US economy recovering but at slow rate - Buffett

OMAHA, Nebraska (AP) — Billionaire Warren Buffett said Monday the US economy is improving but at a very slow rate and consumers are still not spending much, so job growth will remain slow.

Buffet appeared on the CNBC cable network for three hours Monday morning — two days after releasing his annual letter to Berkshire Hathaway Inc. shareholders — and the addressed a range of topics, including health care reform and succession at his company.

Buffett said the reports he receives from Berkshire’s 80 subsidiaries don’t show much improvement. And most of Berkshire’s businesses, especially retail and manufacturing businesses, are still performing worse than they were two years ago before the height of the crisis.

“It’s getting better, but at a very, very slow rate,” Buffett said.

Berkshire owns clothing, furniture, jewelry and corporate jet firms, but its insurance and utility businesses accounted for one-third of the company’s profit last year. Its net income jumped 61 percent in 2009 to $8.1 billion largely because the value of its investments and derivatives rose sharply.

Buffett said he expects job growth will remain slow until demand recovers. For instance, Buffet said Berkshire’s Shaw Carpet and Acme Brick subsidiaries both laid off thousands of employees over the past couple years as housing construction slowed. Buffett said Acme and Shaw will definitely employ more people three years from now, but won’t necessarily hire new employees in the next six months.

“The jobs will come back, but it won’t be fast,” he said.

Buffett said health care costs are a major drain on US businesses that put them at a competitive disadvantage. He said America’s health care system needs fundamental reform to attack costs because it’s not practical to continue devoting roughly 17 percent of the nation’s gross domestic product to health care.

Buffett said much of the rest of the world is paying about nine percent of their GDP on health care and have more doctors and nurses per person.

“That kind of a cost, compared with the rest of the world, is like a tapeworm eating at our economic body,” Buffett said.

He said he hopes Congress will develop a new health care reform proposal that will restrict costs more than any of the current plans would.

“Unfortunately, we came up with a bill that does not deal with the cost system much,” Buffett said.