WASHINGTON - Alan Greenspan, the former Federal Reserve chairman, said yesterday that it is “very difficult’’ to envision the unemployment rate falling soon and that an economic recovery is “going to be a slow, trudging thing.’’
He also expressed concern about falling stock prices.
While the recession is “essentially over,’’ he said, “it’s very difficult to make the case that unemployment is coming down any time soon.’’ He spoke on NBC’s “Meet the Press’’ program.
The United States has lost 8.4 million jobs since the recession, the deepest since the Great Depression of the 1930s, began more than two years ago. Unemployment topped 10 percent in October - the first time that’s happened in a quarter-century - before retreating to 9.7 percent in January, according to Labor Department statistics.
Greenspan, Fed chairman from 1987 until 2006, said he anticipates the US unemployment rate will stay between 9 and 10 percent for most of this year. At this point, the most useful step Congress could take to aid job creation would be to enact tax cuts for small businesses, he said.
“They are the big creator of jobs,’’ he said. “But they won’t hire anybody if they don’t have any business.’’
A decline in stock prices since the start of the year is “more than a warning sign,’’ Greenspan added. “It’s important to remember that equity values, stock prices, are not just paper profits. They actually have a profoundly important impact on economic activity. And if stock prices start continuing down, I would get very concerned.’’
Former Treasury secretary Henry Paulson, who appeared on “Meet the Press’’ with Greenspan, said, “I agree with that, but I also never place too much emphasis on what the market does for any week or two.’’
