Household debt has also fallen steadily for nearly two years as homeowners tightened belts to better survive the financial crisis. Debt as a share of disposable income has declined from a record high of 131 percent in the first quarter of 2008 to 123 percent in the fourth quarter of 2009, Krueger said.
Unemployment remains a persistent problem, however. Krueger said about 44 percent of jobless workers have been out of work for 27 weeks or more, which is a new record.
"Economic conditions continue to improve, but challenges remain, including the high unemployment rate and large government budget deficit," Krueger said. "Nevertheless, the outlook for the economy is positive."
The Obama administration sees real GDP rising to 3 percent this year, with faster growth in 2011. Unemployment is also expected to abate as the economy strengthens. However, the unemployment rate normally declines slowly as jobs are usually a lagging indicator when determining the health of the economy.
"Improvement in the economy will also lead to smaller near-term government budget deficits, but significant policy changes will be required to move the budget to a fiscal sustainable path in the medium and long run," Krueger said.