WASHINGTON (5/8/14)--Federal Reserve Chair Janet Yellen addressed Congress's Joint Economic Committee Wednesday, expressing reserved optimism about the country's current economic situation.
She admitted that 2014 has seen a pause in gross domestic product (GDP) growth in the first quarter, but said that transitory factors, including an unusually harsh winter, were the likely cause.
"With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter," she said.
Several factors, most notably improving unemployment numbers, were a primary cause for her positive outlook.
"The unemployment rate was 6.3% in April, about 1.25 percentage points below where it was a year ago. Moreover, gains in payroll employment averaged nearly 200,000 jobs per month over the past year," she said. "During the economic recovery so far, payroll employment has increased by about 8 1/2 million jobs since its low point, and the unemployment rate has declined about 3.75 percentage points since its peak."
This optimism was tempered by disappointment in the housing market, in recovery since 2011, which she said has "remained disappointing" this year.
"[T]he recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery," she said.
One of the reasons she highlighted for the flattening of growth was less household formation, which began to flatten in 2007 after two decades of growth, according to Thomson Reuters DataStream.
Yellen said for housing growth to continue, household formation numbers needed to be on the rise again. With an increasing number of young people graduating from college with student debt, it means they would be less likely to qualify for mortgages and more likely to live with their parents, meaning fewer new households.
Overall, Yellen said she believed that 2014 would see faster growth than 2013, and expressed optimism that unemployment numbers would fall and inflation will move closer to 2%, a stated goal of the Federal Reserve.
"A faster rate of economic growth this year should be supported by reduced restraint from changes in fiscal policy, gains in household net worth from increases in home prices and equity values, a firming in foreign economic growth and further improvements in household and business confidence as the economy continues to strengthen," she said.