Washington  - US president-elect Barack Obama warned Thursday that the recession in the United States could grow "dramatically worse" and last for years unless "bold" policies are enacted to reverse the trend.

Unemployment could rise into double digits and the US economy could lose 1 trillion dollars of its capacity as the country copes with the poorest economic conditions since the Great Depression of the 1930s, Obama said.

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said in a major speech on the economy at George Mason University, just outside Washington in Fairfax, Virginia.

Obama and his economic advisors are working on a stimulus plan that could reportedly reach up to 1 trillion dollars to pump money into the economy by investing in infrastructure projects, healthcare, education and alternative energy sources. Obama wants the plan ready for congressional action after he takes office January 20.

Obama, giving his first speech since the November 4 election, has largely kept quiet on foreign policy issues and the violence in the Gaza Strip - deferring to President George W Bush - but has weighed in on domestic policy because of the dire economic situation.

The president-elect acknowledged that his stimulus plan will increase the federal deficit beyond the current mark of 1.2 trillion dollars, but said that government spending was the only way to pull the economy out of its current downward spiral.

"But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy," Obama said.

He blamed the economic crisis on bad corporate decision-making on Wall Street, where risky loans designed to boost profits faltered, sparking a crisis in the finance industry and a credit freeze that quickly engulfed the rest of the economy.

"We arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington," Obama said.

He said regulatory scrutiny of Wall Street business practices was too ineffective and that Washington must move to create better oversight. He also called on Congress to cut wasteful spending on pet projects in their home states or districts.

"The result has been a devastating loss of trust and confidence in our economy, our financial markets and our government," Obama said.

The Bush administration in October launched a 700-billion-dollar rescue package for the finance industry, but it has not yet succeeded in reviving the economy or restoring credit, which is the lifeblood of the US economy.

Risky mortgages by the finance firms have promoted record home foreclosures. Unemployment has reached 6.7 per cent and hundreds of thousands of more job losses are expected to be reported Friday.

Obama's stimulus plan is also expected to include tax cuts for lower- and middle-class workers. Obama announced on Wednesday that he would aggressively go after wasteful congressional expenditure, and was creating a watchdog position in his administration to identify unnecessary spending in the federal budget. (dpa)