The Bush administration sought to soothe the public’s growing concern about the U.S. economy Wednesday, projecting that the ongoing expansion would continue at a “healthy and sustainable pace.”
The president’s economic advisers issued a midyear outlook predicting economic growth would be just a tad lower than had been predicted at the end of 2004, while inflation would be only slightly higher.
Bush’s popularity has declined in recent polls, as Americans have increased their criticism of his handling of the economy along with the war in Iraq. According to a June 1 survey by the Pew Research Center, only 1 in 3 people believe the economy is in good shape.
A day after General Motors announced it was cutting 25,000 jobs and as concern is rising about the ability of the government to guarantee many troubled corporate pension plans, the president’s economic advisers said the economy would expand a solid 3.4 percent this year, down from 3.5 percent forecast six months ago.
Annual economic growth in 2006 also will be 3.4 percent, their report predicted, and then will taper off to 3.1 percent in 2009 and 2010.
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They said that the economy would create an average of 178,000 payroll jobs per month this year, and the unemployment rate would be 5.2 percent for the year as a whole. It was 5.1 percent in May.
“The economic expansion is continuing,” said Harvey Rosen, head of the president’s Council of Economic Advisers.
Still, higher oil prices, a volatile stock market, a large federal budget deficit, a shaky dollar and a record trade deficit have weighed heavily on public opinion about the economy. On Tuesday, GM announced it would lay off 25,000 workers by 2008 while the nation’s financially strapped airlines asked skeptical members of Congress for pension relief for their workers.
A CBS poll in late May said only 38 percent of Americans approve of Bush’s handling of the economy, despite the fact that economic growth has been solid, though not spectacular, over the past year (this sentence as published has been corrected in this text).
The president said Wednesday in a speech dealing mostly with Social Security that his economic policy is working. “After all, more people work in America today than ever before in our nation’s history.”
But in an interview with Fox News, Bush conceded that the polls show lower confidence over the economy.
“Polls are polls, kind of snapshots of the moment, and to the extent that some say, `I’m unsettled about the future of our economy,’ they are basically, I think, reflecting the fact that gasoline prices have risen dramatically,” the president said.
“I do think there are some troubling signs in the economy,” he said. “One is the fact that we have not passed an energy bill and we’re dependent on foreign sources of energy and gasoline prices are up.”
The economic advisers predicted that inflation as measured by the Consumer Price Index would be 2.9 percent this year, up from their earlier forecast of 2.4 percent. Higher energy prices have been a chief factor in pushing up the rate of inflation. They said consumer price inflation would stabilize at 2.4 percent in 2006 “and beyond.”
Rosen told reporters in a telephone conference call that higher energy prices have “created headwinds for the economy,” and hurt households and businesses.
“As the president said, there is no magic wand that he can wave to do something about that,” Rosen said. “There are things we can do for the medium and long term, including items in the energy legislation he has proposed.”
But asked about the main risks to the economy, Rosen emphasized other issues. He underscored the importance of controlling the budget deficit and keeping tax rates low. Also, he said, “I think a vibrant trading environment is important for maintaining our growth. We have to beware of any movement toward economic protectionism.”
The administration predicted that the unemployment rate next year and in 2007 would be 5.1 percent, and then average 5 percent from 2008 to 2010.
This appeared to indicate that the White House believes the U.S. economy is close to what economists call “full employment,” defined as a jobless rate that does not cause the economy to overheat and boost prices.
Rosen said a 5 percent unemployment rate is “our estimate of what a sustainable long-term unemployment rate is.”
The jobless rate fell as low as 3.9 percent during the economic boom in the 1990s, but reached 6.4 percent in June 2003 as the economy struggled after the Sept. 11, 2001, attacks and the bursting of what many analysts considered an economic bubble.
According to the newest economic forecast, Bush’s second term would see the creation of roughly 8.1 million jobs. In 2004, the number of payroll jobs totaled 131.5 million. In 2008, this figure would rise to 139.6 million. Bush’s second term ends on Jan. 20, 2009.
Treasury Secretary John Snow said the unemployment rate is now “at a low we’ve rarely seen in history,” and 3.5 million jobs have been created over the past two years after substantial job losses during the first three years of Bush’s first term.
On interest rates, the administration said short-term rates as measured by 91-day Treasury bills would rise from 3.01 percent on June 3 and average 3.4 percent in 2006 and 3.5 percent in 2007. Ten-year Treasury notes would average 4.3 percent this year and jump to 4.8 percent next year and 5.2 percent in 2007, according to the report.
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