Remember When a Possible 9 Percent Unemployment Was Considered a Huge Crisis?
The latest long term budget projections from the Congressional Budget Office assume that unemployment will be very high for years to come. From the CBO:
CBO expects that the recovery will continue but that real (inflation-adjusted) GDP will stay well below the economy’s potential—a level that corresponds to a high rate of use of labor and capital—for several years. On the basis of economic data available through early July, when the agency initially completed its economic forecast, CBO projects that real GDP will increase by 2.3 percent this year and by 2.7 percent next year. Under current law, federal tax and spending policies will impose substantial restraint on the economy in 2013, so CBO projects that economic growth will slow that year before picking up again, averaging 3.6 percent per year from 2013 through 2016.
With modest economic growth anticipated for the next few years, CBO expects employment to expand slowly. The unemployment rate is projected to fall from 9.1 percent in the second quarter of 2011 to 8.9 percent in the fourth quarter of the year and to 8.5 percent in the fourth quarter of 2012—and then to remain above 8 percent until 2014.
These unemployment projections from the CBO are significantly worse than the Federal Reserves projections just two months ago but are similar to more pessimistic recent economic projections from private sector companies, like Moody’s Analytics and JP Morgan.
Official unemployment is around 9 percent and unemployment is expected to stay high for years. This is a massive crisis. Calculated Risk has been tracking this trend for a long time.
I remember when President Obama took office, just two and a half years ago,that merrely the idea unemployment might get close to 9 percent without any stimulus was considered such a huge disaster that it required a big act to avert that crisis. Yet even though we are living through a truly terrible crisis that is projected to last for years, officials in Washington have been put the unemployment issue on the backburner while they focus on deficit hysteria and debts 20 years from now.
It would be nice if our leaders would acknowledge and act like we are in the middle of a truly massive and horrible crisis right now. No more small bore solutions, no more divided attention, no more focusing on anything else, no more pretending the solution to this crisis should be dependent on reaching a compromise to deal with possible deficit problems in the distant future.