NEW YORK — The Obama administration's budget director defended its $787 billion stimulus package, saying the heavy spending was necessary to rescue the economy and that the plan is "on schedule" to produce the intended results.

NEW YORK — The Obama administration's budget director defended its $787 billion stimulus package, saying the heavy spending was necessary to rescue the economy and that the plan is "on schedule" to produce the intended results.

Speaking before the Council of Foreign Relations in New York, Peter Orszag said it was "misleading" to judge the effectiveness of the stimulus package based on unemployment — which hit a 26-year high of 9.5 percent in June — and which he expects will stay high for the "next few quarters."

"Only a very small part of the total job creation expected from the Recovery Act would take place by the end of the second quarter," Orszag said.

"We expect the unemployment rate to remain stubbornly high over the next few quarters even if economic activity itself picks up steam," Orszag said. "Job losses may not be as severe, but job growth will not return for some time."

To create enough jobs to cut unemployment, the economy must grow about 2.5 percent a year, he said.

The Fed sees the economy shrinking between 1 and 1.5 percent this year and growing between 2.1 and 3.3 percent in 2010.

Workers could be delaying retirement after their savings took a hit, slowing new hiring, Orszag said. Not being able to sell a home in the current housing slump also is impeding moves to improve the job market, he added.