Recovery May Still Falter, Greenspan Warns

Federal Reserve Chairman Alan Greenspan sounded a cautious note Saturday about the strength of the nation’s economic recovery and said it may still stumble.

“Although broadly speaking the recent economic indicators are encouraging, one should not readily conclude that we have clear sailing ahead,” Greenspan said in a speech to the Independent Bankers Assn. of America.

The 2-year-old technical recovery remains the weakest on record, despite a 4.8% surge in the annual rate of growth late last year, a pickup in business spending and a steady drop in the unemployment rate to 7% by February, the Fed chief said.

“This is still in some respects a tentative expansion, and the possibility of further setbacks, albeit temporary, cannot be dismissed out of hand,” he said.

He said that February’s employment report, even though it showed the strongest job growth in four years, “almost surely” overstated improvements in the labor market.

The Fed chairman said the central bank intends to “continue fostering the economic expansion in the near term.” He added that the federal budget deficit must be brought down.