May 20 (Bloomberg) -- President Barack Obama told his board of outside economic advisers that the U.S. economy is showing “some return to normalcy” and developing alternative energy sources and boosting exports are crucial to future growth.

Obama addressed the 16-member group, led by former Federal Reserve Chairman Paul Volcker and drawn from the ranks of business, labor and government, as it gathered at the White House today for its first full meeting.

“We expect there’ll be some stabilization of the economy,” Obama said, and that “the engines will start to turn again.” He offered no timetable.

Created to provide outside perspective on the administration’s plans to revive the economy, the President’s Economic Advisory Board will draft recommendations after the meeting that will then be presented to Obama. The topics were energy and jobs.

Members of the panel include General Electric Co. Chairman and Chief Executive Officer Jeffrey Immelt, former Securities and Exchange Commission Chairman William Donaldson, former Fed Vice Chairman Roger Ferguson, UBS Americas Chairman and CEO Robert Wolf, and Service Employees International Union Secretary-Treasurer Anna Burger.

Advice to White House

Since March, the board’s members have been a source of economic advice for administration officials and the president, in constant contact on issues including regulatory reform, job growth and health care.

Payrolls in the U.S. shrank by 539,000 in April, the least in six months, signaling the worst recession in half a century started to ease. Purchases of new homes in March were higher than anticipated even as the median sales price decreased 12 percent from a year ago. Industrial production in the U.S. fell in April at the slowest pace in six months.

Still, the unemployment rate jumped to 8.9 percent last month, the highest level since 1983.

Volcker said told the president and the board “it’s going to take a lot of investment over time” to reshape the U.S. economy in a post-recession era.

“Impressive Consensus’

Obama, seated next to Volcker, said there has been “impressive consensus” on the link between developing alternative sources of energy and creating jobs.

“You’re seeing industry, labor and government working together more cooperatively and in a better spirit” than “in a long time,” Obama said.

He cited the steps he announced yesterday to toughen auto- emissions and fuel-efficiency standards as one such agreement among sometimes competing groups that will aid the economy. Obama said the move “will take a real bite out of oil imports.”

In the discussion about job creation, Obama told the board, “There’s no doubt that manufacturing’s not going to return to the share of the economy that it was in the 1950s, regardless of what our policies are.”

Immelt told Obama that dealing with energy, emissions and climate change can help the economy.

“Clean energy is the most exciting, fastest growing industry in the 21st century,” he said. Immelt said GE’s 70 “energy-efficiency” products are generating about $18 billion of revenue this year, accounting for about 50,000 jobs within the company and “our supply chain” of small and medium companies.

Lead in Technology

“We have to have a broad inspiration to lead in technology” in such areas as coal gasification and nuclear power, he said. “It’s out there to be had.”

Obama is pressing Congress to move forward on energy and climate legislation that would create a market-based cap on greenhouse-gas emissions from utilities and other human sources.

Ferguson, a finance and insurance expert who now is president and chief executive of TIAA-CREF, told Obama that he’ll find there is wide support for climate legislation.

Many people in the finance and insurance industries support this because “think it’s good economic policy as well as social policy,” Ferguson said.

Laura Tyson, a professor at the University of California at Berkley and head of the White House Council of Economic Advisers in the Clinton administration, said afterward that climate change must remain priority for the administration.

“There is the need for the U.S. to lead in this area,” she said in an interview with Bloomberg Television.

Running the Board

While Obama announced the Volcker-led board last November, legal issues establishing the group’s charter, personnel decisions and frictions with National Economic Council Director Lawrence Summers forced a delay in getting the panel running.

Volcker has met with Obama at least 10 times since the president’s January inauguration and is in Washington almost every week, either meeting with Obama and administration officials or speaking to members of Congress, White House economic adviser Austan Goolsbee said.

On regulatory reform, Treasury Secretary Timothy Geithner, White House senior adviser Valerie Jarrett and Summers frequently reach out to Volcker as well as David Swensen, chief investment officer at Yale University, UBS’s Wolf, Donaldson and TIAA-CREF’s Ferguson.

“They had a fairly big influence” on the administration’s decision to roll out its regulatory proposals in pieces, Goolsbee said.

Administration officials emphasize that the board is advisory in nature and not meant to act as a shadow economic entity setting policy. Rather it’s modeled after the Foreign Intelligence Advisory Board, which provides an independent voice outside of regular government channels on intelligence.

To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

Last Updated: May 20, 2009 13:07 EDT