U.S. economy worst since 1970s: GE's Immelt

NEW YORK (Reuters) - The U.S. economy is in its worst shape since the deep recession of 1974 and 1975, and if it deteriorates further the most meaningful comparisons will be to the Great Depression, General Electric Co GE.N Chief Executive Jeff Immelt said on Thursday.

Jeffrey R. Immelt, chairman and chief executive of General Electric leads a discussion with business leaders at an Ecomagination news conference at Universal Studios in Los Angeles, California May 24, 2007. REUTERS/Fred Prouser

“We’re at least to 1974-75,” Immelt said at a Wall Street Journal Executive Breakfast event in New York.

“Once you break through ‘74-‘75, you don’t stop ‘til you get to 1929,” he said. “Unlike the other downturns that I’ve been a part of, this one is faced with limited liquidity. If liquidity exists, it’s not coming back readily. That’s why the government’s role in this cycle is so gosh-darned important.”

He added that in his recent travels to India, Turkey, the Middle East and other places GE does business, the mood is not nearly as bad as in the United States, partly because those places “didn’t have the kind of leverage that we had in this country or in the U.K.”

Government actions taken since the crisis accelerated in September 2008 have “stabilized the credit markets as best as they can be,” Immelt said. “But financial services remains a really difficult place to be. Behind that comes a global recession that has yet to unfold. the mood is really tough.”

Governments around the world are proposing stimulus plans and ways to support the financial sector.

“The governments are all in, and my own view is that the government always wins,” Immelt said.

The question is how long it takes, he said, adding that it was more important for the government to move forward with a large package quickly, rather than worrying about getting the composition of the stimulus exactly right.

The U.S. economy may be among the first to stabilize, he said, but its reversal could take longer than in other countries, he said.

Stabilizing housing prices could indicate a turn in the economy, but it is impossible to say if that turn will come this year or sometime next year. Then, once the economy’s decline is arrested, other problems will take center stage, Immelt said, including big deficits and potential inflation.

Immelt, who described himself as a lifelong Republican, said he would give President Obama an A- or B+ grade for his job as a manager so far, saying Obama has moved quickly to recover from mistakes.

Immelt opposes caps on executive pay for companies receiving government funds, and saw a danger from emerging protectionism that would jeopardize the economy’s long-term growth.

Separately, Immelt said GE continues to run its business with the goal of maintaining its rare AAA credit rating, and has ample cashflow to pay its $1.24 annual dividend. He declined to comment on whether he has considered the benefits of cutting the dividend.

Asked about layoffs at the company, Immelt said job cuts would be decided division by division, with some units laying off many workers and some not losing any.

Reporting by Nick Zieminski, editing by Dave Zimmerman and Derek Caney