December 18, 2004 in Business

Bush cuts job-growth forecast

Associated Press
 
Associated Press photo

Workers in North Carolina line up to collect unemployment benefits.
(Full-size photo)

WASHINGTON — The Bush administration, after being ridiculed by Democrats for an overly optimistic jobs forecast this year, on Friday significantly reduced its forecast for new jobs that will be created in 2005. It slightly boosted its estimate for overall economic growth.

In its new economic outlook, the administration predicted the economy will grow by 3.5 percent next year and will create an additional 2.1 million jobs.

A year ago, the administration was forecasting 3.6 million jobs would be created in 2005 after 2.6 million this year.

Democrats called the forecast for 2004 overly optimistic, an assertion that proved to be accurate. Through November, just 1.3 million jobs were created, half of the administration’s forecast.

The economy has struggled to create new jobs during the recovery from the 2001 recession. Businesses have been successful in boosting production with fewer workers.

A problem facing the administration with its 2004 forecast was that it was prepared in late November 2003 as part of the administration’s budget preparations but not released until early February when the budget was sent to Congress.

In between, the jobs pictured darkened significantly with a string of weak monthly figures, thus making the administration’s forecast look even more optimistic.

Gregory Mankiw, the chairman of the president’s Council of Economic Advisers, told reporters the administration had decided to release the 2005 forecast in early December, when it was completed, rather than waiting for two months for it to be possibly overtaken by events.

“We thought this would minimize the confusion we saw last year by waiting until February,” Mankiw said.

Mankiw and other administration officials said the early release had nothing to do with speculation that Mankiw is planning on leaving his CEA post.

“I serve at the pleasure of the president,” Mankiw said, refusing to discuss his future plans.

Other officials said Friday that if Mankiw does decide to leave, a leading candidate under consideration to replace him is Ben Bernanke, currently serving as one of seven members of the Federal Reserve board.

Bernanke has also been mentioned as a top prospect to replace Fed Chairman Alan Greenspan, whose term ends in January 2006.

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