Obama Budget Sees U.S. Jobless Rate Falling to Lowest Since 2007

The Obama administration is predicting that the U.S. unemployment rate will fall this year to the lowest level since 2007 as stronger economic growth boosts hiring.

The jobless rate will average 5.4 percent in 2015, according to an administration official, citing projections in President Barack Obama’s budget proposal. That’s lower than the 5.7 percent the Obama administration predicted in July and down from an average of 6.2 percent last year.

The world’s largest economy will grow 3.1 percent in 2015 from a year earlier, said the official, up from a 2.4 percent expansion last year and slower than the 3.5 percent expansion projected in July. Yields on 10-year Treasury notes, which were at 1.64 percent late last week, will average 2.8 percent this year, compared with 3.3 percent projected for 2015 in July, said the official, who briefed reporters on condition of anonymity.

“The U.S. economy is the only vibrant economy in the world,” Harvard professor Lawrence Summers, a former top economic adviser to Obama, said in an interview on the Fox News program “Sunday Morning Futures.” Even so, “there’s a real question how long the world economy can fly on a single American engine,” he said.

The economic assumptions underpinning Obama’s $4 trillion budget plan are largely in line with private forecasters. The median estimate of 84 economists surveyed by Bloomberg calls for 3.2 percent economic growth this year, and a separate survey shows expectations for a jobless rate averaging 5.4 percent for the year.

Shrinking Deficit

Stronger hiring and growth are helping reduce the budget deficit as a share of the economy. The shortfall will be 2.5 percent of gross domestic product next fiscal year, down from 3.2 percent this year, and will shrink to 2.3 percent of GDP in fiscal 2017.

Growth hasn’t been fast enough to boost inflation as Federal Reserve officials monitor weakening price gains in deciding when to raise short-term interest rates for the first time since 2006.

A government report today may show the Fed’s preferred price gauge, personal consumption expenditures, gained 0.8 percent in December from a year earlier, the least since 2009, according to a Bloomberg survey of economists. The PCE has been below the central bank’s 2 percent target for 31 months.

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