Recovery slow and steady - Larry Summers

WASHINGTON (CNN) -- A full economic recovery may be slow to materialize, but the administration's stimulus plan is working and the economy has stabilized over the past few months, a key White House adviser asserted Friday.

Unemployment is likely to rise in the months ahead, National Economic Council Director Larry Summers warned, as the full impact of the $787 billion economic recovery plan is not likely to be felt until 2010.

Nonetheless, he said, "We were at the brink of catastrophe at the beginning of the year, but we have walked some substantial distance back from the abyss."

Business and consumer confidence have increased, he noted, and there are indications that the country's gross domestic product "is on a close to level path with prospects for positive growth to commence during this year."

The national unemployment rate is currently 9.5%, with the recession now in its 18th month.

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As unemployment has continued to climb, the stimulus package, has come under stronger criticism from both the right and the left. Some conservatives have characterized it as wasteful and misguided, while some liberals are now claiming it was not large enough.

Summers, however, defended the plan in part by arguing that it is meeting expectations. White House and independent forecasters, he said, "predicted that only a very small part of the total job creation expected from the recovery act would take place within six months."

The recovery plan was enacted in February.

Summers highlighted a study earlier in the year from the White House Council of Economic Advisers which predicted that only 10% of the total job impact of the stimulus package would take place in 2009.

"Given lags in spending and hiring, the peak impact of the stimulus on jobs was expected not to be achieved until the end of 2010," he said.

Summers also warned that "for quite some time, the United States will be living with the consequences of an over leveraged economy."

The "common desire of households, businesses, and financial institutions to reduce their borrowing and improve their balance sheets will act as a drag on spending and growth," he said.

"While painful, these adjustments are essential to laying a sound foundation for future growth."

Summers made his remarks during an appearance at the Peterson Institute for International Economics, a non-partisan think tank focused on global economic policy. 

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