White House: Unemployment to stay near 5%
Slower job growth could keep unemployment rate near current level through 2013 - Bush's Council of Economic Advisors.
NEW YORK (CNNMoney.com) -- The Bush administration's top economists see annual unemployment remaining just below 5% through 2013, meaning an extended period when the jobless rate would top the full-year average in six of the last 10 years.
The annual outlook of the president's Council of Economic Advisors, released Monday, also projects that the economy will keep growing this year and avoid a recession. In fact, real gross domestic product is forecast to rise by a healthy 2.7% when comparing the fourth quarter of this year to a year earlier.
But the report projects the full-year unemployment rate will rise to 4.9% in 2007, up from 4.6% each of the last two years. And it expects the unemployment rate will stay at the 4.9% rate in 2009 before starting to retreating slightly to 4.8% in each of the following four years.
Edward Lazear, chairman of the council, said at a news conference that the downturn in some economic readings since the forecasts were made in November could result in a lowering at its mid-year update. But he said he's also hopeful that interest rate cuts by the Federal Reserve and the recently passed economic stimulus package could keep the economy growing at close to this forecast.
While the administration is always concerned about unemployment, the current level is low by historic standards, Lazear said.
"Even if we go with the most aggressive notion of what is a high unemployment rate - 5.7% - we're still quite a ways from that right now," he said. "I think by anybody's measure 4.9% is still low unemployment.
"I would argue that the 4.9% unemployment that we have now still reflects a relatively tight labor market," he added. "Obviously last month's numbers were not as strong. That's something we're going to keep watching. I think that the concerns that people looking at the economy have are concerns we share as well."
The seasonally-adjusted monthly unemployment rate, which had been as low as 4.4% in March, jumped to 5% in December before retreating slightly to a 4.9% reading in January. But that month also saw employers shave 17,000 jobs from U.S. payrolls.
The CEA forecast also sees soft job growth in the next six years. Average monthly job growth is expected to be 109,000 a month on a fourth-quarter-to-fourth quarter basis. That growth pace would be down 15.5% from 2007 levels and down 43% from the growth reported in 2006.
And while the CEA forecast sees 2009 job growth returning to 2007 levels, it then sees it falling off again in 2010 and for the following three years, falling to only an average gain of 92,000 a month by 2013. Rising retirements by baby boomers is one of the reason for the slower job growth going forward, according to the report.
Unemployment was between 4% and 4.7% in the period from 1997 though 2001, the final year being the period that included the last recession. It then spiked above 5% the next four years, reaching to 6% by 2003 before starting the decline that brought it down to 4.6% the last two years.
Bush received the report from his economic advisers in a White House ceremony at which he said he approved of the $170 billion economic stimulus package passed by Congress last week. He said that he looked forward to signing the legislation to give most taxpayers hundreds in tax rebates, although he repeated his earlier contention that the economy is sound.
"This report indicates that our economy is structurally sound for the long term, and that we're dealing with uncertainties in the short term," Bush said. He said that in addition to the economic stimulus plan, he believes it is important for Congress to make permanent tax cuts passed in 2001 and 2003 that are due to expire beginning next year.