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Near-term outlook for US darkening

(Agencies)
Updated: 2009-03-05 09:12

MIAMI  - The battered US economy will continue to weaken over the coming months, with unemployment rising, top Federal Reserve officials said on Wednesday, though they remain confident that forceful policy action will help end the more than year-long recession.

US Federal Reserve Chairman Ben Bernanke testifies before the Senate Budget Committee on Capitol Hill in Washington March 3, 2009. Bernanke on Tuesday urged bold action action to pull the economy out of a deepening slump, even if it means a surge in US government debt. [Agencies]

Dennis Lockhart, president of the Atlanta Federal Reserve Bank, said it was hard to "be upbeat about the immediate future."

Richard Fisher, president of the Dallas Fed, said indicators show the economy to be on track for a decline in the first quarter roughly equal to the 6.2 percent annual rate of contraction seen in the 2008 fourth quarter.

Fisher, who characterized himself as the most pessimistic of all of his colleagues on the Fed's policy-setting Federal Open Market Committee (FOMC), said he fears the country might suffer two years of recession.

The current recession started in December 2007.

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Lockhart, however, said he still expects the economy to begin a modest recovery in the second half of the year.

That said, Lockhart painted a gloomy picture near-term.

"Looking broadly at the national economy, the recent numbers have been discouraging," Lockhart told the Greater Miami Chamber of Commerce.

"Other incoming data give little reason to be upbeat about the immediate future. Unemployment continues to rise," said Lockhart, who is a voting member of the Federal Open Market Committee this year.

He later said he was apprehensive about the government's February jobs report, which is due on Friday.

"I'm concerned that this, too, will show some job destruction, substantial job destruction and the unemployment rate will rise," Lockhart told public television's "Nightly Business Report."

Analysts polled by Reuters expect a loss of 648,000 jobs last month, compared with a 598,000 loss in January, with the US unemployment rate rising to 7.9 percent from 7.6 percent. 

OUTLOOK UNCLEAR 

Lockhart said the outlook was more unclear than usual and deteriorating financing conditions for the commercial real estate sector could add to the strain on battered banks. 

"Problems in residential real estate are well known. But, with continued economic weakness, I'm increasingly paying attention to commercial real estate," he said.

"Declining commercial real estate markets could put further pressure on already strained financial institutions and markets. And overcoming problems in the financial sector is central to achieving economic recovery," he said. 

Fisher, speaking in Fort Worth, Texas, called 2008 "an annus horribilis -- a truly horrible year that only a sadist could look back upon with pleasure. 

"Other incoming data give little reason to be upbeat about the immediate future. Unemployment continues to rise," said Lockhart, who is a voting member of the Federal Open Market Committee this year.

He later said he was apprehensive about the government's February jobs report, which is due on Friday.

"I'm concerned that this, too, will show some job destruction, substantial job destruction and the unemployment rate will rise," Lockhart told public television's "Nightly Business Report."

Analysts polled by Reuters expect a loss of 648,000 jobs last month, compared with a 598,000 loss in January, with the US unemployment rate rising to 7.9 percent from 7.6 percent.

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