Romer: Jobless rate to remain high despite economic growth

A top White House economist voiced worry that the economic growth expected in coming years won't be enough to bring down the unemployment rate to pre-recession levels.

White House Council of Economic Advisers Chairwoman Christina Romer said that, in 2010, the economy will likely grow but the jobless rate will peak at 10 percent and won't start falling at a rapid clip.


The administration and independent economists expect next year "steady but not-over-the top GDP growth" of between 2 to 3 percent, Romer told The Hill.

"That will bring unemployment down slowly but not by big movements, unemployment on the right trajectory but not coming down for what we or American people would need or like," Romer said.

The unemployment rate for August was 9.7 percent, the highest since 1983.

"No question they're unacceptable now," Romer said.

She added that "it will take a lot of rapid GDP growth... to bring [unemployment] down to normal levels."

White House economists in recent days have warned that the economic recovery won't be swift. Lawrence Summers, director of the National Economic Council, said last week that unemployment will "remain unacceptably high for a number years."

The White House's mid-year budget review predicted 3.3 percent GDP growth and a full-year unemployment rate of 9.8 percent in 2010. While the economy would grow by at least 5 percent in each of the following six years, the jobless rate would remain above 6 percent until 2014, according to the official White House forecast. The unemployment rate in 2007, before the recession began, was less than 5 percent.

Economic growth generally corresponds with a decrease in the unemployment rate. According to an economic rule of thumb known as Okun's law, a 3 percent GDP boost corresponds with a 1 percent drop in the jobless rate.

But Romer said that forecasting the future unemployment numbers is made even more difficult by the unique nature of the current recession. She noted that job losses have fallen faster than most economists expected given a 1 percent contraction of the economy, the White House's predicted GDP change for 2009.

She said that the "unbelievably high" rise in productivity may be one factor contributing to the unexpectedly high jobless rate. The productivity rate for non-farm businesses grew by more than 6 percent in the second quarter of this year as firms cut staff. The productivity boost was the highest in six years.

"That's not something you normally see during a recession," Romer said of the productivity increase. "If you compound that we're in a recession and firms are getting better and producing less labor, then you get an unusually high spike in employment."

How the economy adjusts to the new productivity numbers will help determine how quickly jobs come back, she said.

"Is that a permanent change and we've learned ways to do things, or is that a temporary response to the crisis and that will go away when we are firmly back in recovery?" she said.