March 10 (Bloomberg) -- President Barack Obama’s advisers said the U.S. economy is on track to strengthen and add more jobs in the next two years because many of the impediments to faster growth have subsided.
The unemployment rate has dropped to the lowest levels 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, Obama said in an annual economic report to Congress.
“After 5 years of grit and determined effort, the U.S. is better-positioned for the 21st century than any other nation on Earth,” Obama said in the report released today.
The 410-page document is being released as the campaign season begins for the November elections for all 435 seats in the U.S. House and one-third of the 100 seats in the Senate. Obama’s economic record will be one of the issues Republicans use in their campaigns as they seek to increase their control of the House and gain a majority in the Senate.
Obama’s economic advisers drew on economic data that they said shows the gross domestic product expanding by 3.1 percent this year and 3.4 percent in 2015, which would be the best performance since 2005. The economy grew 1.9 percent last year.
The jobless rate will average 6.9 percent this year, declining to an average of 6.4 percent in 2015, the White House economic team said.
The annual Economic Report of the President highlights forecasts that were part of the fiscal 2015 budget released on March 4. The administration also released today historical documents and analytic material in support of the budget.
The budget’s economic projections were based on information in mid-November. Jason Furman, chairman of the White House Council of Economic advisers, said those forecasts now look too cautious based on more current data.
“If we were doing the forecast today, we would be projecting a higher starting off point for real GDP, in 2014, and a lower unemployment rate in 2014,” Furman said in a March 4 review of the budget. He didn’t give specifics on how the forecast would be changed.
A two-year budget agreement in Congress through 2015 that ends “budget brinksmanship” and means “some stability during the coming year” will aid the economy, the report said. Further, households are building wealth, housing demand is gathering momentum, inflation remains subdued and global markets “are stable or improving.” The report was written before the Ukraine crisis.
The White House’s 2014 growth projection is more optimistic than the 2.9 percent median forecast of economists surveyed last month by Bloomberg, while the jobless rate outlook for this year is less optimistic than the survey’s median of 6.4 percent.
Policymakers at the Federal Reserve Board, who released their estimates in December, saw economic growth of 2.8 percent to 3.2 percent this year and 3 percent to 3.4 percent in 2015. The central bankers’ forecasts are based on comparisons of the fourth quarter to the same period in the prior year.
The growth being forecast isn’t enough to substantially reduce unemployment, said Peter Morici, a professor at 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 percent,” Morici said in a statement.
“Over the last four and one-half years, the pace of GDP growth has been a paltry 2.3 percent-about the same as during the Bush expansion,” he said.
Employers added 175,000 jobs in February, and the unemployment rate rose to 6.7 percent from 6.6 percent in January as more people looked for work, the Labor Department said March 7.
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’s is more than twice what it was during the pre-crisis years, 2.3 percent in January 2014 compared with 1.0 percent on average from 2001 to 2007.
“Reducing long-term unemployment presents a major challenge because these individuals may face stigmatization from employers or experience skill deterioration.”
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