Economy limping back to strength
The unemployment rate will remain elevated for years to come, according to a forecast released Tuesday by the Federal Reserve that addresses for the first time economic conditions at the time of the next presidential election.
It paints a grim picture. Top Fed officials expect the unemployment rate to remain in the 6.8 to 7.5 percent range at the end of 2012 and said it could take “about five or six years” from now for economic activity to return to normal. The jobless rate was 10.2 percent in October.
That sober forecast came on top of a revised government estimate also released Tuesday of economic output in the third quarter showing that the recovery got off to a slower start over the summer than previously thought.
Government efforts to prop up the economy — including the $787 billion stimulus package passed in February, the “Cash for Clunkers” program to support auto sales this summer, and a zero interest rate policy by the Federal Reserve — are helping. The contribution of government spending to gross domestic product in the third quarter was actually higher than originally reported, the Commerce Department said.
But so far, the impact of these efforts has not been enough to engender a strong rebound.
“It is a slow-motion recovery,” said Stuart Hoffman, chief economist at PNC Financial Services Group. “It sure doesn’t look like the beginning of a normal, rapid recovery.”
The math is simple: The U.S. economy is capable of growing at roughly 2.5 to 3 percent a year, thanks to population growth and technological improvement, and needs to grow faster than that to create large numbers of jobs and significantly improved standards of living.
Following the last recession of comparable depth for example, in 1981-82, gross domestic product growth averaged a 7.8 percent annual rate for four quarters.
In this recession, by contrast, the five current Fed governors and 12 presidents of regional Fed banks expect growth of 2.5 to 3.5 percent in 2010 — which would be enough to bring the unemployment rate down only slightly.
Sorry, but this doen’t paint picture of “limping back to strength”; it sounds like an economy on life support. A pig is a pig is a pig, regardless of cosmetics.
Oh, and who was President during the ‘81-’82 recoverery of which they speak? Let’s see, ummmm…..oh yeah, a fellow by the name of Ronald Reagan.
Alas, this time, all we have is Obama for three more years.