Federal Reserve Chairman Alan Greenspan, in his remarks to the U.S. securities industry, said an improving U.S. economic tempo should soon generate a jobs revival, but warned mounting budget deficits pose a serious long-term threat to the nation’s fiscal health.

He also signaled U.S. interest rates likely will remain low for some time since there was no sign that companies were making price increases stick.

“Speaking before the U.S. Securities Industry Association, the long-time business cycle theorist made it clear that he believes that job growth will improve and the U.S. economy will remain strong in coming months,” said BMO Nesbitt Burns in a commentary released yesterday.

Nesbitt that rebounding inventories all but insures that businesses will begin to step up hiring. “This, in turn, will boost consumer confidence, and so the old multiplier-accelerator model of business cycles portends a self-sustaining U.S. economic expansion, boosted by a reviving global economy.”

“The only thing that could derail this economic revitalization would be an exogenous shock to reduce confidence, say another major domestic terrorist attack. Barring this kind of inherently unpredictable occurrence, all forces are now in place for a synchronized global economic rebound.”

Nesbitt said that Greenspan reiterated that inflation continues to be extremely low, and that the risks remain on the side of deflation. “This is all Fed code for — expect labor markets to improve (the Fed already has tomorrow’s nonfarm payroll report) and, if this happens, expect a rate hike next year.”

“The Fed will allow the economy to run for an extended period without tightening monetary policy aggressively, but with overnight rates at a mere 1%, a modest rate hike in the next 6 to 8 months appears likely. So does a 5 handle on the 10-year Treasury bond, current at 4.43%.”

“All relevant leading indicators of employment have turned upward, and now Alan Greenspan has at least changed his tempo, if not his tune,” it concludes.