The Congressional Budget Office said yesterday the economy has entered a recession that will last the rest of this year, with inflation at or near a double-digit pace in 1979 and 1980 and the jobless rate rising to 7.3 percent.
The updated forecast, decidedly gloomier than the mild recession the agency predicted last January, calls for three consecutive quarters of "significant" decline in output this year, followed by "a week recovery in 1980."
Nevertheless, Alice M. Rivlin, the agency's director, cautioned Congress yesterday not to rush into a new round of economic stimuli such as a tax cut or new spending programs, for fear of worsening inflation.
Rivlin suggested instead that the lawmakers begin work on a "contingency plan" in case the recession lasts longer.But she warned that any proposed remedies should be limited, and not the general tax cut usually used to counter recessions.
The CBO forecast, which is generally in line with predictions of non-government economists, is expected to be somewhat more pessimistic than the Carter administration's latest predictions, scheduled to be unveiled today.
Although the White House has not disclosed this forecast, the administration is expected to predict a milder downturn.
Treasury Secretary W. Michael Blumenthal told a congressional hearing yesterday that because of recent oil price increases "the chances of a recession have been substantially increased," but he declined to provide figures.
Carter also has been cautious about rushing into a general tax cut, telling congressmen who visited Camp David this week he wants to wait several months before deciding and even then would support only limited measures.
Both Rivlin and key administration officials have mentioned the same sorts of proposals as possible anti-recession payroll taxes, a revival of "real wage insurance," or business tax cuts.
The forecasts came as, separately, the administration's Council on Wage and Price Stability announced it is probing 29 food processing and distribution firms it says have violated wage-price guidelines by raising markups.
Concerned officials say the increases appear to be offsetting some recent declines in farm prices, and consumers are still paying more in supermakets.
Meanwhile, Blumenthal told the congressional Joint Economic Committee that, despite the latest rise in oil prices, the dollar would remain stable on foreign exchange markets. The dollar declined yesterday, however.
The new CBO forecast was considered unlikely to force major changes in Congress' budget targets. The sharp increase in the predicted inflation was expected to boost revenues more than enough to finance higher recession costs.
The House Budget Committee began hearings yesterday on a revised budget resolution that it hopes to push through before Congress' recess in August. Sources say final budget numbers won't be hammered out for several weeks.
The CBO forecast said:
The nation's economy has entered a recession that is likely to last three quarters or more, with "real" output, adjusted for inflation, declining by 1 percent in 1979 and rising a modest 2.9 percent in 1980.
Inflation will continue high both year and in 1980, with consumer prices rising 10.9 percent through the final quarter of 1979 and 8.9 percent, or as much as 9.9 percent, in 1980.
The jobless rate will rise to an average 6.9 percent in the final quarter of 1979 and 7.2 percent in the last three months of 1980 - a forecast officials say calls for peak unemployment of 7.3 percent.
Although CBO conceded its forecast was based on an economic performance that turned out "considerably worse" than it predicted in January, Rivlin continued to call the recession "mild," and asserted there would be no "major" downturn.
However, she cautioned repeatedly that the situation could be made worse by "uncertainties" ranging from another sharp rise in oil prices to a strike in the auto industry or a drop in the value of the dollar.
The recent oil price inceases were a major - although not exclusive - factor in CBO's decision to revise its January forecast. The agency also cited food prices higher than expected and a sharp rise in mortgage rates.
Concern about inflation has been a major factor this year is dampening early support for a general tax cut as an anti-recession measure. The fear is that a tax cut would increase the federal budget deficit and might overstimulate the economy.
That view is shared widely in both the administration and Congress. A congressional task force on inflation scheduled to meet today is expected to shun any major proposals for a major tax reduction.