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Much work remains to achieve maximum U.S. employment and stable prices, and the central bank will do its part, an influential Federal Reserve official said on Friday.

The pace of the U.S. economic recovery remains “sluggish” and is likely to slow somewhat this year, New York Fed President William Dudley said in prepared remarks. Unemployment is likely to remain “unacceptably high” for some time, he added, while inflation is likely to be below the Fed’s new 2-percent objective for several years.

“Clearly, much work remains to achieve the Fed’s dual mandate of maximum sustainable employment in the context of price stability,” Dudley said in a briefing to media.

The Fed, which has kept interest rates near zero for more than three years, “has done and will continue to do its part in supporting the recovery - but it is not all-powerful,” he added.

“Other complementary policy actions in housing, fiscal policy and structural adjustment or rebalancing of the economy will be essential if we are to achieve the best available recovery free business cards.”

Besides the low rates, the Fed has also bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades. Yet the recovery has been slow and the outlook issued by the Fed this week was bleak, leading the central bank to say it expects to keep rates “exceptionally low” at least through late 2014.

Dudley, a permanent voter on the Fed’s policy-setting committee, added that he expects “moderate” growth this year, and warned the risks are skewed to the downside in part because of Europe’s debt crisis. The economy continues to operate with “significant excess slack,” he said.

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An unusual small claims lawsuit by a Honda hybrid owner took another complicated turn Wednesday with additional arguments that prompted a commissioner to delay a ruling for more consideration.

Superior Court Commissioner Douglas Carnahan said he was aware of “a media blitz on this case,” and wanted to be clear on all of the issues raised by Honda owner Heather Peters.

Peters told the court she was anxious to get the matter resolved and did not want to waste the court’s time.

“You’re not wasting the court’s time,” said Carnahan. “These are serious issues affecting more people than just you.”

Honda representative Neil Schmidt showed up for the hearing with a stack of envelopes that the commissioner estimated as 8 inches high, purportedly containing letters from satisfied Honda owners.

Carnahan declined to open the envelopes, saying it would just prolong the hearing that has already gone on longer than most small claims court actions.

Peters said she did not want to see the letters and had submitted her own testimonials from those who are dissatisfied with the cars.

“I’ll stipulate there are people who love their cars,” she said as she pointed to the audience where six other disappointed Honda owners were seated, including a woman who drove from Sacramento to attend the hearing.

The woman, Kathy Wood, of Elk Grove said outside court, “I drove from Sacramento because if she can do all this that’s the least I can do.”

Peters, a former lawyer, has been using the Internet to try to rally other Honda hybrid owners to follow her example and go to small claims court rather than accept a proposed class-action settlement by Honda.

Peters bought her car in April 2006.

Peters claimed the car never came close to the 50 miles per gallon (21.26 kilometers per liter) promised and that it got no more than 30 miles per gallon (12.75 kilometers per liter) when the battery began deteriorating. She still owns the car and wants to be compensated for money lost on gas, as well as punitive damages.

She bolted from a class-action lawsuit in order to sue for $10,000 rather than agree to a proposed settlement by Honda with thousands of car owners that would give each owner $100 to $200 and a $1,000 credit on the purchase of a new Honda.

She has said that if all owners of the problem cars won in small-claims court, it could cost Honda $2 billion

Wood said she is planning to opt out of a class-action suit.

“I’m never buying a Honda again,” Wood said.

Schmidt presented charts that he said showed that even with the decreased mileage, Peters benefited from having the car. She called his calculations “laughable.”

“If Honda snuck into my garage and siphoned gas out of my car, that’s a crime,” Peters told the commissioner. “That’s what they’re doing.”

Honda also sent Darren Johnson, its manager in charge of certifications, to explain how Honda tests its vehicles in relation to tests by the environmental protection agency.

Schmidt claimed there was no fraud and said “we’re being sued for telling the truth and she actually benefited from having the hybrid.”

Carnahan said he was taking the matter under submission and would have a ruling probably next week or at least before the Feb. 11 deadline for people to opt out of the class action case.

Outside court Peters said, “I feel great. I did my best. However he decides it I’m happy I did it. It’s brought to light a lot of background stuff that people should know.

“I’m the trailblazer here,” she said, “and everyone else can follow what I did.”

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The war of words between Europe and private investors heated up Tuesday as talks to reduce Greece’s massive debt burden hit an impasse.

