By Mark Felsenthal and Pedro da Costa
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. economic recovery was on solid footing but cautioned it could be years before the jobs lost during the deep recession are restored.
"Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the demand in economic recovery," Bernanke said in testimony to the House of Representatives Budget Committee.
However, he said the recovery will likely be held back by a slow pickup in employment and weak housing and commercial property markets.
Bernanke noted that the U.S. central bank expects growth of 3-1/2 percent this year and a slightly faster expansion in 2011, but he said at that pace, unemployment would decline only slowly.
"In this environment, inflation is likely to remain subdued," Bernanke said, adding that long-run inflation expectations were stable.
Financial markets largely ignored the comments, which were similar to remarks Bernanke made on Monday night.
Labor markets have shown modest improvements recently in employment, hours worked, and income, and hiring prospects have improved, he said. But it will take "a significant amount of time" before employers restore the roughly 8-1/2 million jobs lost during the downturn, he added.
He said the Fed is keeping a close watch on the European debt crisis for any possible impact on the U.S. economy. Actions taken by European leaders emphasize a firm commitment to calming strains and restoring stability, he said.
"If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest," he said.
(Writing by Mark Felsenthal; Editing by Andrea Ricci)
