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Wednesday, June 17, 2009

President Obama: Unemployment Will Reach 10 Percent

DC social lion Al Hunt's interview with President Obama was interesting in he admitted that U.S. unemployment would eventually reach 10 percent. From Bloomberg:

"President Barack Obama offered stern words for Wall Street and a prediction of 10 percent U.S. unemployment even as he said the 'engines' of an economic recovery have begun to turn.

"'Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected,' Obama said, referring to criticism of the government’s growing role in the economy and markets.

"Obama, in an interview with Bloomberg News on the eve of the release of his plan to revamp financial-market regulation, voiced confidence the economy would recover soon, while warning that robust growth was needed if the U.S. is to rein in its budget deficit without raising taxes on most Americans.

"'You’re starting to see the engines of the economy turn,' Obama said. Still, he said, 'It’s going to take a long time' for a full-fledged recovery as households work off the debt accumulated during the real estate boom.

"The jobless rate will continue to climb from its current 25-year high of 9.4 percent as employers are slow to take on new workers, the president said. 'Jobs are a lagging indicator,' he said, while adding that he didn’t have 'a crystal ball' to predict when unemployment will start to decline.

ABC News's Jake Tapper and Karen Travers note:

"In January, the incoming administration predicted in a white paper study that without a huge stimulus package, unemployment would reach just over 8%, and would be contained at under 8% with a stimulus package.

"(When asked about this discrepancy, one of the authors of the study – Jared Bernstein, the top economic adviser to Vice President Biden – recently said that 'when we made our initial estimates, that was before we had fourth-quarter results on GDP, which we later found out was contracting at an annual rate of 6 percent, far worse than we expected at that time.' The bottom line, Bernstein said, is that without the stimulus the unemployment rate 'would have been between 1.5 and 2 points higher than it otherwise will be.')

The timing is curious though the message, unfortunately, was not. Most political watchers know that the unelmployment rate will top 10 percent. At a Meet the Press roundtable on April 19, 2009, guests Fmr. Rep. Harold Ford, Jr. (D-TN), Fmr. House Majority Leader Dick Armey (R-TX), Time Magazine's Rick Stengel, The Washington Post's Steven Pearlstein and Fortune Magazine's Nina Easton all came to pretty much the same conclusion:

"MR. GREGORY: I want to follow up on one point, this question of recovery. We know that unemployment is something that lags. So if the recession were to end, say this fall, as some forecasters think it will, when do you think unemployment would actually peak?

"MR. PEARLSTEIN: Not till the end of next year at the earliest.

"MR. GREGORY: So it could take an additional year...

"MR. PEARLSTEIN: Yes, sir.

"MR. GREGORY: ...of job losses. That's pretty frightening.

"MR. STENGEL: And then people--by the way, we call it a lagging indicator. You lose your job, you're not a lagging indicator. You are in serious trouble.


"MR. STENGEL: And the thing is...

"MR. PEARLSTEIN: You're a present indicator.

"MS. EASTON: Right.

"MR. STENGEL: Well, that's right, you're a present indicator. And the point is, is we're, we're thinking, "Oh, the economy will be healthy but unemployment will go up to 10 percent." I mean, does anybody here at this table think it's not going to go up to 10 percent?


"MR. STENGEL: Everybody does.

"MR. GREGORY: Right."

At present American unemployment is 9.4 percent. Other numbers: Nevada's unemployment is at a record 11.3 percent, Missouri's unemployment is at 9 percent, Michigan's unemployment rate is at 12.9%, California is at 11% and the unemployment rate for African American workers is now at 14.9 percent.

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