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http://www.businesstimes.com.sg/sub/specialfocus/story/0,4574,332535,00.html?

Special Focus
Published May 12, 2009

STATE OF THE US ECONOMY
Unemployment rate likely to keep rising until 2010
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(WASHINGTON) President Barack Obama’s chief economics forecaster said on Sunday that the nation’s unemployment rate was likely to keep rising until 2010, even if the economy begins growing later this year.

Ms Romer: Unemployment could hit 9.5% and GDP has to grow at a rate of about 2.5% before unemployment will fall. It’s reasonable to estimate that GDP’s growth rate in 2010 would be 3%, she says
Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the economy to begin growing in the fourth quarter of this year. Ben Bernanke, the Federal Reserve chairman, made a similar prediction recently.

But Ms Romer also said that she expected unemployment to rise even after the economy turns, saying that gross domestic product has to grow at a rate of about 2.5 per cent before unemployment will fall.

Before that happens, she said, it is ‘unfortunately pretty realistic’ that the unemployment rate could reach 9.5 per cent. It was reasonable to estimate that the GDP’s growth rate in 2010 would be 3 per cent, she said.

Robert Reich, who served as labour secretary under ex-president Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher – 4.5 per cent – to reverse rising unemployment.

‘I think that when we talk about – or anybody talks about – hitting bottom, what we really have to understand is that the bottom is a kind of an undefined concept here,’ he said on ABC’s This Week.

According to figures released on Friday, the unemployment rate in April was 8.9 per cent, its highest level in a quarter-century. The so-called underemployment rate, which counts people who are working part time because their hours have been cut and those who have given up looking for jobs, reached 15.8 per cent.

Still, the administration seized on the report as an early sign that the economy’s free-fall was coming to a halt, because the pace of deterioration had slowed.

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http://www.bloomberg.com/apps/news?pid=20601103&sid=aaL8T61F4UwE

Unemployment at 8.9%

The U.S. unemployment rate surged to 8.9 percent in April, the highest level since 1983, already worse than the government’s estimate. “Economic developments since the forecast was made suggest that unemployment may peak at an even higher rate” on an average basis, the budget documents acknowledged.

Christina Romer, chairman of the White House Council of Economic Advisers, said in an interview on the Cable Satellite Public Affairs Network, or C-SPAN, yesterday that unemployment may rise to 9.5 percent this year.

The administration’s forecasts for unemployment are more optimistic than those made by the CBO in its March report, though a budget official said they were in line with Blue Chip forecasts.

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http://voices.washingtonpost.com/economy-watch/2009/05/bernanke_i_still_see_late_09_t.html?wprss=rss_blog

HE TICKER
Bernanke: Let In More Foreign Scientists, Engineers
UPDATED at 11:58 A.M.:

Fed Chairman Ben Bernanke went off on a bit of a tangent when asked during a meeting of Congress’s joint economic committee underway right now what else could be done to stimulate the flagging economy.

“I know it’s not very popular to say, but our immigration laws discriminate pretty heavily against talented scientists and engineers” from other countries, Bernanke said.

“If you allow more people with high-tech skills to come here,” you get more innovation and more growth, Bernanke said, adding, “I know that’s controversial.”

Bernanke: Unemployment Won’t Hit 10%

11:34 A.M.: Bernanke said that he anticipates that U.S. unemployment will peak in early 2010 but not hit 10 percent. It currently stands at 8.5 percent.

“Currently, we don’t think it will get to 10 percent,” Bernanke said, while testifying before Congress’s joint economic committee, currently underway. “Our current number is somewhere in the 9s.”

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http://online.wsj.com/article/BT-CO-20090505-722418.html

MAY 5, 2009, 10:30 P.M. ET
Fed’s Yellen: See “Basis For Optimism” About Economy
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BERKELEY, Calif. (Dow Jones)–The end of the recession is in sight, although the recovery could prove long and slow, the San Francisco Federal Reserve Bank’s top official said Tuesday.