While the finance ministers of the countries that use the euro as their currency adopted a tough stance on how much rescue money they would pump into the Greek economy, the head of the group that represents the country’s private creditors _ banks and other investment firms _ warned that the future of Europe was being threatened if a voluntary debt reduction deal over Greece was not agreed.

Charles Dallara, the managing director of the Institute of International Finance, warned that Europe was putting “decade of progress at risk” over the management of Greek debt-reduction talks, which stalled over the weekend.

“European stability is at stake as well,” Dallara said in Zurich in a press conference.

On the front line of Europe’s sovereign debt crisis, Athens is trying to get its private creditors to swap their Greek government bonds for new ones with half their face value, thereby slicing some euro100 billion ($130 billion) off its debt. The new bonds would also push the repayment deadlines 20 to 30 years into the future.

However, the main stumbling block over the past few weeks to securing this deal has been the interest rate these new bonds would carry. A high interest rate could buffer losses for investors, but would also require the eurozone and the International Monetary Fund to put up more than the euro130 billion ($169 billion) in rescue loans they promised in October.

Dallara said the private creditors, which include banks, insurance companies and hedge funds, were acting in good faith and that the proposal made last week was in the spirit of last October’s agreement. At that time, Europe’s leaders said Greece should look to reduce the value of its private sector debts by 50 percent, or euro100 billion ($130 billion).

In the early hours of Tuesday, eurozone politicians drew a firm line on the Greek debt restructuring.

Jean-Claude Juncker, the Luxembourg prime minister who chaired a meeting of finance ministers on efforts to fight the crisis, said the average interest rate over the lifetime of the new Greek bonds must be “clearly below 4 percent,” with an average rate of less than 3.5 percent for the period until 2020. That is far below the 4 percent demanded by the Institute of International Finance, which has been leading negotiations for the private bondholders.

The European ministers’ tough stance on the interest rates underlines how the eurozone and the IMF are unwilling to increase new rescue loans above the promised euro130 billion, even though Greece’s economic situation has deteriorated. After already granting Greece a euro110 billion bailout in May 2010, the eurozone and the IMF are threatening to withhold further funding for the country, which has repeatedly failed to hit budget and reform targets required in return for the financial aid.

The interest rate caps will also seriously test the willingness of private bondholders to agree to a debt deal voluntarily.

Dallara said talks would continue over the coming days, adding that he was confident there would be “large-scale” participation by the private sector if a “voluntary” deal is clinched.

However, he refused to put a deadline on the discussions.

Given the complexity of the negotiations and the legal consequences that would ensue, many analysts think a deal has to be agreed soon if Greece is to meet a vital bond repayment deadline in March.

If it can’t pay its bond, Greece would be in default of its debts, a scenario that could lead to renewed panic in financial markets and potentially derailing a feeble global economic recovery.

Dallara said Europe must keep the support of the private sector, given the massive amounts of debt that have to be refinanced from France to Portugal.

He added that there wasn’t a country that didn’t need investment from the private sector.

“Investors need to feel confident in their investments … in sovereign debt,” he said.

Before Dallara’s latest comments, German Finance Minister Wolfgang Schaeuble said the current impasse was a normal part of difficult negotiations.

“We continue the negotiations (with investors) as happily, but also as little susceptible to blackmail as possible,” he told reporters in Brussels. “That exists in every bazaar _ a final offer _ one shouldn’t let oneself be overly impressed by that.”

The alternative to a voluntary deal would be to force losses on to investors _ a move that the eurozone has so far been unwilling to make. Some officials fear that a forced default could trigger panic on financial markets and hurt bigger countries like Italy, Spain or even France.

But several ministers indicated that they might be willing to accept a forced default if it puts Athens in a position where it can eventually repay its remaining debt _ including the rescue loans from the eurozone and the IMF. The eurozone has said that Greece’s debt is sustainable if it falls to some 120 percent of gross domestic product by 2020. Without a restructuring it would reach close to 200 percent by the end of the year.

Even Olli Rehn, the EU’s Monetary Affairs Commissioner, said that forcing some holdouts to accept a restructuring that has the support of the majority of bondholders would be acceptable.

“That is possible within the framework of achieving a voluntary agreement on private sector involvement,” Rehn said, referring to so-called collective action clauses that Greece could write into its old bond contracts to allow majority decision making. The Commission has so far always been opposed to any forced losses for investors.

