Fed predicts unemployment rate of 7.5% in … 2012
posted at 2:55 pm on November 25, 2009 by Ed Morrissey
Hope and change, my friends … hope and change:
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. …
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.
“Business contacts reported that they would be cautious in their hiring and would continue to aggressively seek cost savings,” said minutes of the Fed policymaking meeting earlier this month, which were released alongside the forecast. The officials “expected that businesses would be able to meet any increases in demand in the near term by raising their employees’ hours and boosting productivity, thus delaying the need to add to their payrolls.”
Why did we experience a growth rate of over 7% in 1982? Ronald Reagan cut taxes and reduced regulation. He lowered the capital gains tax rate to encourage investment. Reagan and a Democratic Congress also pushed through tax reforms on retirement accounts that created a broad investor class of Americans, allowing much more capital to flow into the market in the 1980s for investment and technological innovation. Reagan also encouraged energy exploration and production by eliminating self-defeating tax treatments for new resources.
Why won’t we get it now? Obama wants to hike capital-gains tax rates. He also wants to increase tax burdens on multinational corporations based in the US, although he had to put that aside for a while. Obama and the Democrats also want to escalate energy prices with an ill-advised attack on carbon emissions. Obama’s skyrocketing deficits portend higher inflation, higher interest rates, or both in the next few years. All of the price signals on taxes sent thus far by the White House and Congress have investors clinging to their liquidity.
So now we will have high unemployment rates not just through next summer, but probably through the next presidential election three years from now. Looks like we’ll see a rebirth of the Misery Index, and a rerun of the 1980 election. If we still have a 7.5% unemployment rate in 2012, Obama will join the Democratic leadership in the Senate on a train ride to political oblivion.
Blowback
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Ed,
Forget my previous post. I found it. Sorry to bother you.
Americannodash on November 25, 2009 at 3:45 PM
So everyone who contributed and deffered the nice low taxes under Bush is going to get hosed when they take those funds out under presumably higher taxes down the road.
Glad I went with the Roth, unless of course they decide to start taxing that too.
Your stock trades already include a fee you pay to the broker. Those fees are taxed. And I’d be good with a total revamp of the tax code (something like a very low two or three level flat tax with a consumption tax), but let’s just say I’m skeptical that anything like that is in the works.
That’s some grade A stupid. You should apply for a patent and start packaging that.
BadgerHawk on November 25, 2009 at 3:47 PM
The only reason we have an economy at all right now is that the Fed injected trillions of dollars of free electronic money. To their credit the are withdrawing that gradually, thus causing slow growth. If the Obamanauts can take control of the Fed, they will let that money out into the wild and will trigger hyperinflation.
pedestrian on November 25, 2009 at 3:49 PM
equality through poverty
Daveyardbird on November 25, 2009 at 3:49 PM
Undoubtedly the MSM will just spin it by saying the administration cut unemployment by 4%. Expect to hear “slow, painful” but continuing recovery.
Ok, back to my fruit fly colony. I love government money.
Rambotito on November 25, 2009 at 3:50 PM
It wont get that low if Obama keeps doing what he does now.
Just look at the Great depression.
He needs to change direction completely.
the_nile on November 25, 2009 at 3:52 PM
Not true. Obama did NOT have to sign off on porkulus, stimulus, etc. He promised a line by line veto, and to cut out the pork. All congress had to do was ship him the bill, and without blinking, he signed it. He’s as responsible for this, as his ilk in Congress.
Perhaps you should turn off ABC, NBC, CBS, CNN, MSNBC, and public television. ;)
capejasmine on November 25, 2009 at 3:52 PM
I think Decider left to play with her Obama doll talking and fighting the PowerRangers. It is so easy to spot these one time voter know it alls.
bluegrass on November 25, 2009 at 3:52 PM
“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”
Winston Churchill
the_nile on November 25, 2009 at 3:53 PM
Perhaps you should turn off ABC, NBC, CBS, CNN, MSNBC, and public television. ;)
capejasmine on November 25, 2009 at 3:52 PM
HERE HERE
bluegrass on November 25, 2009 at 3:53 PM
True, in the sense that the President draws a salary of only $400K or whatever. The trillion dollar deficits he plans on running, now that’s a different story.
pedestrian on November 25, 2009 at 3:54 PM
It could be Frum..
the_nile on November 25, 2009 at 3:54 PM
You honestly believe that labor rates determine growth rates?
