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NY Times - White House Forecasts No Job Growth Until 2010

NY Times: White House Forecasts No Job Growth Until 2010

By JOSHUA BRUSTEIN

MAY 11, 2009



President Obama's chief economics forecaster said on Sunday that the country was not likely to see positive employment growth until 2010, even if the economy began to grow later this year.
Speaking on C-SPAN, Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the G.D.P. to begin growing in the fourth quarter of this year. Ben S. Bernanke, the Federal Reserve chairman, made a similar prediction last week.

But Ms. Romer also said that she expected unemployment to rise even after the economy turns, saying that the G.D.P. has to grow at a rate of about 2.5 percent before unemployment will fall. Before that happens, she said, it is "unfortunately pretty realistic" that the unemployment rate could reach 9.5 percent. A reasonable estimate for the G.D.P.'s growth rate in 2010, she said, is three percent.
Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher - 4.5 percent - to reverse rising unemployment.

"I think that when we talk about - or anybody talks about - hitting bottom, what we really have to understand is that the bottom is a kind of an undefined concept here," he said on ABC's "This Week."
According to figures released on Friday, the unemployment rate in April was 8.9 percent, its highest level in a quarter-century. The so-called underemployment rate, which counts people who are working part time because their hours have been cut and those who have given up looking for jobs, reached 15.8 percent.

Still, the administration seized on the report as an early sign that the economy's free-fall was coming to a halt, because the pace of deterioration had slowed.

The economic recovery, Ms. Romer said, will be driven by business investment in sectors like renewable energy rather than consumer spending. She echoed the views of other economists who expect a long-term economic shift.

"The chance that consumers are ever going to go back to their high spending ways is not very plausible, nor do I think they should," she said. "We were a country that needed to start saving more."
Several major retailers, including Wal-Mart, Macy's and Nordstrom are due to post quarterly earnings reports in the coming week, which will give further indication of consumer spending.

Ms. Romer also defended the Obama administration's budget, which has been criticized by Republicans and independent analysts for not cutting deeply enough. In details released Thursday, White House Budget Director Peter Orszag announced cuts to 121 programs that would save $17 billion. The savings total about one-half of one percent of the $3.5 trillion budget. The White House is expected to provide additional information on its budget on Monday.

Ms. Romer said that the cuts announced Thursday were only one part of the Obama administration's larger plan to cut the size of the deficit in half by the end of his first term, a goal that she said was still reasonable. She pointed to the president's announcement last week to close tax loopholes for offshore tax havens as another example. But the "big dollars," she said, would come from fundamental changes in the health care system.

"When you actually look at that budget going out in time, the thing that is going to bankrupt us is government expenditures on health care," she said.
 
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