Americans should brace themselves for a slow recovery back to health after the recession ends, with unemployment likely to hit the double-digits, a Federal Reserve official said Friday.
WASHINGTON – Americans should brace themselves for a slow recovery back to health after the recession ends, with unemployment likely to hit the double-digits, a Federal Reserve official said Friday.
Consumers here and abroad — fearful of losing their jobs or homes — likely will remain cautious spenders, said Richard Fisher, president of the Federal Reserve Bank of Dallas.
"Under these conditions, I envision a slow recovery," Fisher said in prepared remarks to a banking convention in San Antonio, Texas. "Not a V-shaped snapback — nor even a U-shaped one — but a very slow slog as we find a more sensible and sustainable mix between consumption and savings and investment."
Looking at the current quarter, Fisher said he expects the "pace of decline will moderate." The economy is "likely to bounce along the bottom for a while, perhaps punching through to positive growth as 2010 dawns," he said.
Federal Reserve Chairman Ben Bernanke told Congress last week that the economy could actually start growing again later this year. Bernanke — like Fisher — warned that any recovery would be slow, pushing unemployment higher.
Fisher said increases in unemployment will be blunted by a pickup in federal government hiring for the 2010 Census. Even so, the country is likely to see a "10 percent jobless rate before we reverse course," he said.
The jobless rate rose to 8.9 percent in April, the Labor Department said last week.
Addressing recent economic barometers, Fisher said there have been some hopeful signs. Job losses may be slowing, purchasing managers are reporting the pace of decline in new orders has abated and retail sales are "getting slightly less worse," he said.
"But we are not out of the woods. We have miles to go before we sleep," Fisher said.
As the recession, now the longest since World War II, has dragged on, there's been more concern about deflation. That's a widespread and prolonged bout of falling prices affecting retail prices, wages, stocks and home values.
"The recent pressures have been to the deflationary side, though we seem to have beaten that back," Fisher said.
The Fed's decision to cut interest rates to a record low near zero and take other aggressive steps to revive the economy has helped to fend off the deflation risk.
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