Cleveland Fed president says housing remains weak link in recovery
Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, says the housing sector remains one of the most "unforgiving aspects" of the recession. "Home values have not rebounded, and a large number of properties remain available for sale," Pianalto told the University of Akron Alumni Panel. "Many homes remain in the foreclosure pipeline, and we are looking at well over a year before the number of bank-owned properties begins to decline significantly." Pianalto paints the problems in the housing sector as a "drag on economic growth" since investments in home construction and improvements boosted America out of past recessions. "But in this recovery these investments have actually fallen," she said. Even still, Pianalto believes the recovery is on "firmer footing," projecting annual GDP growth at 3%. Meanwhile, new risks could threaten the pace of the recovery, with energy prices shooting up and political unrest in the Middle East and North Africa threatening international stability and a disruption in the energy sector. "If the spike in oil prices is sustained, it will potentially slow the pace of GDP growth," she said. "But these effects would be tempered by the fact that energy is less central to the service sector, which now represents about 60% of our economy, and even manufacturers and other large users of energy are far more energy efficient than they once were." Write to Kerri Panchuk.