NEW YORK – The national economy picked up in the fourth quarter of 2010 despite a slowdown in the Northeast, which had been outpacing the nation, and “we believe that conditions are in place for such higher growth in 2011 and 2012,” according to Federal Reserve Bank of New York President and Chief Executive Officer William C. Dudley.
Saying he “would not be overly discouraged” by the northeast’s slowdown,” he explained, “soft patches are not uncommon during economic recoveries.”
“The economy is healthier, but it is not yet well,” Dudley told a press briefing in New York, according to prepared remarks released by the Fed Monday. “In order to reduce joblessness significantly over the coming quarters, the economy needs to grow at a considerably faster rate than we have seen so far in this recovery.”
While “unemployment remains stubbornly high,” he said “many indicators suggest that conditions are in place for stronger growth in the coming months.”
Again, the region’s households “are in better shape than the nation as a whole” in terms of debt since “they increased their debt burdens less during the boom and thus have had less need to deleverage.”
Housing, however, faced “renewed weakness,” with softer prices and very low levels of construction. “We believe that it will take more time, perhaps as much as another year, for enough of these homes to be bought that residential construction might begin a meaningful recovery,” he said.
Dudley called the latest employment report “difficult to interpret,” as fewer than expected jobs were added, but the unemployment rate fell 0.4 percentage points. Job growth, he said, was restrained by inclement weather, however the jobless rate decline “was not an unmitigated positive, as a significant part of this decline was due to fewer people looking for work.”
“At this point, while the soft patch is over and the risk of a double dip has subsided, the economy still faces headwinds as a result of the aftermath of the financial crisis, the housing bust and the high level of unemployment that still prevails,” Dudley said. “As banks and other financial institutions seek to strengthen their balance sheets and avoid future credit losses, they may keep credit conditions tighter than normal. In addition, many consumers' borrowing options may be limited by their impaired credit histories, and the recovery is not getting the strong boost from home construction that most previous recoveries have benefited from. Furthermore, … households are still feeling the financial impact of lost wealth and jobs, which makes some cautious about spending and investing.”
He called the current economic situation “unsatisfactory,” but added, “we appear now to be moving in the right direction.”
