Federal Reserve Bank of Boston President Eric Rosengren said Thursday that “rather slow recovery is likely” for the economy.
“My best judgment is that a rather slow recovery is likely. Unfortunately, such a forecast does imply continued weakness in the labor market, and an unemployment rate that continues to rise through this year,” he said at the an economic meeting in Worcester Massachusetts.
Rosengren said that the current recession has four features which would likely result in a slow recovery.
First he said the “financial freeze” has thawed quite a bit, but that it would “take some time” for complete normalization of financial markets and lending.
Second, he said that a loss of in household wealth has put a strain on consumers’ “balance sheets,” which would take some time to show improvement.
Third, he added that the sharp decrease in home prices would also affect labor market mobility, restrained financing for homes, and the ability to use home equity to finance projects would be limited.
Fourth, he said the economic health of U.S. trading partners remained somewhat fragile, “so it would be unwise to expect much help in the form of foreign growth that would propel our export-led industries.”