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Federal Reserve Bank of Dallas President Richard Fisher said the U.S. economy will probably undergo an extended period of slow growth while facing “financial headwinds” that will take years to wane.

“We are likely to see a prolonged period of sluggish economic performance and uncomfortably high unemployment as businesses reallocate capital and labor,” Fisher said yesterday in a speech at the University of California in Santa Barbara.

The regional bank chief’s comments echo most policy makers’ concern that the economy will probably recover “only slowly” this year, according to minutes of their Aug. 11-12 meeting. In a sign companies are focused on cutting costs, some 570,000 Americans filed jobless-benefit claims last week, Labor Department figures showed yesterday. The figure exceeded the median forecast of 40 economists surveyed by Bloomberg News.

“Businesses will continue to run tight budgets as they try to preserve profit margins,” Fisher, 60, said at the event sponsored by the Laboratory for Aggregate Economics and Finance. “They will continue to focus on cost control, most painfully by shedding workers and driving those who remain on the payroll to higher levels of productivity.”

“It will be some time before we get back to net job creation,” Fisher said in response to an audience question.

Fed Chairman Ben S. Bernanke has tried to unfreeze credit and revive growth by loaning to banks, providing backstop financing for the commercial paper and asset-backed securities markets, and injecting liquidity through direct purchases of securities.

Markets Recovering

The London interbank offered rate, which measures banks’ willingness to lend, has declined since October, suggesting credit markets are recovering from the seizure that followed last year’s collapse of Lehman Brothers Holdings Inc.

The Standard & Poor’s 500 Index has climbed 50 percent from its March low.

“Markets are still a long way from having normalized,” Fisher said business cards. “We know from our experience and the experience of other countries that financial headwinds like these take years to abate.”

Central bankers extended their $300 billion U.S. Treasury securities purchase program by a month in August and continue buying up to $1.25 trillion in agency mortgage-backed securities and $200 billion in the debt of agencies including Fannie Mae and Freddie Mac.

Federal Open Market Committee members discussed extending the end date of the agency and mortgage-backed bond programs, minutes of the group’s Aug. 11-12 meeting showed.

‘Premature’ Exit

Fed district bank presidents Jeffrey Lacker of Richmond and James Bullard of St. Louis last week said the central bank may not need to complete its purchases of mortgage securities. New York Fed President William Dudley by contrast stressed an exit is “premature,” citing “high unemployment” and weak growth.

“I’m not against completing that process” of purchasing the $1.25 trillion of securities that have been authorized, Fisher told reporters after the speech.

Fisher described himself last year as one of the most “bearish” members of the Federal Open Market Committee. He dissented in favor of tighter policy five times in 2008, and does not vote on the FOMC this year.

“For the immediate future, the risk to price stability is a deflationary risk, not an inflationary one,” he said. Inflation won’t be a significant problem in the intermediate term if “we conduct ourselves appropriately,” he said to reporters after the speech.

Household consumption is probably engaged in “a slow crawl out of purgatory,” Fisher said in his speech, while nonresidential fixed investment may be showing the “beginnings of a modest expansion.”

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