“However, it remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening in credit conditions,” he added. Spending by businesses and individuals is an important ingredient to keeping the economic expansion – which began in late 2001 – from fizzling out. Developments affecting the job market and income growth also will be watched closely. “The labor market has shown some signs of cooling, but these are quite tentative so far, and real income is still growing at a solid pace,” Bernanke observed. The benefits of a mostly sturdy employment climate have helped cushion some of the negative effects that the housing slump, weaker home values and a credit crunch have had on consumers. Job creation rebounded in September, with employers boosting payrolls by 110,000, the most in four months. Wages grew solidly. The unemployment rate did creep up to 4.7 percent last month but that rate is still considered low by historical standards. On the inflation front, Bernanke noted that the prices of crude oil and other commodities have been rising and that the value of the dollar has weakened. Oil prices galloped to a record high of $86.13 a barrel Monday. Bernanke said the Fed will continue to monitor inflation developments carefully. Yet, with the limited information seen since the central bank’s September meeting, the inflation barometers “are consistent with continued moderate increases in consumer prices,” he said.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! WASHINGTON – A deepening housing slump probably will be a “significant drag” on economic growth into next year and it will take time for Wall Street to fully recover from a painful credit crisis, Federal Reserve Chairman Ben Bernanke warned Monday. Bernanke once again pledged to “act as needed” to help financial markets – which have suffered through several months of turbulence – function smoothly and to keep the economy and inflation on an even keel. “Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks,” Bernanke said in a speech to the New York Economic Club. A copy of his remarks was made available in Washington. It was Bernanke’s most extensive assessment of the country’s current economic situation since the August turmoil unhinged Wall Street. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREGame Center: Chargers at Kansas City Chiefs, Sunday, 10 a.m.The ultimate implications of the credit crunch on the broader economy remain uncertain, the Fed chief said. Against that backdrop, Bernanke said the central bank will be closely watching the economy’s vital signs. He didn’t specifically commit to cutting rates again. Economists have mixed opinions on whether the Fed will lower interest rates at its next meeting, Oct. 30-31. To help cushion the economy from the ill effects of the credit crunch and housing slump, the Fed on Sept. 18 slashed a key short-term interest rate by one-half percentage point – to 4.75 percent. It marked the first rate cut in more than four years. It also reflected the most aggressive action taken by the Fed to curb fallout from the credit crisis, which intensified in August. Since that September meeting, the housing slump – the worst in 16 years – has gotten deeper, Bernanke said. “The further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year,” he said.