White House forecast: no roaring economic recovery in 2010
President Obama's annual economic forecast predicts job growth of 95,000 jobs a month in 2010, but said any growth may not be reflected in lower unemployment rates.
The White House predicted modest growth in its annual economic forecast, warning that a revival of job growth may not bring a big decline in unemployment.
Christina Romer, President Obama's chief economist, forecast average job growth of 95,000 jobs per month. That target is in line with many private forecasts, though the government's monthly job tally has yet to shift from negative to positive.
The report follows a year when Ms. Romer and the Council of Economic Advisers, which she heads, had proved too rosy in their forecasting. Unemployment shot up to 10 percent in 2009, well above White House predictions.
The current Economic Report of the President may err on the side of caution. Often after a deep recession the economy is able to generate a stronger rebound than the 3 percent growth rate the report calls for in 2010. Last month, the unemployment rate dipped to 9.7 percent, from 10 percent. And some private forecasters believe that job growth could soon begin, reaching a pace of 200,000 to 300,000 jobs per month.
Romer and her team acknowledge the uncertainty surrounding any forecast, noting that the recovery could also prove more disappointing than they predict.
"Relatively little decline is projected in the unemployment rate during 2010," the report says. "Indeed, it is possible that the rate will rise for a while as some discouraged workers return to the labor force, before starting to generally decline."
The report comes as Mr. Obama is working with Congress to pass a job-creation bill, a smaller follow-on to the $787 billion in stimulus spending passed last year. In the economic report, Obama's advisers offer a defense of such stimulus efforts at a time when weak consumer spending is challenge for private-sector job creation.
The report cites three administration priorities for a jobs bill:
• Tax breaks for businesses. Incentives targeted especially at small firms that hire, pushing some employers to add jobs sooner than they otherwise might.
• Incentives to spur energy efficiency and clean energy. One option, a program to spur home retrofits for efficiency, would have "employment effects ... concentrated in construction, an area that has been particularly hard-hit by the recession."
• Infrastructure investments. The report argues that an added $50 billion in spending on roads, bridges, transit, and water projects would provide both jobs in the short run and build a foundation for a stronger economy in the long run.
While Romer's near-term forecast for the economy is not overly optimistic, the report calls for faster growth for the rest of the decade than some private forecasters predict – including growth rates averaging above 4 percent for the period from 2011 to 2015. It also calls for stable inflation (roughly 2 percent a year during the decade) and relatively stable interest rates (10-year Treasury notes rising to a 5.3 percent yield by 2013 and then holding steady).
The report predicts that the unemployment rate will fall from 10 percent this year to 8.2 percent in 2012 and 5.5 percent in 2016.
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