Wednesday, February 3, 2010

Can These Economic Growth and Unemployment Forecasts be Right?

As part of the annual budget, the Obama White House assumes real gross domestic product growth of 2.7 percent in 2010, followed by 3.8 percent, 4.3 percent and 4.2 percent in 2013.

At the same time, the forecast assumes unemployment of 10 percent in 2010, with a decline to 9.2 percent in 2011, 8.2 percent in 2012 and 7.3 percent in 2013.

I'm no economist, but at least some trained economists have to be wondering how growth can occur at those accelerating rates if unemployment remains so stubbornly high. 

There are some obvious answers, including the possibility that the White House does not actually believe both sets of assumptions are congruent, but have some other compelling political motivations for claiming the figures. 

Other forecasts suggest that we will not recover the lost jobs of the recent recession until 2014 or even later. As consumer spending drives 70 percent of GDP, it is hard to see strong growth and high unemployment at the same time.  

Perhaps growth will be higher, and unemployment less bad, than these numbers suggest. As somebody who believes in the vitality of the U.S. workforce and economy, I would not bet against the United States, if impediments are not thrown in its way. 

But then, I'm not a professional economist. 

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