NEW YORK The head of the arbiter of U.S. economic cycles said on Monday that while the U.S. recession will likely be longer than average, it will not even come close to the Great Depression.
"We are in a very different place than the U.S. economy was in the 1930s," James Poterba, president of the National Bureau of Economic Research, told the Reuters Investment Outlook Summit in New York.
"It is possible to have the worst postwar recession without getting anywhere close to what it was in the 1930s, and it is important to remember that," he said.
He said the market's unemployment rate projections of 8 percent to 9 percent are a "far cry from what we traditionally associate with the U.S. economy in the Great Depression."
Nevertheless, he said, "I think there is every reason to suspect that this will be a longer than average recession."
The NBER last week said the recession started in December 2007.
"Given the employment numbers we have seen it is pretty clear that we are in a painful economic period," Poterba said. "We are not going to avoid that and my guess is that we still see more pain before we see better times ahead."
On Friday, data showed the U.S. economy suffered its worst monthly job losses since 1974 in November, with the loss of 533,000 jobs, underscoring the depth of the global financial crisis. The U.S. unemployment rate hit 6.7 percent in November.
Poterba said the length and depth of the recession will depend on policy responses, adding he believes policy-makers have learned from past mistakes.
Both the Treasury and the Federal Reserve have taken a number of aggressive steps to combat the crisis.
"I suspect we will continue to see initiatives that are large by historic standards and unprecedented in some areas as the monetary and fiscal policy side wrestle with the events that we are dealing with," Poterba said.
President-elect Barack Obama on the weekend pledged to create more than 2.5 million new jobs by 2011 and launch the largest investment in U.S. infrastructure since the 1950s. Poterba said it will take time to gauge how Obama's infrastructure program will work and what shape it will take.
Poterba said that given the commitments the government has taken on with its rescues of mortgage finance giants Fannie Mae, Freddie Mac and insurer AIG, "it is clear we are headed for a federal deficit number that is in excess of half a trillion."
"Some have suggested a trillion dollar deficit. That's not an outlandish prediction."
(Additional reporting by John Parry; Editing by Leslie Adler)