President Barack Obama’s advisers have grown more confident about U.S. economic growth this year, revising their outlook to project the creation of 2 million new jobs if administration policies are adopted, a White House official said.
That may bring the unemployment rate closer to 8 percent by the November election. The rate was 8.3 percent last month, the figure’s fifth consecutive decline.
Alan Krueger, chairman of the White House Council of Economic Advisers, said in a statement last night that the president’s economic team has become more optimistic following a series of positive economic indicators that culminated in January’s drop in the jobless rate.
He said the budget proposal the administration will release next week will project an average unemployment rate of 8.9 percent this year and 8.6 percent next year. Those official forecasts are “stale and out of date,” he said.
The unemployment rate is a key piece of economic data for voters in the presidential and congressional elections. Only one U.S. president since World War II -- Ronald Reagan -- has been re-elected with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment on Election Day, after the rate had fallen almost three percentage points in the previous 18 months.
Criticism on Economy
The president’s handling of the economy has been the main line of attack by the Republicans running to face him in November, including former Massachusetts Governor Mitt Romney, who has said the recovery has been sluggish because of Obama’s policies.
The budget Obama sends to Congress Feb. 13 will include the administration’s outlook for the economy as well as the president’s spending blueprint.
“Private sector forecasters have shaved about half a percentage point from their 2012 unemployment rate forecast in response to the improvement in the job market since we made our forecast,” Krueger said in his statement. “We would certainly lower our forecast of the unemployment rate from the figures that will appear in Monday’s budget if we were to do another forecast today.”
Krueger said the official forecast for the budget was prepared in mid-November. Another administration official, who declined to be identified, said the White House projects 2 million additional jobs will be created this year.
Krueger first disclosed the change in the administration’s outlook in an interview with the New York Times.
Action by Congress
The administration’s outlook for an improved employment picture depends on congressional passage of Obama’s economic proposals, including an extension through the end of the year of a 2 percentage point reduction in the payroll tax for workers and extended jobless benefits, said the White House official.
Private forecasters have projected the policies would add about 1 percentage point to economic growth this year.
U.S. House and Senate lawmakers are seeking to break an impasse over extending the payroll tax cut and unemployment assistance, which expire Feb. 29. Lawmakers have divided along partisan lines over how to cover the $100 billion cost.
The Federal Reserve in its Jan. 25 forecast projected an unemployment rate of 8.2 to 8.5 percent in 2012, falling to 6.7 to 7.6 percent by the fourth quarter of 2014.
The nonpartisan Congressional Budget Office issued a more pessimistic forecast on Jan. 31, projecting unemployment may rise to 8.9 percent in the last three months of this year, which includes Election Day, and increase to 9.2 percent in the last quarter of 2013.
Employers added 243,000 jobs in January, the biggest gain in nine months, the Labor Department reported Feb. 3. The improvement exceeded the most optimistic forecasts in a Bloomberg News survey of economists.
Still, the portion of the population counted as participating in the workforce declined in January to 63.7 percent from 64.0 percent in December. In December 2007, at the start of the recession, 66.0 percent of the population held jobs or were actively seeking employment.
As the 2012 campaign plays out, the U.S. economy remains vulnerable to risks such as a worsening of the European debt crisis.
The Standard & Poor’s 500 Index rose to a seven-month high yesterday as Greece’s government began talks on terms to secure a second aid package. Companies most-tied to economic growth led the gains in the S&P 500 as measures of financial and technology shares added more than 0.6 percent.
Obama said Feb. 3 that while too many people in the U.S. still don’t have jobs, the data show “the economy is growing stronger” and “the recovery is speeding up.” He also appealed to Congress to act.
“Do not slow down the recovery that we’re on,” Obama said, directing his words at lawmakers. “Don’t muck it up.”