Sept. 1, 2011, 1:47 p.m. EDT
Jobless rate to be over 8% in 2012: White House
New estimate also sees lower economic growth this year
By Robert Schroeder, MarketWatch
WASHINGTON (MarketWatch) — President Barack Obama will attempt re-election with an unemployment rate of 8.2%, the White House estimated Thursday as it laid out its economic forecasts.
The unemployment rate the White House predicts for the fourth quarter of 2012 would be the highest for an incumbent since Franklin Delano Roosevelt successfully was re-elected in 1936 with a 16.6% unemployment rate. Jimmy Carter lost when he attempted re-election with a 7.5% unemployment rate.
The U.S. unemployment rate will average 8.8% this year, falling from a previously estimated 9.3% as the economy grows at a moderate pace, the White House added.
In a new estimate, the White House’s Office of Management and Budget also said that the federal budget deficit would shrink to $1.32 trillion in 2011, down from the $1.64 trillion estimated in the Obama administration’s fiscal 2012 budget.
The report to Congress, named the Mid-Session Review, lands just as lawmakers are preparing to return to Capitol Hill with a ramped-up focus on jobs and stimulating the economic recovery. Obama is scheduled to unveil new proposals to create jobs and grow the economy in a prime-time speech next week.
The stakes are high for the first-term president as he seeks re-election next year. Almost two-thirds — 65% — of respondents to a CNN/ORD poll released Thursday said they disapproved of the president’s handling of the economy.
The OMB report paints a picture of an economy that is still growing painfully slowly for many Americans and warns that the jobless rate will decline only gradually over the next several years.
“With continued growth, the unemployment rate is projected to fall, but it is not projected to fall below 6.0% until 2016,” the OMB report says.
OMB predicts the economy will grow by 2.1% this year, a downward revision from the 2012 budget’s estimate of 2.7%.
Both political parties are under intense pressure to address both joblessness and the soaring U.S. budget deficit, which was thrust into the spotlight anew during the summer drama over raising the U.S. debt ceiling and the downgrade by Standard & Poor’s.
Next week, Obama is expected to stress infrastructure spending and payroll-tax cuts, among other ideas, to stimulate the economy.
Republicans, meanwhile, want to slash taxes on small business owners and cut more government spending, presaging a drawn-out political battle.
Representatives of both parties assigned to a new deficit-cutting “super committee” are also preparing to try to nail down $1.5 trillion in savings by Thanksgiving. The bipartisan group’s meetings are scheduled to begin this month.
The latest jobs gains, meanwhile, are expected to be paltry.
Economists surveyed by MarketWatch are predicting that just 53,000 jobs were added in August, less than half the number added in July. The jobless rate is expected to hold steady at 9.1%. The new jobs figures are due at 8:30 a.m. Eastern on Friday.
Last week, the nonpartisan Congressional Budget Office predicted that the federal government would post a budget deficit of $1.28 trillion this year, a small improvement from last year’s shortfall but still the third-largest in 65 years.
The CBO also estimated that real GDP will increase by 2.3% this year and by 2.7% next year. The jobless rate will stay above 8% through 2013, CBO said.
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