported by simulative monetary and fiscal policies, Mr Bernanke said.
But note the phrase "next several years" and remember that in the minutes of the June Fed meeting, there seemed to be agreement that the US economy would not return to trend line growth and employment for "five to six years".
As real as the chances are for a second half slowdown in growth (which there surely must be, given that the economy expanded at an annual rate of 5.6% in the final quarter of 2009, and that won’t be matched in 2010), the longer term danger to the economy is the prospect of half a decade of mediocre recovery and a stubbornly highly level of unemployment, with millions of wasted lives, especially among young people.
Here the Fed chairman was realistic in his testimony, saying unemployment will drop more slowly than was predicted earlier this year.
And while not mentioning the possibility of a double dip recession in his remarks, he said the Fed also sees the risks for growth as "weighted to the downside".
"In all likelihood, a significant amount of time will be required to restore the nearly 8.5 million jobs that were lost over 2008 and 2009," he said.
And he emphasised what he termed the "exceptional near-term hardships" on workers and their families, as well as the potential erosion of skills and possible long lasting effects on employment and earnings prospects.
One other factor underlying the weaker outlook, says Mr. Bernanke, is that although financial conditions have improved significantly, they have become "less supportive of economic growth in recent months". He cites the situation in Europe as one contributing factor.
However, the Fed chairman did not seek to downplay the most troubled areas of the US economy, noting that housing remained strained, and pointing out that the sluggish labour market was an “important drag on household spending”.
Not to mention the continuing foreclosures of homeowners who are under water on their mortgages, with loan values way in excess of the value of their homes and land.
Banks repossessed a record number of US homes in the second quarter. The banks took over 269,962 properties, up 5% sequentially and 38% from a year ago (according to RealtyTrac).
In a normal year, American banks repossess around 100,000 homes – but they are now on track for over a million in 2010.
And, more than 3 million homeowners will receive at least one foreclosure notice this year.
And in one of his daily missives, Canada’s resident bear, Dave Rosenberg, came up with a new phrase of his own that Dr Bernanke would never use, but should add to his repertoire: "The new normal, a recovery gripped with deflationary impulses", Rosenberg wrote to describe the current state of the US economy.
"All we hear from in the mainstream economics community is that double-dip recessions are out of the question because they are "extremely rare" events.
"The double-dip deniers say that this only happened in 1982 because of the renewed sharp tightening by the Fed (as if we aren’t going to see a sharp fiscal withdrawal this time around to take its place). What is it that these economists and strategists don’t see?
"These "extremely rare" events have been the norm for the past 24 months: negative nominal GDP growth; negative operating earnings; a massive contraction in credit; a 30% slide in home were telling everyone that home prices never deflate over a 12-month time span … but they did this time!); a record-high duration of unemployment.
"The past 24 months have given us a lifetime of "extremely r
