Oct. 9 (Bloomberg) -- White House economic adviser Lawrence Summers rejected the notion that the U.S. faces an extended period of below-average growth and high unemployment in the wake of the worst recession since the 1930s.

“I would be very reluctant to accept the idea that the American economy no longer has the potential to grow rapidly,” Summers told a forum in New York yesterday organized by Bloomberg LP, the parent of Bloomberg News. “The American people have not become less capable of entrepreneurship. They have not become less dedicated to hard work, and the productive potential of this economy has not declined.”

Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., has said the U.S. is entering a “new normal” -- a sustained period of annual growth of about 2 percent where credit and jobs are less plentiful. In the five years before the recession began at the end of 2007, gross domestic product expanded at an average annual rate of 2.8 percent.

Summers, 54, also repeated the administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner, and he said it’s in China’s interest to reduce its dependence on exports to fuel economic growth.

“He made it very clear that our commitment is to a strong dollar based on strong fundamentals,” Summers said in reference to remarks by Geithner.

Dollar’s Decline

The dollar yesterday fell to its lowest level in almost 14 months against the currencies of six major U.S. trading partners amid signs the global economy is beginning to recover from the recession and as investors seek higher-yielding assets.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, reached 75.767 yesterday in New York, the weakest level since August 2008.

Geithner said Oct. 3 that “it is very important to the United States that we continue to have a strong dollar.” His comments came after policy makers from China to Russia called for an alternative to the world’s main currency in foreign- exchange reserves.

China, the world’s third-largest economy, has amassed a record $2.13 trillion in currency reserves, and it has used some of those reserves to purchase $800.5 billion of U.S. Treasury securities as of July.

“It’s very much in China’s interests, as its economy grows, to be less dependent on exports as the principal engine of economic growth,” Summers said.

‘Normal Conditions’

In the U.S., Summers said there has been a “substantial return to more normal conditions,” citing economists’ estimates that the economy returned to growth in the third quarter following a recession that began in December 2007.

“We’re looking at a very different economic situation,” he said. He added: “We’re in no position to rest, no position to declare victory.”

He called the $787 billion stimulus package approved by Congress earlier this year “a profoundly important and positive step” on the road to recovery, even as he warned about continued high unemployment.

“We’ve got a substantial period ahead of us until we get back to a fully satisfactory state for the American economy,” he said.

The jobless rate rose to 9.8 percent last month, the highest since 1983, and it is forecast by economists to reach 10 percent by the end of the year.

Payrolls Drop

Payrolls dropped by 263,000 in September, exceeding economists’ forecasts. September’s losses brought total jobs lost since the recession began to 7.2 million, the biggest decline since the Great Depression.

Obama and his advisers are considering a mix of spending programs and tax cuts beyond the stimulus measure, although Summers declined to specify which measures are under consideration.

“We’re carefully studying the experiences that have been accumulated to date,” Summers said yesterday. “There has not been a day when the president and the members of his economic team have not been thinking about strengthening the American economy.”

On the Obama administration’s push for an overhaul of financial regulations, Summers said changes are needed after major economic upheavals every three or four years, such as the collapse of hedge-fund Long Term Capital Management in 1998, and financial crises in Southeast Asia and Mexico.

As lawmakers begin debating Obama’s proposals, rejecting some of his recommendations and changing others, Summers said the administration is not “committed on any precise matter of detail,” although it wants action taken soon.

“If you don’t move quickly when the crisis is fresh in mind, you may not move at all,” he said.

To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net

Last Updated: October 9, 2009 00:00 EDT