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The Fed chairman admitted that recovery from recession had been slower than hoped and that short-term growth prospects for the US had been adversely affected by Europe's debt crisis, and by the wrangling between Democrats and Republicans over the US budget. He stressed that any repetition of that partisan in-fighting could make global investors less willing to hold US assets or to put money into job-creating enterprises. "Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about European sovereign debts and developments related to the US fiscal situation, including the recent downgrade of the US long-term credit rating by one of the major ratings agencies and the controversy concerning the raising of the US federal debt ceiling," said Bernanke. "It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks." While the Fed was alert to the risks, he said there was also a strong case, despite the poor state of America's public finance, for the new jobs package being planned by the Obama administration to tackle long-term unemployment. "Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery. Fortunately, the two goals of achieving fiscal sustainability – which is the result of responsible policies set in place for the longer term – and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives." Rejecting the idea that slow growth could morph into a long-lasting downturn, Bernanke said there had been some encouraging signs, including a 15% rise in US manufacturing output and a narrowing of the trade deficit.