Obama economists paint rosier picture for 2014, 2015

WASHINGTON — Five years removed from the worst of the financial crisis, the United States economy is on track for robust growth as businesses add jobs and households make substantial progress in paying off their debt, putting them in a better position to increase spending, the White House said on Monday.

The unemployment rate has dropped to its lowest level in more than five years, deficits have been cut by more than half, housing is on the rebound, manufacturers are adding jobs for the first time since the 1990s and exports are accelerating, President Barack Obama’s top economists said in an annual economic report to Congress.

“After five years of grit and determined effort, the US is better-positioned for the 21st century than any other nation on Earth,” the White House said in an introduction to the report.

In the report, the Council of Economic Advisers said the nation’s economy would grow by 3.1 per cent this year and 3.4 per cent next year, which would be its best performance since 2005. The economy grew 1.9 per cent last year.

The unemployment rate — which reached a high of 10 per cent in 2009 — will average 6.9 per cent this year, declining to an average of 6.4 per cent next year, the report said.

The White House’s 2014 growth projection is more optimistic than the 2.9 per cent median forecast in a Bloomberg poll last month, while the unemployment rate outlook for this year is less optimistic than the poll’s median of 6.4 per cent.

Policymakers at the Federal Reserve Board, who released their estimates in December, saw economic growth of between 2.8 per cent and 3.2 per cent this year and 3 per cent to 3.4 per cent next year.

The 410-page Economic Report of the President highlights forecasts that were part of the fiscal 2015 budget released on March 4. The budget’s economic projections were based on information in mid-November.

The growth being forecast is not enough to substantially reduce unemployment, said Professor Peter Morici from the Robert H Smith School of Business at the University of Maryland and a frequent Obama critic.

“The economy needs to add about 350,000 jobs each month to push unemployment down to an acceptable level and that would require GDP growth in the range of 4 to 5 per cent,” Prof Morici said in a statement.

“Over the last four and one-half years, the pace of GDP growth has been a paltry 2.3 per cent — about the same as during the Bush expansion,” he said.

The report acknowledges that the unemployment rate “remains elevated, and for too many Americans, wages have been slow to rise”.

Long-term unemployment rate is also troublesome, the report said, because it is more than twice what it was during the pre-crisis years, 2.3 per cent in January compared with an average of 1 per cent from 2001 to 2007.

“Reducing long-term unemployment presents a major challenge because these individuals may face stigmatisation from employers or experience skill deterioration.” Agencies