White House report forecasts tepid job growth this year
Friday, February 12, 2010
The economy is projected to add jobs this year at a pace too sluggish to make much of a dent in unemployment, according to a new White House forecast that suggests President Obama's advisers expect the jobless problem to be a fact of life throughout his term.
With the release of the annual Economic Report of the President, the Obama administration laid out a sweeping economic agenda that includes overhauling health care, restructuring financial regulation and dealing with long-term budget deficits. But the backdrop for all those initiatives is an economy that, if the administration's forecast is correct, will be functioning well below its potential for years to come.
The nation will add an average of 95,000 jobs a month this year, according to the forecast, a bit below the number that economists think needs to be generated just to keep up with population growth. The unemployment rate is projected to come down quite slowly after that, averaging 8.2 percent in 2012, when Obama will be up for reelection.
There have been some blips of good news in the job market lately, including a steep decline in the number of new claims for unemployment insurance benefits last week. According to a Labor Department report Thursday, 440,000 people filed for jobless benefits last week, down from 483,000 the previous week.
Also, last Friday the department said the unemployment rate dipped to 9.7 percent in January, from 10 percent in December. The White House forecast, which was first disclosed as part of the president's proposed budget last week, envisions an average unemployment rate of 10 percent in 2010.
But Americans are still gloomy about the economy, showing the political difficulty that continuing joblessness creates for the administration. While economists widely believe that the recession ended last summer as the nation's economic output began climbing, only 12 percent of Americans agree, based on their personal point of view, according to a Washington Post/ABC News poll. Only 45 percent of Americans believe that the economy has begun to recover.
The president's advisers say they were intentionally conservative in developing the forecast, and think the situation could be improved through legislation being considered in Congress aimed at generating jobs.
"There is a lot of uncertainty," said Christina Romer, chairman of the White House Council of Economic Advisers, in an interview. "As we still don't know what form any further targeted initiatives on jobs might take. I think something along the lines of a new jobs tax credit could have tremendous upside potential and really ignite private sector hiring."
The document frames the nation's great economic challenge over the coming years as one of rebalancing -- a notion many economists across the ideological spectrum tend to agree with -- so that the economy is driven more by exports and business investment, and less so by housing, consumer spending and financial engineering.
It also contains a bit of chest-thumping about the role of the Obama administration's policies in helping get an economic recovery going. "Even as we worked to address the crises in our banking sector, in our housing market, and in our auto industry, we also began attacking our economic crisis on a broader front," President Obama wrote in a letter presenting the report to Congress, referring to the $787 billion stimulus bill enacted a year ago. "Because of these and other steps, we can safely say that we've avoided the depression many feared."
"There's a little bit more confidence in the president's policies than is warranted, claiming glorious results from the stimulus for example, but the economic outlook is fairly sensible," said Kevin A. Hassett, a senior fellow at the conservative American Enterprise Institute. "They're right to be cautious on the economic outlook."
The economic report lays out the administration's argument for stabilizing the budget deficit at about 3 percent of gross domestic product, arguing that that level of deficits would allow the nation's debt-to-GDP ratio to remain stable at about 70 percent. Such a debt load would be high by modern standards in the United States, though not unheard of in other large industrial nations.
"A debt-to-GDP ratio of around two-thirds is comfortably within the range of historical and international experience," the report argues. "It represents substantial fiscal discipline relative to the trajectory the Administration inherited."
Staff writers Jon Cohen, Michael A. Fletcher and Lori Montgomery contributed to this report.