MarkTheGreat on November 25, 2009 at 3:56 PM
7.5% seems a little high for ’12 at this point, frankly.
changer1701 on November 25, 2009 at 3:57 PM
Er, I mean low. I’d be surprised if its below 8.
changer1701 on November 25, 2009 at 3:57 PM
In your opinion, the main purpose for the Republican party is to make the Democratic programs more efficient?
MarkTheGreat on November 25, 2009 at 3:58 PM
Funny myth that. One that has worked every single time it has been tried. Presidents from Kennedy to Reagan to Bush have lowered taxes, followed by increases in economic activity. Hoover, FDR, Clinton raised taxes, and were rewarded with less economic activity.
MarkTheGreat on November 25, 2009 at 4:02 PM
When we restore the welfare system that Contract for America ended and Bill Clinton took the credit for turning the economy around you will once again see that there is a group of people in this country that will be content doing nothing. In fact there are more than you can imagine. Take the 52% who voted for Obama less the independents who have run like hell away from him and there is the Hope N Change we were promised. The chickens have come home to roost.
bluegrass on November 25, 2009 at 4:03 PM
The man who spouts DNC talking points telling others to think for themselves? Now that’s funny.
The president doesn’t direct the economy, but the policies put forth by the president have very large impacts on how well the economy does.
MarkTheGreat on November 25, 2009 at 4:04 PM
This is a lesson for all why it won’t happen under Obama.
Every sane person should read and internalize this, especially those who don’t know it yet.
Schadenfreude on November 25, 2009 at 4:04 PM
MSM in 2012: Bush’s fault.
If Obama does prove to be one-term, utterly failed President, you just KNOW that’s going to be the historians’ meme, at least for awhile. Go with what works (in their minds).
Missy on November 25, 2009 at 4:04 PM
Ed, you have been taken in by the optimism of the Fed. It won’t get anywhere near 7.5% by 2012.
burt on November 25, 2009 at 4:06 PM
What makes you think he has any interest in cutting taxes?
MarkTheGreat on November 25, 2009 at 4:06 PM
Democrats are firmly committed to the notion that trading in stocks does nothing to create wealth, so eliminating it will actually help the economy.
MarkTheGreat on November 25, 2009 at 4:09 PM
Lets put Joe the Plumbers advise given him to use in reverse.
Call it….. Spread the taxes. That should shut the mouths of a lot of freeloaders.
bluegrass on November 25, 2009 at 4:09 PM
This isn’t a consumption tax. It’s a tax designed to destroy economic activity at it’s core.
MarkTheGreat on November 25, 2009 at 4:10 PM
If anyone but a democrat wins election in 2012…they can cut taxes. Cutting those taxes puts money back in the pockets of those who create jobs. Cease the threats of higher taxes, and socialism, and the public will become more secure, and content to start investing again. When jobs start, and consumers feel more assured, they will start spending. Everything we buy is taxed. More money spent, more taxes go to the government. Cutting programs? You bet that’s a good idea. Government is already to big. It needs to be downsized, and it can be done.
capejasmine on November 25, 2009 at 4:13 PM
I call BS on that nonsense.
MarkTheGreat on November 25, 2009 at 4:13 PM
7.5% unemployment in 2012. They’re dreaming or simply drinking the kool aid.
A good rule of thumb is to multiply any bad numbers the Feds project by at least 2, while dividing any good number projected by the same number.
Unemployment, thus, will be at least 15%.
TXUS on November 25, 2009 at 4:14 PM
I’ve long believed that if you dump every tax we currently have on the books, and replace it with a tax done where money changes hands (a consumption tax of some sort) – including legal fees, church donations, stock trades, etc (everything) – you’d raise enough money and you’d have a better economy from it. And you wouldn’t have to hire an accountant to do your taxes each year. You pay them each time you buy something.
