Though the economy is hampered by lingering impediments from the collapse in housing prices and the 2008 financial crisis, the report forecasts “an upturn in economic growth” this year as the recovery “will continue to gain strength.”
Alan Krueger, chairman of the White House Council of Economic Advisers, said in a conference call that employment growth “has gained momentum” in recent months.
A “plausible range” for the average unemployment rate this year would be between 8 percent and 8.6 percent, the report said, citing private forecasters.
The rate, the main economic indicator for voters and in the political debate, dropped to 8.3 percent in January, the lowest level in nearly three years.
The report and the administration’s chief economist, rebutting Republican criticism of Obama’s handling of the economy, defended the president’s response to the recession he confronted upon taking office.
“The actions of the administration were extremely important to bringing the recession to an end and putting us on an upward trajectory,” Krueger said.
The report said the financial crisis of 2008 caused a plunge in the economy unlike other post-World War II recessions in the U.S.
Better Than Typical
Policies, including the 2009 economic stimulus, have allowed the country to do better than is typical of countries in the aftermath of a financial crisis, the report said, citing research by economists Carmen Reinhart and Kenneth Rogoff.
If the U.S. had followed the path of the average country following a financial shock, the unemployment rate would have been 10.4 percent last month instead of 8.3 percent, the report said. The calculation is based on the aftermath of financial crises in 14 countries since 1977 identified by Reinhart and Rogoff.
The “breadth and speed” of the stimulus and interventions by the Federal Reserve are “the main reasons why the economy avoided a steeper and more prolonged decline,” the report said.
The report also drew favorable comparisons to the recoveries following the 1990-91 and 2001 recessions. Private- sector job growth began earlier in the current recovery than it did after those two recessions, the report said.
Krueger said “it’s very reassuring to see that we’re on a path similar” to the rebounds after those recessions, both of which were criticized at the time as “jobless recoveries.”
The aftermath of the housing bubble and 2008 financial crisis have continued to restrain the growth of consumer spending and home construction that are typical of U.S. economic recoveries, the report said.
The pace of the recovery “would in all likelihood be faster” if not for “the lingering effects of the financial crisis,” the report said.
To contact the reporter on this story: Mike Dorning in Washington at firstname.lastname@example.org