But ministers also put the pressure on Greece to reach a manageable debt level by bolstering its reform and austerity measures.

“Greece and the banks have to do more in order to reach a sustainable debt level,” Dutch Finance Minister Jan Kees de Jager told reporters as he arrived for a second day of meetings with his European counterparts. “We have to await the discussions about that because a sustainable debt level is absolutely a precondition for the next (rescue) program.”

Schaeuble also insisted that firm support for new austerity measures from all major Greek parties _ including after elections expected in April _ was a precondition for a new bailout.

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Pan Pylas in Zurich and Nicholas Paphitis in Athens, Greece, contributed to this story.

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Thousands of Romanians, including teenage students who cut class, marched through their capital on Thursday to demand the resignation of their government for imposing harsh austerity measures in order to receive international loans for the nation’s battered economy.

It was one of the largest protests in recent times in Bucharest and came after a week of sometimes violent anti-government demonstrations.

As the march reached University Square, protesters blocked traffic and shouted what has become a trademark slogan aimed at President Traian Basescu: “Get out, you miserable dog.”

The square _ a focal point of recent protests _ is historically significant for Romanians because it was a centerpiece of the 1989 anti-communist revolution that led to Romania’s birth of democracy.

On Thursday, some protesters pretended to hang Basescu and his close political ally, Tourism and Regional Development Minister Elena Udrea, by stringing their dummies to gallows set up in the square.

“Resign!” and “Down with Basescu!” other protesters screamed.

Some 14-year-old students at a school located along the route of the march abandoned class to join the demonstration. “To prison with you!” the students yelled at their president.

Police said 7,000 attended the rally, while organizers claimed the crowd was far larger.

In 2009, Romania took a two-year euro20 billion ($27.5 billion) loan from the International Monetary Fund, the European Union and the World Bank as its economy shrank by 7.1 percent. It imposed harsh austerity measures under the agreement, reducing public wages by 25 percent and increasing taxes. Anger has mounted over the wage cuts, slashed benefits, higher taxes and widespread corruption.

On Thursday, Basescu made his first public appearance since the protests began a week ago in an address to ambassadors in Bucharest. He spoke about Iran, the Middle East, domestic reforms and the “Arab Spring,” but did not touch on the demonstrations or the anger over the state of Romania’s economy.

During the Bucharest rally, one protester who only identified himself as Tudor, a 43-year-old locksmith said: “We want decent salaries and pensions. We want change _ from the top to the bottom.”

Another protester, a 55-year-old nurse named Lorelei said, “We wouldn’t have needed to have austerity measures if our governments hadn’t stolen so much and bled us dry.” She said she has attended all this week’s anti-government rallies.

Three opposition parties organized Thursday’s march, with protesters arriving in the capital from all over the country. Opposition leaders and Romanian personalities addressed the crowd before the march.

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Foreign direct investment in China fell for the second straight month in December as global financial turmoil dimmed companies

Banks are hoarding the European Central Bank

So the U.S. economy added hundreds of thousands of jobs last month and everything is fantastic, right?

Well, not exactly. More than 40,000 of those jobs were couriers and messengers, which were in demand during the holidays because of the increased focus on online shopping rather than retail. But these jobs tend to be temporary seasonal hires and not permanent additions.

"People are happy to get those jobs for the time they have them, but come January, they’re out looking for jobs again," said Dean Baker, co-director of the Center for Economic and Policy Research.

The U.S. Labor Department reported that the economy added 200,000 jobs, which was stronger than economists expected, and the unemployment rate dipped to 8.5%.

Obama proposes pay hike

But spokeswomen for FedEx (, Fortune 500) and UPS (, Fortune 500) confirmed that they increased temporary hiring during the 2011 holiday season even more than the year before. However, many of those jobs have already evaporated.

"The hiring boost this holiday season was greater than the prior holiday season," said Kara Ross of UPS, noting that her company hired 55,000 temporary workers for the 2011 holiday season, an increase of 5,000 from the year before credit reports free.

Ross said that many of those new hires were drivers, driver helpers, loaders and unloaders. Many of them won’t remain on the payrolls after the holiday season, she said, though the level of attrition is yet to be determined.

"It just depends on our volume loads," she said. "Some of them we might keep on; some of them we might not."

Carla Boyd of FedEx said her company hired 20,000 temporary seasonal workers from October to December, an increase of 17,000 from the prior holiday season.

