President Obama’s chief economics forecaster said on Sunday that the nation’s unemployment rate was likely to keep rising until 2010, even if the economy begins growing later this year. Speaking on C-SPAN, Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the economy to begin growing in the fourth quarter of this year. Ben S. Bernanke, the Federal Reserve chairman, made a similar prediction last week.
But Ms. Romer also said that she expected unemployment to rise even after the economy turns, saying that gross domestic product has to grow at a rate of about 2.5 percent before unemployment will fall. Before that happens, she said, it is “unfortunately pretty realistic” that the unemployment rate could reach 9.5 percent. It was reasonable to estimate that the G.D.P.’s growth rate in 2010 would be 3 percent, she said.
Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher — 4.5 percent — to reverse rising unemployment. “I think that when we talk about — or anybody talks about — hitting bottom, what we really have to understand is that the bottom is a kind of an undefined concept here,” he said on ABC’s “This Week.”
According to figures released on Friday, the unemployment rate in April was 8.9 percent, its highest level in 25 years. The so-called underemployment rate, which counts people who are working part time because their hours have been cut and those who have given up looking for jobs, reached 15.8 percent. Still, the administration seized on the report as an early sign that the economy’s free fall was coming to a halt, because the pace of deterioration had slowed.
The economic recovery, Ms. Romer said, will be driven by business investment in sectors like renewable energy rather than consumer spending. She echoed the views of other economists who expect a long-term economic shift. “The chance that consumers are ever going to go back to their high-spending ways is not very plausible, nor do I think they should,” she said. “We were a country that needed to start saving more”…
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