The U.S. economy’s sluggish growth the past two months will likely be temporary, New York’s top banker said today.
William Dudley, president of the Federal Reserve Bank of New York, said the slow pace of hiring, high prices for gasoline and food and the Japanese earthquake that have combined to dampened commerce recently will ease later this year.
He said growth would be fueled by overseas demand for U.S. goods and services, better financial conditions for big companies, less household debt and more hiring.
“Economic growth so far this year as has been disappointing,” Dudley told the Brooklyn Chamber of Commerce. But “this softness is related to factors that I expect will prove transitory…the soft patch may not persist.”
He predicted that “economic growth will pick up enough in the second half of 2011 to sustain a moderate economic recovery” from the recession that ended in June 2009. “Still, the pace of recovery probably will be painfully slow for the many unemployed and underemployed workers,” he added.
Dudley also acknowledged that faster economic growth wasn’t certain. He said a continuation of soaring gas prices and falling home values would reduce consumers’ purchases of other goods. In turn, this would discourage businesses from hiring and investing in new equipment and factories.
Dudley also joined Federal Reserve Bank Chairman Ben Bernanke in warning against big cuts in federal government spending as proposed by Congressional Republicans.
“Although these issues bear watching, I still believe that they remain risks rather than the most likely outcomes,” Dudley said.
Locally, Dudley expressed concern about widespread teacher layoffs and Gov. Andrew M. Cuomo’s plan to trim 9,000 jobs from the state payroll.
“State and local government employment has already weakened in many areas,” Dudley said. “Going forward, further contraction in this sector continues to pose some risks to the recovery” in New York State.
He also called for more investment in worker training programs, saying the quality of the region’s workforce “determines a large part of its economic success and resiliency.”
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