Unemployment rate, state by state

"There’s an incredible holiday surge," said Boyd. "We had our busiest day in history on Dec. 12."

On that day, FedEx had 17 million shipments, compared to the year-ago holiday peak of 15.6 million. But the annual average is 8.5 million, so FedEx doesn’t need that many workers year-round.

"The problem is that you have a lot of reporters touting this as a really strong report, and if that creates a view among policy makers that the economy is on the mend, then that undermines the need to do anything," said Baker. 

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Europe won modest respite from its debt crisis Wednesday as Germany and Portugal borrowed with relative ease ahead of a hazard-filled few weeks for the 17 nations that use the euro.

But Greece’s new prime minister warned that his debt-crippled country has only three months to come up with new reforms so his country can stay in the eurozone and avoid a potential default _ a reminder of how the crisis can flare up at any time. And the news that a major Italian bank had to offer an unexpectedly large discount to raise new capital showed just how wary investors are of Europe’s shaky banks.

So far this year, markets have pushed concerns about Europe to one side, especially as countries have managed to raise the money they need.

Germany, the biggest contributor in Europe’s bailouts, managed to sell euro4.06 billion ($5.3 billion) in its benchmark ten-year bonds Wednesday at an average yield of 1.93 percent, down on the previous 1.98 percent it had to pay. And Portugal, which was bailed out last April, paid a markedly lower interest rate to borrow euro1 billion ($1.3 billion) in three-month treasury bills.

But Italian bank UniCredit saw its share price tumble over 10 percent on the news it was selling new shares at a large 69 percent discount to Tuesday’s closing price. UniCredit is trying to raise euro7.5 billion ($9.8 billion) to meet new European requirements for banks to thicken their financial cushions against possible losses.

Banks are an integral part of the debt crisis because they hold government bonds. A default or steep fall in the value of government bonds could inflict heavy losses on banks and choke off credit to the European economy. That’s why the regulatory authorities want Europe’s banks to raise their buffers by euro115 billion ($150 billion) over the next few months.

The German and Portuguese auctions come ahead of severe tests for eurozone leaders as they try to navigate their way out of a crisis over too much debt in some countries.

Eurozone governments are struggling to convince financial markets that indebted governments will not default and should be able to borrow at affordable rates to repay debts as they come due. Greece, Ireland and Portugal have needed bailouts, while much larger Italy and Spain have seen their borrowing costs rise ominously.

Italy, the recent focus of the crisis, must borrow to cover euro53 billion ($69 billion) in expiring debt in the first quarter alone in debt auctions beginning Jan. 13. That will test whether the government of new Prime Minister Mario Monti is making progress in regaining market confidence through budget cuts and efforts to improve weak economic growth.

Further trouble could come from a slowing eurozone economy that may already have shrunk in the fourth quarter.

Additionally, Greece must also win approval of a second, euro130 billion ($169 billion) bailout, without which it can’t pay its debts, and strike a deal with creditors for a 50 percent reduction in their holdings of Greek debt to try to put the country back on its feet.

Greek Prime Minister Lucas Papademos warned union leaders and business groups Wednesday that decisions made in the next few weeks, ahead of a new visit by international debt inspectors, will determine whether Greece remains in the 17-nation eurozone or reverts to its pre-2002 currency, the drachma.

Portugal looks like it’s in better shape at the moment. The rate it had to pay at its auction fell to an eight-month low of 4.346 percent. Although Portugal cannot tap long-term bond markets at a reasonable price, it has sought to maintain a market presence by issuing shorter-term debt.

Analysts said the improvement may represent a sign that Portugal is regaining the markets’ confidence as it carries out spending cuts and revenue increases in return for its euro78 billion ($102 billion) bailout.

“There’s been an improvement in the risk perception of Portuguese debt, which has driven rates down” said Filipe Silva, debt manager at Portuguese financial group Banco Carregosa. “Now we just need to see whether it holds.”

Germany’s auction was better than one in November which raised fears that Europe’s debt crisis was spiraling out of control when the government sold only 65 percent of debt on offer.

Still, there was some concern over the amount of German bunds investors actually wanted Wednesday. Bids for euro5.14 billion ($6.7 billion) worth of bonds exceeded the full amount on offer of euro5 billion ($6.5 billion), but only barely, counting euro943 million ($1.23 billion) the government kept back for secondary market operations.