The problem with taxes right now is that everything is either cut or raised around the edges. There are too many “no fly zones” – where you can’t cut or raise without pissing off someone.
So, you replace it with a consumption tax. It’s fair and your burden is directly related to how much you spend – so it’s progressive (in some sense) as well.
lorien1973 on November 25, 2009 at 4:14 PM
It won’t be that low.
True_King on November 25, 2009 at 4:16 PM
Cluelessness should be a crime. It really should be.
lorien1973 on November 25, 2009 at 3:33 PM
L–O–L–!!!
lovingmyUSA on November 25, 2009 at 4:18 PM
Simply well-put…
lovingmyUSA on November 25, 2009 at 4:20 PM
Unless we have the greatest jobs creating recovery in history for the next 3 years starting this month, it’s mathematically impossible to get down to 7.5% UE by 2012.
Remember, because of population growth, we need to create a certain number of jobs each month just to keep the UE rate steady. And there is a ton of slack in the system for part-time and <40h/week workers creating a buffer before the UE rate can come now. Not to mention discouraged workers who would come flooding into the labor pool once jobs started being created.
In other words, not gonna happen.
John9400 on November 25, 2009 at 4:21 PM
The numbers they just released, they admit, ARE BOGUS because they say they have not been adjusted.
There are a number of things going on.
First the libs are doing their best to pass anti private sector legislation. They are openly hostile to the private sector.
Second the libs do absolutely nothing to create private sector growth.
We crossed the unemployment tipping point where the number of unemployed and homeless have an accelerated and corrosive effect on the economy.
Finally every bit, and I mean every last statement of economic data coming from the government must be validated since every single thing they report, to be charitable, is at best, ahem inaccurate.
Of course at a certain point one must conclude that the inaccuracies are intentional, willful LIES.
If retailers are laying people off at the beginning of teh Christmas season as the BLS.gov website reports, uhhhh hello, thats not a recovery. Thats a symptom of something seriously wrong.
dogsoldier on November 25, 2009 at 4:22 PM
Thank you for that article–worth the read! Keeps it simple–I wish everyone would read that!
lovingmyUSA on November 25, 2009 at 4:24 PM
78% of porkulus is not spent yet. According to all reports. But since its all propaganda, who knows.
dogsoldier on November 25, 2009 at 4:24 PM
Actually he has a great deal to do with it, since his cabinet sorta like controls the economy.
dogsoldier on November 25, 2009 at 4:26 PM
The best thing that could happen to the Chairman’s prospects for 2012 would be for voters to sweep his socialist allies out of power in 2010. Tax cuts and spending cuts would ensue, and the economy would revive, and he, Barry, takes credit. Jes’ like 1994 and 1996.
james23 on November 25, 2009 at 4:29 PM
The current dufus in charge has no idea how to create jobs and opportunity. Cutting taxes doesn’t even compute in his brain.
As long as him and other leftists are in charge, we will have high unemployment numbers.
RedbonePro on November 25, 2009 at 4:31 PM
If this keeps up, Ann Althouse is going to seriously consider having second thoughts about this guy.
Jim Treacher on November 25, 2009 at 4:33 PM
I’ll call your Teabaggee and raise you a nut waxer!
Juno77 on November 25, 2009 at 4:33 PM
This is a lesson for all why it won’t happen under Obama.
Every sane person should read and internalize this, especially those who don’t know it yet.
Schadenfreude on November 25, 2009 at 4:04 PM
I wish every citizen had to read that, thankyou, my heart is sad for my Country. I will make sure I pass that along.
LSUMama on November 25, 2009 at 4:33 PM
With accounting systems (e.g., QuickBooks, MAS, etc.) as they are, accountants would not be in too much demand if our tax system was based on consumption. MY 100 person company would not need an accountant for customary annual activity.
How do accountants and lawyers make my daily life better anyway? I.e., what do they produce?
WashJeff on November 25, 2009 at 4:33 PM
So you are saying that his spending of over 3 trillion (yes trillion) in the first 10 months had no effect? His takeover of the banks had no effect, or the take over of GM had no effects? The passage of Health care, one of his conerstones, has no economic impact?