In a speech late Tuesday, Federal Reserve Bank of San Francisco President Janet Yellen said she sees a “basis for optimism” about improvements in the economy, which could come as early as the second half of this year.

Yellen joined a chorus of other Fed officials, including Chairman Ben Bernanke, who sees signs that the long and painful downturn is starting to end.

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http://www.federalreserve.gov/monetarypolicy/fomcminutes20090128ep.htm

In conjunction with the January 27-28, 2009 FOMC meeting, the members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in deliberations of the FOMC, provided projections for economic growth, unemployment, and inflation in 2009, 2010, 2011, and over the longer run. Projections were based on information available through the conclusion of the meeting, on each participant’s assumptions regarding a range of factors likely to affect economic outcomes, and on his or her assessment of appropriate monetary policy. “Appropriate monetary policy” is defined as the future policy that, based on current information, is deemed most likely to foster outcomes for economic activity and inflation that best satisfy the participant’s interpretation of the Federal Reserve’s dual objectives of maximum employment and price stability. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge over time under appropriate monetary policy and in the absence of further shocks.
FOMC participants viewed the outlook for economic activity and inflation as having weakened significantly since last October, when their last projections were made. As indicated in Table 1 and depicted in Figure 1, participants projected that real GDP would contract this year, that the unemployment rate would increase substantially, and that consumer price inflation would be significantly lower than in recent years. Given the strength of the forces currently weighing on the economy, participants generally expected that the recovery would be unusually gradual and prolonged: All participants anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks; a few indicated that more than five to six years would be needed for the economy to converge to a longer-run path characterized by sustainable rates of output growth and unemployment and by an appropriate rate of inflation. Participants generally judged that their projections for both economic activity and inflation were subject to a degree of uncertainty exceeding historical norms. Nearly all participants viewed the risks to the growth outlook as skewed to the downside, and all participants saw the risks to the inflation outlook as either balanced or tilted to the downside.

(Buried in these figures from January is an estimate of the
2009 2010 2011 unemployment rates:
8.5 to 8.8 8.0 to 8.3 6.7 to 7.5 -kh)

Table 1. Economic projections of Federal Reserve Governors and Reserve Bank presidents, January 2009
Percent
Variable Central tendency1 Range2
2009 2010 2011 Longer Run 2009 2010 2011 Longer Run
Change in real GDP -1.3 to -0.5 2.5 to 3.3 3.8 to 5.0 2.5 to 2.7 -2.5 to 0.2 1.5 to 4.5 2.3 to 5.5 2.4 to 3.0
October projection -0.2 to 1.1 2.3 to 3.2 2.8 to 3.6 n.a. -1.0 to 1.8 1.5 to 4.5 2.0 to 5.0 n.a.
Unemployment rate 8.5 to 8.8 8.0 to 8.3 6.7 to 7.5 4.8 to 5.0 8.0 to 9.2 7.0 to 9.2 5.5 to 8.0 4.5 to 5.5
October projection 7.1 to 7.6 6.5 to 7.3 5.5 to 6.6 n.a. 6.6 to 8.0 5.5 to 8.0 4.9 to 7.3 n.a.
PCE inflation 0.3 to 1.0 1.0 to 1.5 0.9 to 1.7 1.7 to 2.0 -0.5 to 1.5 0.7 to 1.8 0.2 to 2.1 1.5 to 2.0
October projection 1.3 to 2.0 1.4 to 1.8 1.4 to 1.7 n.a. 1.0 to 2.2 1.1 to 1.9 0.8 to 1.8 n.a.
Core PCE inflation3 0.9 to 1.1 0.8 to 1.5 0.7 to 1.5 0.6 to 1.5 0.4 to 1.7 0.0 to 1.8
October projection 1.5 to 2.0 1.3 to 1.8 1.3 to 1.7 1.3 to 2.1 1.1 to 1.9 0.8 to 1.8

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