Speaking before the Exchequer Club of Washington, U.S. Treasury Secretary Henry Paulson said the stimulus package has supported the economy in the last year.

Paulson said market turmoil and energy prices have dragged on the economy, while the labor market has softened. He added that the key to stabilizing housing and the financial markets is to work through unsold homes. Paulson noted that existing home inventories are expected to remain elevated for some time.

Paulson said the U.S. should be able to get through the housing correction in months, not years. Paulson commented that all parties must work to address systemic risk in GSEs, adding that the turmoil in the housing and financial markets is priority.

Earlier today, the advance U.S. GDP report came in lower than expected for the second quarter of 2008, rising by 1.9% against expectations of 2.3% growth.

Real nonresidential fixed investment increased 2.3% in the second quarter, compared with an increase of 2.4% in the first quarter. Nonresidential structures advanced 14.4% in the second quarter, compared with a previous increase of 8.6% in the first quarter.

By Steve Stecyk and edited by Sarah Sussman