He posts mis information (read lies) on his recovery.org website, and refuses to correct the problem because “it might confuse the people”.
All of that, and you say he has no impact on the economy?
Amazing, and you know what? I really believe that you actually believe what you posted. That’s what scares me about liberals, they actually believe most of what they post….
right2bright on November 25, 2009 at 4:45 PM
They are not drinking the cool aid.
They are freebasing it.
Slowburn on November 25, 2009 at 5:20 PM
Rightwinged predicts unemployment rate of 17.5% in 2012
RightWinged on November 25, 2009 at 5:50 PM
What do you expect from our president, the Post Turtle?
http://www.flickr.com/photos/eric_tank/2678855518/
mwdiver on November 25, 2009 at 5:59 PM
So since when did the Fed predict anything? That was right?
tarpon on November 25, 2009 at 6:36 PM
If this is true, an Obama re-election may well be ours to lose. Let’s not lose it.
Loxodonta on November 25, 2009 at 6:36 PM
A majority of low tax and spend conservatives in the House would stop any further stupid liberal legislation.
Loxodonta on November 25, 2009 at 6:47 PM
Nancy Pelosi has suggested a voluntary program where you can turn over the balance to the Feds. They guarantee you a payout.
You know where that’s going.
The voluntary program will be undersubscribed, and followed by the federal takeover as the default that everybody can opt out of, for a private IRA. By filing the option for free.
Followed by opting out, annually, for a fee.
Then only a minority will remain outside the system, and will gobbled up as a “comprehensive reform”.
Chris_Balsz on November 25, 2009 at 6:50 PM
The most unintentionally funny of all the trolls….
There Goes The Neighborhood on November 25, 2009 at 8:44 PM
7.5 or 75?
BTW listening to the fed is a fool’s game. just remember it was Greenspan who in 2006 swore there was no housing bubble. And bernanke who in 2007 said sub-prime mortgages were nothing to worry about. They have about as much credibility on the economy as Obama does on stimulus jobs saved.
angryed on November 25, 2009 at 9:06 PM
Economically illiterate and historically inaccurate. Every time taxes are cut, revenue increases. It worked for Reagan, and it worked for Bush 43. Bush 41 raised taxes, though reluctantly, and we saw a recession that Clinton capitalized on as “the worst recession in 50 years.” (A breathtaking lie, of course. But then, you could always count on Clinton to go big with his lies.)
Pretty much everyone knows by now that you don’t raise taxes in a recession. Oops! Apparently not Obama or Pelosi.
You can see the advantage India has competing due to its lower labor costs, but can’t see the advantage states with lower taxes will have in drawing business to themselves? The smartest thing any state can do in the current economy is to lower its tax burden and attract business. Which is why Texas is probably going to do well in the current economy.
There Goes The Neighborhood on November 25, 2009 at 9:21 PM
Thats what they said when they needed to pass the Stimulus. Time is up for you idiots.
BigMike252 on November 25, 2009 at 9:58 PM
That be the plan. The Trolls like simple want us to be like them
CWforFreedom on November 25, 2009 at 10:46 PM
As president, other than the veto, has little control over congress, however by his/her policy statements businesses can feel somewhat confident of the future and if he vetoes expansive government spending and taxing, businesses just might invest and hire because they see actions rather than just words. Reagan took actions to instill confidence, Obama has not and I am not confident that I will not get shafted in the future; so-o-o no new car or other debt until I SEE real change that improves America’s economic and political picture.
amr on November 25, 2009 at 11:06 PM
“Fed predicts unemployment rate of 7.5% in … 2012″
Tens of millions of uncounted now in relocation/re-education camps, millions gainfully employed in either local, state and federal jobs, including the Civilian National Defense Corp, but the private sector (mostly resturant and janitorial jobs) employment rate rises to 7.2 percent, for a total of 5 million private sector jobs.
