The nation’s economy will grow by only 1.4 percent in 2013, and unemployment will remain above 7.5 percent through 2014, according to a Feb. 7 forecast by the non-partisan Congressional Budget Office.
“If that occurs, 2014 will be the sixth consecutive year with unemployment exceeding 7½ percent of the labor force, the longest period of such high unemployment in the past 70 years,” said the CBO’s statement, titled “Economic Growth Is Likely to Be Slow in 2013 and Pick Up in Later Years.”
The statement, signed by CBO director Doug Elmendorf, forecasts growth in 2013 will be held back by efforts to curb the nation’s trillion-dollar annual deficits. Without the spending restrains, the economy would growth by roughly 3 percent in 2013, said the CBO.
SInce 2009, the federal government has borrowed and spent roughly $5 trillion, pushing the nation’s debt to $16 trillion. The Federal Reserve has also added $2 trillion in stimulus spending.
In 2014, the economy will grow 3.4 percent, partly because housing constriction will begin rising from a very low level, the statement said. Continued high unemployment will help keep inflation under 2 percent, it added.
The CBO’s downbeat forecast clashes with repeated claims by Obama that the economy is recovering.
In a midday speech Feb. 7, Obama told a meeting of Democratic legislators that the nation’s economic is in a “hard-won recovery.”
On unemployment, Obama claimed ”we’re seeing some job growth,” he said.
In December, amid threats of new taxes and regulations, the formal unemployment rate rose to 7.9 percent as the private sector produced only 157,000 new jobs. That total matched the normal growth of the working-age population from American students and immigrants.
The crash began in December 2007, when the housing bubble burst 11 years after the federal government stepped up pressure on banks to provide mortgages to poor people.
Overall economic output may reach its potential in 2017, CBO reported. “The unemployment rate is projected to fall from about 7½ percent at the end of 2014 to about 5½ percent at the end of 2017,” said the CBO statement.
But that recovery will come at the end of a decade of slow growth, reduced investment, and low wages that has cost American trillions of dollars.
Between December 2007 and 2016, the economy’s slow growth will have cost the nation the equivalent of six months’s wealth-generation, said the CBO forecast.
“With such a large gap between actual and potential output persisting for so long, the cumulative loss of output relative to the economy’s potential between 2007 and 2017 will be equivalent to nearly half of the output produced last year,” said the statement.