Perhaps this is the Associated Press’ attempt to rid itself of its favorite adverb on economic reporting. According to their analysts, the recovery — if it can be called that — will produce no significant boost in employment this year, and even into next year. The news comes at a bad time for Democrats who assumed their stimulus spending would produce a wave of employment and goodwill coming into the midterms:
The pillars of Americans’ financial security — jobs and home values — will stay shaky well into 2011, according to an Associated Press survey of leading economists.
The findings of the new AP Economy Survey, released Monday, point to an economic recovery that will move slowly and fitfully this year and next. As a result, the Federal Reserve will be forced to keep interest rates near zero until at least the final quarter of this year, three-fourths of the economists said. …
• The unemployment rate will stay stubbornly high the next two years. It will inch down to 9.3 percent by the end of this year and to 8.4 percent by the end of 2011. The rate has been 9.7 percent since January. When the recession started in December 2007, unemployment was 5 percent.
• Home prices will remain almost flat for the next two years, even after plunging an average 30 percent nationally since their peak in 2006. The economists forecast no rise this year and a 2.3 percent gain next year.
• The economy will grow 3 percent this year, which is less than usual during the early phase of a recovery and the reason unemployment will stay high. It takes growth of 5 percent for a year to lower the jobless rate by 1 percentage point, economists say.
The administration offered a bleak forecast last month, but not this pessimistic, in what was widely assumed to be a bit of sandbagging in order to claim victory if the economy exceeded their stated expectations. The White House presumed a growth rate of 3% this year as well, but in 2011 they predicted 4.3% GDP growth.
That falls mainly into line with the AP’s predictions, but they diverge on employment. The administration predicted over 100K new jobs per month this year, 200K per month in 2011, and 250K per month in 2012. Not only is that on the low end of any post-war American recovery, it’s not going to move the needle past 7% unemployment, and the AP doesn’t see them breaking the 8% barrier that Porkulus was meant to prevent in the first place.
And those already unemployed for a while shouldn’t get their expectations raised anyway, according to the Seattle Times. The long-term unemployed are facing historically dire straits, thanks to the fumbled recovery:
Never since the Great Depression has the U.S. labor market seen anything like it. The previous high in long-term unemployment was 26 percent in June 1983, just after the deep downturn of the early ’80s. The 44 percent rate this year translates into more than 6.5 million people. …
The hardships of workers are straining the nation’s finances, too. In normal times, jobless workers can qualify for up to 26 weeks of state unemployment benefits. But the crisis of the past two years has prompted the federal government to help fund jobless benefits for up to 99 weeks in high-unemployment states, including Washington.
Congress is poised for yet another partisan showdown over the issue Monday when lawmakers return from a two-week recess. The Senate is scheduled to vote on whether to end debate on a measure that would further extend jobless benefits, subsidies for the COBRA health-insurance program and federal flood insurance through May 5. Because some Republicans want spending cuts elsewhere to offset the $9 billion price tag, Democrats will need at least one GOP supporter to get the 60 votes necessary to proceed.
We need rapid economic growth in order to offset these strains on our finances. The best way to get that is to stop penalizing capital gains and reverse the pricing signals on taxes that Obama and Democrats have set with their expansive agenda of government control over health care and energy production. Until we do that, even these low expectations will fail to get met in the next two years.