“Yes, it was covered, so that’s a relief,” said Marc Ostwald, a markets strategist at Monument Securities. “On the other hand, the coverage was poor.”

Germany can borrow cheaply because its economy is the strongest in the eurozone but concerns about the costs of bailing out fellow eurozone nations have raised questions about Germany’s finances as well.

Wednesday’s auction results follow a recent trend. On Tuesday, the Netherlands saw its borrowing rates fell to near zero percent in a pair of short-term auctions, in a sign that investors are searching out what they consider to be Europe’s safer assets.

Italy also sold large chunks of debt last week and analysts say the run of smooth auctions may be largely due to a massive euro489 billion ($636 billion) infusion of cheap, 3-year credit to eurozone banks by the European Central Bank.

Some of that cheap money may be being used by some banks to buy higher-yielding short-term debt. Italy’s longer-term borrowing rate in the markets remain at dangerously elevated levels near 7 percent, a point that prompted Greece, Ireland and Portugal to seek bailouts.

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President Barack Obama is pushing his economic message in Ohio, brandishing his presidential megaphone in a politically important state to make certain his appeal to the middle class is heard amid the boisterous start of the Republican campaign for the White House.

Obama was traveling Wednesday to the most Democratic congressional district in Ohio, a Cleveland suburb, a day after Mitt Romney won Iowa’s Republican presidential caucuses by just eight votes. Obama’s trip signals the White House’s intent to keep the president in the public eye even as the political world focuses on the GOP’s selection process.

The White House’s choice of Ohio for Obama’s first presidential trip of 2012 underscores the state’s high-profile role in presidential politics. It is a swing state that went for George W. Bush in 2004 and for Obama in 2008. A top manufacturing state, Ohio has seen its jobless rate follow the national pattern; unemployment was 8.5 percent in November compared with 9.6 percent a year before.

Obama set the tone Tuesday for a White House strategy that aims to maintain pressure on congressional Republicans while promoting an economic plan that serves as much as a policy prescription as it does a political platform for the general election.

Addressing Iowa Democrats by teleconference as the GOP caucus counting was still under way, Obama described Republicans as embracing a “theory that says we’re going to cut taxes for the wealthiest among us and roll back regulations on things like clean air and health care reform, Wall Street reform, and somehow that automatically that assures that everybody is able to succeed.”

“I don’t believe that,” Obama declared.

Pressing his economic agenda, Obama has said expanding the middle class is “the defining issue of our time.” His spokesman, Jay Carney, on Tuesday called it “his No. 1 focus.”

As defined by the president and by his advisers, his economic argument is that the middle class is facing a “make or break moment.” On that score, Obama still has a few confrontations with Congress in the year ahead.

He still wants to extend a payroll tax cut for all of 2012. Republicans avoided being blamed for a tax increase last month when House GOP leaders agreed to a two-month extension personal loans for people with bad credit. A longer version will have to be decided by the end of February. Obama is also likely to point to elements of a jobs package he advanced last year that failed in the face of Republican opposition.

Obama is also at odds with Senate Republicans over his nomination of Richard Cordray as head of the Consumer Financial Protection Bureau, a central feature of new bank regulations that Congress approved and Obama signed in 2010. Republicans are blocking Cordray’s appointment, effectively hamstringing the bureau’s work. Battling Wall Street overreach has been a recurrent Obama theme as he advocates for the middle class.

Signaling that he would continue to draw sharp lines between the middle class and the wealthy, Obama told the Iowa Democrats in his videoconference Tuesday that he would insist on the rich paying more in taxes.

“If we’re going to make the investments that we need for our kids at the same time as we’re controlling our deficit, then there’s nothing wrong with saying to millionaires and billionaires that we’re going to let your tax cuts expire,” Obama said. “The other party has a fundamentally different philosophy.”

Administration officials say they were especially encouraged by the public’s response to Obama’s call for extending the payroll tax cut and indicate Obama will make such appeals repeatedly to gain leverage over Congress and Republicans, in particular.

“There are more things that need to be done,” Carney said Tuesday. “There are elements of the jobs act that we believe, as we did from the beginning, merit bipartisan consideration and support. This country is in crying need of work on its infrastructure.”

In speaking at Shaker Heights High School on Wednesday, Obama is returning to a Cleveland suburb that he visited in 2009 while pushing his health care overhaul plan. Obama also planned to meet with a family at their home, a tactic Obama has employed before to personalize his agenda.

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