Tim Geithner warns of high unemployment throughout the year

I guess this is where the next 5-7 million forecast of foreclosures makes sense.

Obama Aides See Jobless Rate Elevated for ‘Extended Period’
By Rebecca Christie and Mike Dorning

March 16 (Bloomberg) — U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today.

The proportion of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, said in a joint statement. The officials said unemployment may even rise “slightly” over the next few months as discouraged workers start job-hunting again.

“We do not expect further declines in unemployment this year,” the officials said in testimony prepared for the House Appropriations Committee. They predicted the economy would add about 100,000 jobs a month on average — not enough to bring the jobless rate down substantially.

Today’s projections are in line with the 10 percent average unemployment forecast for this year in last month’s budget plan. Christopher Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York, said the administration’s language risks damping expectations for a recovery.

“They need to work on the message, and right now the message is that there is not a lot to be hopeful about,” Rupkey said. “Warning about a slow jobless recovery can help make it a reality.”

Growth Outlook

Geithner, Orszag and Romer reiterated the administration’s forecast that the economy would grow 3 percent this year, as measured by comparing fourth quarter growth in gross domestic product. Growth is projected to rise to 4.3 percent in 2011 and 2012, and inflation probably will remain low, they said.

“The worst now appears to be behind us,” the officials said. “However, the country faces significant and ongoing challenges: high unemployment, the need to build a new and stable foundation for prosperity in the years and decades ahead, and a medium- and long-term fiscal situation that could ultimately undermine future job creation and economic growth.”

The three urged Congress to pass Obama Administration job stimulus proposals including extended unemployment benefits, aid to state and local governments and tax breaks for businesses that hire new workers.

They argued tax benefits for businesses that add new workers would have a large impact in the early stages of an economic recovery.

‘Particularly Effective’

“The current situation — where for many firms the question is not whether to hire but when — is one that may make such programs particularly effective,” they said.

The officials said projected federal budget deficits, which the administration forecasts at more than $1.5 trillion for 2011 and over $751 billion for 2015, “remain undesirably high.”

“Deficits matter. Ours are too high; they are unsustainable,” Geithner said during testimony. “The American people, along with investors around the world, need to have more confidence in our ability to bring them down over time.”

The officials put the greatest blame for the high budget deficits on “years of poor decisions” during the administration of George W. Bush, citing enactment of the Medicare prescription drug benefit and income-tax cuts without corresponding budget savings to pay for them.

“If these two policies had been paid for, projected deficits — without any further deficit reduction — would be about 2 percent of GDP per year by the middle of the decade, and we would have been on a sustainable medium-term fiscal course,” they said.

To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net; To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net;

Last Updated: March 16, 2010 11:37 EDT

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