Upcoming jobs now include the Bill Ayers Brigade – which needs heavy equipment operators (Spanish language only) for the huge task of covering over the no longer working human debris from pre-Obama times.
http://www.thenewamerican.com/usnews/election/480
Friendly21 on November 26, 2009 at 7:31 AM
must mention one more time if you use the MIsery Index you will have to account for ZERO Interest rates from the Fed this time and ZERO credit available for consumers this time as well
in the 70s consumers had CREDIT available
in the 70s Volcker? raised rates to slay inflation
the Fed has done everything but sign in blood that they are not tightening for at least a year
so the Misery Index which accounts for inflationa dn itnerest rates would really not give us an accurate picture of how bad things are right now
we need a revamped index
ginaswo on November 26, 2009 at 8:49 AM
Stock trading is a combination of legalized gambling, a slick carnie’s hide-the-pea game, and a soap opera. Like gambling, attempting to make money on stock trading has ruined far more people than it has made wealthy, and that’s not even including the debacle we had in 1930. The times that people have been snookered into buying worthless stocks – or whose supposedly-reliable investments evaporated – are beyond count.
Atbest, the stock market gives people like you and me a semi-reliable method of long-term investing. At worst it drains retirement funds, destroys dreams, and can even pull down the nation’s economy.
Dark-Star on November 27, 2009 at 12:49 PM
America’s economy will never recover to 2005 levels. Remember, 70 percent of the economy is consumer spending and both the government and consumers were spending huge amounts of borrowed money by 2005. Until America starts actually producing things we are in a graveyard spiral. The only road to recovery is to start beheading environmentalist lawyers. We can probably sub that out to muslims pretty cheap.
lonesomecharlie on November 27, 2009 at 2:36 PM
.
Almost? Redistribution was is only purpose. That and oiling union pockets for future redistribution back to Democrat coffers.
Dasher on November 27, 2009 at 5:19 PM
How do you stop stupid?
Americannodash on November 25, 2009 at 3:28 PM
Shoot it in the head..
huckelberry on November 27, 2009 at 5:33 PM
My local palm reader has more accurate predictions than the entire Democrat Party.
AND SHE’S A HELLUVA LOT CHEAPER.
Cybergeezer on November 27, 2009 at 6:37 PM
According to the Lame Stream Media, it will be an unprecedented economic turnaround. A masterful job done by Obama. In the immortal words of Charles Barkley, N Pleeeeeease.
marklmail on November 27, 2009 at 6:48 PM
Make that 8.75% – there are going to be a lot of unemployed global warming scientists.
darwin-t on November 27, 2009 at 10:47 PM
The Fed can’t predict what the unemployment rate will be next week. How can they predict 3 years from now. I know they same way Michael Mann predicts the global temperature 50 years from now.
Dasher on November 28, 2009 at 1:04 AM
It will take exactly 4 years for unemployment to recover. As soon as Obama gets voted out and a republican is able to give the required tax cuts to business to start hiring. That is IF any business survives Obama.
patriotparty1 on November 28, 2009 at 9:41 AM
In his weekly address, Bozo asked all the unemployed to remain “patient” while he works on the economy.
http://www.rollcall.com/news/40966-1.html
Yeah, all those parties, trips and golf are hard work, during those “waking moment”(s) with your “economic team”.
dogsoldier on November 28, 2009 at 10:08 AM
They can’t even accurately report the count of people who lost their jobs last week! Which is incredible and hard to believe. This IS 2009? Every time they publish a count, a week later the count gets revised upward by 50,000 or more.
dogsoldier on November 28, 2009 at 10:10 AM
Before too long he will be hoping for exactly that to happen. What’s hard to understand is why the Democrats haven’t figured out that the crap they are doing is at the root of the problem. They are creating chaos with the economy, a child could see it so I guess it is intentional.
whbates on November 28, 2009 at 9:21 PM
The economists from Rutgers U. predict if we are lucky the jobs will come back in 2017. The population growth indicates we need to do more than “save” or “create” the jobs that have been lost.
http://finance.toolbox.com/blogs/sme-sound/rutgers-job-study-full-employment-by-2017-34762
njpat on November 29, 2009 at 1:16 AM
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