WASHINGTON -- Even when companies start hiring again, it will be some time before there is a serious dent in the unemployment rate, former Federal Reserve Chairman Alan Greenspan told attendees of CUNA's Governmental Affairs Conference.
"As soon as hiring begins, many people who had stopped seeking jobs will come back into the job market, and this will keep the unemployment at around 9% for a period," he said.
Greenspan, who headed the Fed from 1987 to 2006, said the economy was going through an "odd type of recovery." He noted that if current trends continue, later this year the gross domestic product will be back to its prerecession levels. He noted that the recovery is being driven by high-income consumers and big businesses.
But he said that small businesses are "still in the doldrums. They are not getting worse but are showing few signs of getting better."
Greenspan said the precarious condition of the commercial real estate market is a threat to the economy's long-term economic health. He added that until two key indicators-housing starts and motor vehicle sales-have several months of steady growth he wouldn't consider the economy to be out of the woods. He added that the severity of the recession wasn't evidence that the system of capitalism had collapsed but showed a failure to understand the risks involved in certain policy decisions.
In response to a question, he said attendees should lobby lawmakers hard to increase member business lending because credit unions have a "somewhat better argument than the other side."
While Greenspan gave a mixed assessment of the economy, former presidential adviser David Gergen was more pessimistic in his assessment of the overall state if the political system.
Gergen said many of the nation's chronic problems aren't being solved because both parties aren't showing enough mettle, leadership and courage.
"The troubles are deep, chronic and Washington is having a hard time," he said. "Presidents and Congress respond well when there is a crisis. The key is responding to chronic problems and we keep delaying the hard choices."