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August 2, 2010    

Alan Greenspan issues caution for US economic recovery

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by Kay Murchie

Alan Greenspan, the former chairman of the US Federal Reserve, has told US television that there is currently a “pause” in the US recovery.

Mr Greenspan told NBC’s Meet the Press programme: “We’re in a pause in a recovery, a modest recovery but a pause in the modest recovery feels like a quasi-recession.”

He was asked if he thought the US could fall back into recession and he answered, “It is possible if home prices go down. Home prices as best we can judge have really flattened out in the last year.”

The US housing market has been suffering since a Government tax incentive expired at the end of April.

The end of the Government’s tax credit initiative, which provided up to $8,000 for new buyers and $6,500 for current owners who buy and move into another home, has boosted the housing market over the last few months.

However, as the effect of the tax credit continues to fade over the next few months, sales and activity are expected to dwindle, according to experts.

Meanwhile, there have also been fears about the strength of the US economic recovery, particularly as the country continues to grapple with high unemployment.

Mr Greenspan said long-term unemployment is having a negative impact on the world’s largest economy but believes the jobless rate will remain around the 9.5% mark for the remainder of the year.

US unemployment figures are due later this week.

Mr Greenspan’s comments come just after the US Commerce Department revealed the economy experienced annualised growth of 2.4% in the April to June period.

The figure came in slightly below expectations. However, US economy has now grown for four consecutive quarters.

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