WASHINGTON - Americans could face higher unemployment for some time to come, President Barack Obama warned on Wednesday, underscoring the tough challenges the country faces even as the economy shows signs of stabilizing.

Obama, speaking to a meeting of his 16-member Economic Recovery Advisory Board headed by former Federal Reserve chief Paul Volcker, said he was encouraged by signs of normalcy in the financial markets and hints the economy was steadying -- though he remained concerned in the long run.

One of the things that we're wrestling is how do we deal with job creation and employment, Obama said.

The concern that we have is that even in a stabilizing situation there is the prospect of higher unemployment for some time to come, Obama said, noting the decline of U.S. manufacturing and changes in the global economic picture.

The U.S. unemployment rate rose to 8.9 percent in April, the highest since 1983, following months of heavy job losses stemming from the global financial crisis.

There have been some signs the worst of the U.S. recession could be over, and Treasury Secretary Timothy Geithner told a Senate panel on Wednesday the U.S. financial system was starting to heal after a period of severe trauma.

But continued high unemployment levels could be risky for Obama as he seeks to maintain political momentum to enact major initiatives on climate change and U.S. healthcare and carry into next year's mid-term congressional elections.

GREEN JOBS

Obama sought to highlight the job prospects created by one of his chief policy initiatives: reducing greenhouse gas emissions blamed for global warming and moving the U.S. economy off its heavy reliance on oil.

Clean energy is obviously a huge opportunity for job creation, Obama told the panel, which includes GE chief executive Jeffrey Immelt and Caterpillar CEO Jim Owens, underscoring his interest in the market-based cap and trade system now under consideration in Congress.

A Reuters survey showed Democrats on the House Energy and Commerce Committee had enough votes to approve that bill, which Republicans have warned could spell economic pain.

Panel member Richard Trumka, secretary-treasurer of the AFL-CIO labor federation, said there was great potential for the United States to lead in job-creating clean energy exports. But he voiced concern that free trade agreements the administration was considering would disadvantage American business in global competition.

Volcker's role in advising Obama is of keen interest to many on Wall Street, where the 81-year-old former central banker remains a towering figure known for breaking the back of runaway inflation during the 1980s.

He remained silent through most of the meeting while Obama led the discussion, although the two met privately earlier.

Manufacturing Barack obama Timothy geithner