U.S. could still grow 2.7 pct 2007: adviser

Edward Lazear, chairman of Bush's Council of Economic Advisers (L), and Treasury Secretary Henry Paulson at the White House, October 11, 2006. Lazear said on Wednesday the economy could still meet the White House's economic forecast of 2.7 percent growth this year despite weaker growth in the first quarter.

PARIS (Reuters) - The U.S. economy could still meet the Bush administration's forecast for 2.7 percent growth this year despite a weak performance in the first quarter, White House economic adviser Edward Lazear said on Wednesday.

Weaker exports and a steady slide in spending on homebuilding helped slow U.S. growth to an annual rate of just 1.3 percent in the first quarter, its softest pace in four years.

"We could still make 2.7 percent," Lazear, chairman of President George W. Bush's Council of Economic Advisers, told reporters at a briefing in Paris.

"I mean obviously it's harder when you have a 1.3 percent first quarter and you have to build on that."

He said most economic forecasters were looking for stronger growth in the second half of the year.

"Depending on how much stronger that is, we could certainly be in the range of 2.7 percent: we could even be at 3 percent for the year as a whole," he said.

Second quarter growth would depend partly on the performance of the housing market, Lazear said.

"We don't think it's over yet in a sense that the declines that have already taken place (in housing) will continue to show up in this quarter," he said.

"But there is some evidence that there is a bottoming out."

He said the U.S. current account deficit, which rose to 6.5 percent of the overall U.S. economy last year, had been a source of economic strength.

"There is no question that it's growing. It's something that we watch," he said. "Up 'til this point, it has been a source of our strength."

He said the current account could become a problem if there was an abrupt reversal in capital flows due to protectionism or a squeeze on U.S. businesses from higher taxes.

US JOBS MARKET STRONG

Lazear said the labor market was still strong despite the April payrolls number which showed a modest 88,000 jobs were created in the U.S. economy.

He said one month's data on its own was "not a statistically significant change" but if the trend continued for over several months, "there might be some weakness".

Lazear, who was in Paris for a meeting of the Organization for Economic Cooperation and Development, said the European economy was doing well.

"We've seen very strong growth, particularly in Germany, and

a couple of other countries have turned around," he said, adding that the Japanese economy was in "relatively good shape".

Lazear will be part of a U.S. team meeting with top Chinese officials later this month, as part of the second round of a so-called strategic economic dialogue initiated by Beijing.

"China is a very important partner for the United States and we are certainly an important trading partner for China," he said. "So it's clear that the incentives are very strong to come to some kind of an agreement on some of the thornier issues that have been bothering both nations."

The talks are expected to cover investment, policy transparency, growth, energy and the environment.

U.S. Treasury Secretary Henry Paulson is being pushed by Congress to urge China to let its currency rise in value in hopes that it will slow imports. But Bejing has said it cannot move faster for fear of destabilizing its economy.