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Bernanke: U.S. economic recovery finally taking hold

NEW YORK (CNNMoney) – The U.S. economic recovery is finally getting stronger, Federal Reserve Chairman Ben Bernanke said Friday morning.

Bernanke, in remarks prepared for testimony before the Senate Budget Committee, said there is increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold.

“Overall the pace of economic recovery seems likely to be moderately stronger in 2011 than it was in 2010,” he said.

But he said a rebound in employment remains elusive, and that unemployment is likely to remain close to 8% two years from now.

“Persistently high unemployment, by damping household income and confidence, could threaten the strength and sustainability of the recovery,” he said.

The remarks came just an hour after the Labor Department reported that unemployment had dropped to 9.4% in December from 9.8%. Still, the number of jobs added was lower than expectations.

Bernanke said it is important that Congress change fiscal policy over the long-term to address the growing federal deficit.

“It is widely understood that the federal government is on an unsustainable fiscal path,” he said. “Yet, as a nation, we have done little to address this critical threat to our economy.”

However he cautioned against too much belt-tightening now.

“In their planning for the near term, fiscal policymakers will need to continue to take into account the low level of economic activity and the still-fragile nature of the economic recovery,” he said.

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