White House predicts 'moderate' recovery through election

In its annual economic report to Congress released Friday, the White House forecast the economy would create 2 million jobs in 2012. That's an average of 167,000 new jobs per month, up from the 1.8 million jobs created in 2011.

The report predicted a “moderate” economic recovery this year and sought to blame an unexpected downturn in 2011 on last summer’s debt-ceiling debacle in Congress.
 
The document says “self-inflicted wounds” from the debt-ceiling standoff contributed to weakness last year, which is being remedied by stronger growth this year.
 

Except for the job creation figure, the annual report contains the same “outdated” economic forecasts for this year that appeared in this week’s 2013 budget. Those were locked in on Nov. 15. The administration at that point saw 3 percent growth this year and 8.9 percent unemployment in 2012 falling to 8.6 percent next year. The administration said it may re-estimate the unemployment figures this summer.
 
“The Budget forecast does not reflect the improvement in the job market since the forecast was finalized,” the report states. “This should not be interpreted as a projection that the unemployment rate will rise: instead, it is the result of an out-of date forecast.”
 
The annual report puts February unemployment forecasts by the Blue Chip economic survey and the Federal Reserve next to the budget's forecast.
 
The Blue Chip sees an average 8 percent unemployment in 2012 and 7.4 percent in 2013. The Fed had a range of 8.2 percent to 8.5 percent for the fourth quarter of 2012 and 7.4 to 8.1 percent for 2013.
 
The move to include Congress in the list of obstacles to the economy is clear.
 
“In addition to lingering effects of the financial crisis and the long-standing problem of weak income growth for the middle class, the recovery in 2011 faced additional shocks from natural disasters in Asia, unrest in the Middle East that caused oil prices to spike, self-inflicted wounds to confidence from the contentious debt ceiling debate over the summer, and stress in European debt markets,” the report says.
 
It says that judging from the Great Depression — the last time unemployment has remained this high for three years — things can get back to normal if the government pursues the right policies.
 
“The full recovery of real GDP during the decade following the Great Depression suggests that the U.S. economy can recover from a severe shock to return to this underlying trend level,” it states.
 
To get there, the report recommends postponing fiscal discipline and stimulating demand in the short term.

White House economic adviser Alan Krueger told reporters the payroll tax deal in Congress this week was vital to continuing the recovery and will provide a "cushion" in case gas prices rise dramatically this year due to conflict in the Middle East.

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