A report on the economic condition of the nation by the Obama Administration's Council of Economic Advisers is providing a clearer picture of just how much longer and more difficult the economic recovery is likely to be.
Released Thursday, the annual Economic Report of the President predicted the U.S. unemployment rate would average 10% for this year, would drop to 8.2% by 2012, and remain at levels higher than 6% until 2015. The report also said the U.S. gross domestic product would increase by 3% in 2010, then rise to 4.3% in both 2011 and 2012 before slipping slightly to 4.2% in 2013 and dropping down to 3.4% by 2015.The forecast of high unemployment and moderate-to-low growth for the next five years is not the kind of news desperate workers were looking to hear from an administration that has said it is finally focused on creating jobs. The report mentions developing initiatives to jump-start job creation by small businesses, using incentives for homeowners to upgrade their homes with energy efficient improvements to create construction and manufacturing jobs, as well as using clean energy and infrastructure investments to create new jobs. But with Senate Majority Leader Harry Reid (D.-Nev.) seemingly unable to get bi-partisan cooperation on a substantial jobs bill, the dismal projections of the administration may very well come to pass, and that means continued suffering for American workers.
"Their projections are reasonable, but the outcomes are unacceptable," said Lawrence Michel, President of the Economic Policy Institute. "It appears that unemployment will be at 8% two years from now, meaning that five years from the start of the recession we will have higher unemployment than at any point in the previous two recessions."
An Unusually Deep Hole
The 458-page report defends the administration's policy approaches to getting the economy turned around, and it also criticizes the Bush administration for digging a considerable economic hole that the current administration was forced to begin digging out of. Additionally, it has been pointed out that this recession doesn't seem to be following the same patterns of previous recessions. As The New York Times reported, Christina Romer, chairwoman of the Council of Economic Advisers, told reporters during a press conference, "The usual relationship between GDP growth and the unemployment rate has broken down somewhat. The unemployment rate has risen much more than one would have predicted."
A group of at least 40 leading economists surveyed by the Philadelphia Federal Reserve have predicted similarly dismal forecasts about the economy. The first quarter 2010 Survey of Professional Forecasters released Friday by the Philadelphia Fed predicted unemployment at 9.8% for 2010, dropping to 8.3% in Obama's re-election year and then falling to 7.3% in 2013. The economists also said GDP growth, would rise by 3% in 2010, then drop to 2.9% in 2011, go back up to 3.4% in 2012 before slipping again to 3.1% in 2013. The lack of GDP growth in this forecast makes for an even chillier economic scenario.
With the stock market continuing its slide downward and Congress operating in a dysfunctional manner, there is only more pressure on the administration to find a way to generate a robust enough recovery that can replace the 8.2 million jobs lost since 2007.
"The first stimulus act did a lot to get us out of the deep hole we were in," said Michel, "but aggressive policy action is still needed to get us the rest of the way out of that hole."
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