While many economists are forecasting continued recovery in 2011, one official at the Federal Reserve Bank of New York expects the foreclosure process to remain a drag on the overall economy. Joseph Tracy, executive vice president at the NY Fed, said the housing market continues to pose a significant downside risk to the recovery. He said housing prices are still down in many markets, and considerable excess supply, pushed higher by increased foreclosure levels and time lines, will continue to "exert downward pressure on house prices and new construction." As the pace of foreclosure starts exceeds completed foreclosures each quarter, Tracy estimates "we are only halfway through the resolution process." He said the Great Recession was marked by its severity rather than length. A decline in real output of $1.1 trillion, or 8%, pushed the level of economic growth back to levels of 2006. He said consumption normally slows but remains positive during a recession. But that wasn't the case over the past few years, as demand for durable goods fell and companies cut jobs to realign staff to the lower level of demand. This led to the loss of 7.3 million nonfarm payroll jobs, putting employment at levels last seen in 2000. "The severity of the Great Recession is very apparent when you realize that an entire decade's worth of job growth was lost," Tracy said. There are about 15 million unemployed workers, 9 million working part time for economic reasons, and some 1.3 million discouraged workers who want a job but aren't actively looking for work and therefore not counted as unemployed, he said. Earlier in January, Federal Reserve Chairman Ben Bernanke said he expects U.S. unemployment to remain elevated and be near 8% in 2013. As the economy deteriorated and loan losses mounted, banks tightened their lending standards and credit spreads increased. Tracy said the aggressive monetary and fiscal policy actions undertaken by the Federal Open Market Committee kept the recession from becoming the second Great Depression. Despite the fear of a double-dip recession midway through 2010, economists started increasing their forecasts for economic growth in 2011, as strong data from leading indicators as last year ended showed "the economy was in fact regaining its lost momentum." On Friday, the Commerce Department said GDP growth rose an inflation-adjusted 3.2% in the fourth quarter, possibly indicating the recovery may be beginning to pick up. The acceleration from was up from 2.6% growth in the third quarter, and "confirms that the economic recovery regained some lost momentum over the closing stages of last year," according to Paul Ashworth, chief U.S. economist with Capital Economics. He said growth was driven by a 4.4% increase in consumption, the biggest quarterly gain in almost five years. "With the new payroll tax reduction kicking in on Jan. 1, we expect first-quarter GDP growth to be equally as strong, driven again by a good showing from consumption," Ashworth said. "Nevertheless, we also anticipate a slowdown in GDP growth later in 2011, as the stimulus begins to fade." Write to Jason Philyaw.