From Fox News
Obama Economic Adviser Predicts Relief Within Weeks of Stimulus Passage
Sunday, January 25, 2009
Measures to save law enforcement and teaching jobs will help cities see changes rapidly while withholding changes on paychecks could come "within weeks" of passage of an economic stimulus plan now being considered by Congress, one of President Obama's top advisers said Sunday.
National Economic Council director Lawrence Summers said despite the fact the U.S. economy's problems took months or years to create -- and it may take just as long to solve them -- immediate stimulus could come with hundreds of billions of dollars in government spending and tax cuts. . . . .
The Obama administration predicted that the national unemployment rate was going to peak at 8.1 percent this year and then decline to 7.9 percent next year (See Table S-8
in the February 28, 2009 report
). These predictions may have made some sense when the national unemployment rate was 7.6 percent in January and they were made before
the unemployment rate had jumped to 8.1 percent in February. They were made after the stimulus bill had passed
In December, the Wall Street Journal survey of business economists predicted this: "The unemployment rate will rise from 6.7 percent now to 8.1 percent by next December." In February, the NABE survey predicted
: "The survey of 47 NABE forecasters has the jobless rate rising to 9% by the end of the year. It is currently 7.6%."
In March, the WSJ survey of Business Economists made this prediction
Meanwhile, the economists surveyed this month predict that the economy will shed another 2.8 million jobs over the next 12 months as the unemployment rate climbs to 9.3% by December, up from the 8.1% rate recorded in February. Economists also see nearly a one-in-six chance that the U.S. will fall into a depression, defined as a decline in per-person GDP or consumption by 10% or more.
In April, the WSJ's Economic Forecasting Survey
predicted that the unemployment rate would go to 9 percent by June, 2009 and 9.5 by December. The December 2008 survey had predicted that the unemployment rate would rise to 7.9 percent by June. In that survey, out of 53 economists, one predicted a 9 percent unemployment rate by June, one at 8.9 percent, and two at 8.5 percent, and three at 8.4 percent. Remember we are two months away from the June unemployment rate being announced.
In the January survey, only one economist predicted a June unemployment rate as high as 9 percent, one at 8.9 percent, and a third at 8.8 percent.
In February, the WSJ's Economic Forecasting Survey predicted
an unemployment rate of 8.3 percent in June. In March, a 8.7 percent rate in June. In April, a 9 percent rate in June. Note that the April unemployment rate implies that both of these forecasts were overly optimistic.
One thing is clear and that is the forecasts have been getting progressively more pessimistic. The administration was also wildly wrong about the impact that its economic program would have on the economy. They had argued that as soon as the program was enacted the economy would start to improve.
A month ago, the Wall Street Journal had this headline: "Jobless Claims Suggest Recession’s End Could Be Near."
Since then the unemployment rate has gone up from 8.5 to 8.9 percent.
Of course, despite all this background on things being worse than continually predicted, the media has managed to turn the 8.9 percent unemployment rate into a positive thing.
The Miami Herald headline reads: "Job figures not as bad as feared"
Of course, I know that the the drop in jobs was "less than a loss of 620000 expected by analysts and far below the 699000 drop in March."
But the media could also have gone with the headline that the unemployment rate is the highest in over 25 years. You really have to dig hard to come up with a positive headline from a 539,000 job loss. The change in the unemployment rate was also the same in the last two months, so that hasn't been changing.
This headline from the AP is just in the tank for the Democrats:Evidence piling up that worst of recession is over
Finally, despite all this unexpected increase in the unemployment rate, this note on Fox News caught my eye
Obama has claimed that his stimulus package has already saved or created more than 150,000 jobs. But the U.S. economy has lost more than 2 million jobs since he took office, according to the Bureau of Labor Statistics, seeming to undercut Obama's claim.
Since the unemployment rate has gone up much faster than the Obama people forecast, wouldn't one think that the stimulus package has made things worse rather than better?
I did notice one interesting fact. While much of the media is talking about things looking better, the WSJ survey of economists indicates that the length and severity of the recession has been increasing over time. The predicted increase in unemployment is greater for December 2009 than the increase for June 2009. The predicted drop in GDP growth is greater for the 4th quarter than the 3rd quarter.
Now the Administration says this
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. . . . .
Also the administration is predicting a 3.5 percent
growth in GDP the end of the year, but private forecasts are down to just 1.6%
Labels: forecasting, stimulus, unemployment