Obama Economists Expect 8.2% Unemployment In 2012

The new “Economic Report of the President” prepared by the Council of Economic Advisers shows that The White House has a more grim picture of the unemployment situation than may be evident from its comments about rapidly rebuilding the US economy.

The reports projects that unemployment will be 8.2% in 2012 and will not drop below 6% until 2015. Real GDP will only be 3% in 2010 and will barely hold above 4% in 2011 to 2013 when it will begin to drop slightly again, according to the CEA numbers

The new forecasts indicate that the $747 billion stimulus package has not fulfilled its promise of restarting the economy and creating or saving 3.5 million jobs. It is also evidence that the bipartisan jobs bill which is about to work its way through Congress will only have limited results. The programs in the legislation include a waiver of the Social Security tax for each worker a company hires who has been out of a job for at least 60 days. The cost of the bill most likely to pass is $15 billion over 10 years. although some Senators have proposed a more aggressive $85 billion bill.

The numbers provided by the Council of Economic Advisers call into question not only the effectiveness of past programs but also those proposed to help stop the bleeding of jobs. The figures raise the issue of whether a “jobless” recovery can actually take root. Unemployment which could linger above 8% for another two years will continue to cripple consumer spending which in turn will make a full recovery as measured by GDP nearly impossible. The ripple effects of this on revenue at American companies that make their sales from consumer activity and on the struggling housing market will be broad and deep.

The notion of a GDP recovery without jobs growth has less and less support from economic numbers and forecasts as each day passes.

Douglas A. McIntyre