Jobless forecast remains bleak
White House says high unemployment to last through 2012
WASHINGTON – In a move to underscore the urgency of the nation’s economic problems, the White House issued a new assessment that predicted continued high unemployment for the rest of this year and all of 2012.
The grim outlook, part of the summer report on the nation’s budget and the economy, was released Thursday as President Barack Obama prepares to address the nation’s widespread unemployment in a speech next week.
The administration said that based on the latest economic data, it now expects the unemployment rate to end the year at the same 9.1 percent where it stood in July. The unemployment rate for August will be released today with accompanying statistics on job creation.
The report underscores the double bind policymakers are caught in: a stagnating economy reduces tax revenues and aggravates the deficit problem, but the kinds of government stimulus measures that many economists think are needed to get the economy growing again also cost money and add to the deficit – in the near term, anyway.
And the policy problem is magnified by the current political stalemate in Washington.
Many private analysts expect today’s report to show an unchanged unemployment rate of 9.1 percent for August and sluggish job growth of 70,000 to 80,000, about the same as the average of the previous three months when the recovery was stalling.
Under normal conditions, experts say, the U.S. economy would need to generate about 125,000 additional jobs every month to absorb new entrants to the job market and keep the unemployment rate steady. But persistent weakness in hiring has prompted many workers to quit looking for jobs – and in the government’s methodology, these people are not counted as part of the official unemployment rate, thus understating the actual jobless problem.
“If there are any signs of jobs being created, some large, unknown proportion of the population will flood back into the labor market,” said Ron Blackwell, chief economist at the AFL-CIO union. And unless hiring rises dramatically, he said, the unemployment rate is sure to climb higher because some of those returning workers won’t be able to land jobs.
The White House forecast also sees hardly any change in the unemployment rate next year in the run-up to the presidential and congressional elections, with the jobless figure projected to drop a notch to 9 percent on average. Only modest improvement was forecast for 2013, when unemployment is projected to dip to 8.5 percent.
Despite the unusually bleak outlook, Katharine Abraham, a member of the White House Council of Economic Advisers, said the forecast doesn’t see a double-dip recession. But in a conference call with Office of Management and Budget Director Jacob Lew, she said the report from Lew’s office reveals economic numbers that are “not what we’re going to be happy with” and highlight the importance of Obama’s new job-creation effort that he plans to unveil Thursday night.
Obama is expected to outline proposals such as increased job training, tax credits and investment in infrastructure as ways to get people back to work. Many in the Democratic Party are pushing the president to announce an ambitious jobs package to juice up the waning recovery. It’s unclear, however, how much Obama will propose, given stiff Republican opposition to increased spending that could increase the nation’s deficits.
In the report released Thursday, known as the mid-session review, the administration projected that the budget deficit would hit $1.32 trillion in 2011. The figure is about 20 percent lower than the $1.65 trillion deficit estimated in February because of more tax revenue and less spending than anticipated. The Congressional Budget Office issued a similar deficit number last week.
Nonetheless, a federal deficit of $1.3 trillion would represent about 9 percent of the U.S. economy in terms of gross domestic product – triple the percentage that economists consider a sustainable rate in the long term.