By Mike Dorning Feb. 5 (Bloomberg) -- White House economic adviser Lawrence Summers expressed confidence the U.S. will see employment growth as the economic recovery strengthens. “We’re not going to be out of the woods by any stretch, but I suspect six months from now people are going to feel that this recovery is better established than they do today,” Summers said in an interview to be broadcast on Bloomberg Television’s “Conversations with Judy Woodruff” at 6 p.m. New York time today. Summers added the nation is not “too far” from the beginning of a rebound in jobs. He said economic recoveries normally play out “in a sequence” that begins with growth in gross domestic product and then the length of the average work- week, both of which have already occurred. Growth in payrolls follows and eventually the unemployment rate drops, he added. A Labor Department report today may show that nonfarm payrolls rose by 15,000 in January, according to the median forecast in a Bloomberg News survey of economists. Employment has grown in only one previous month since the end of 2007, by 4,000 jobs last November. Summers also pressed the case for passage of the Obama administration’s financial regulatory overhaul this year. “American consumers will be much more vulnerable to being ripped off than they need to be” if the plan isn’t passed, he said. “Taxpayers would be at greater risk of having to be called on again for bailouts.” Bank Tax He defended the tax the president has proposed on large banks to recover the costs of rescuing financial firms. Summers said it’s not “punitive” for the government to “seek to recoup just its direct outlays of cost, that’s a small, small fraction of their profits or market value.” Summers said he supported Obama’s proposal last month to bar commercial banks from using their own capital to conduct proprietary trading or from owning hedge funds and private equity funds. Still, he said he didn’t regret promoting legislation, signed by President Bill Clinton in 1999, that repealed the Glass-Steagall Act’s separation of commercial from investment banking. Summers pointed to the performance during the financial crisis of banks in Canada, which permits banks to combine commercial and investment banking. “If you ask which country’s been most successful in weathering these financial problems, Canada has a banking system with so-called universal banking,” Summers said. Regulatory Failures He attributed the crisis to the failures of regulators who supervised the banking system. “The failures took the full form of regulators who were asleep at the switch, who didn’t recognize the erosion of capital and liquidity positions,” Summers said. Summers downplayed friction between the U.S. and China, including charges that a recent computer attack targeting Google Inc. came from China. The relationship between the two nations is resilient enough to withstand occasional dust-ups, he said. “This is a mature relationship,” Summers said. No one is under the “illusion that there’s going to be agreement in every area.” To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net.

Source