The Obama administration predicted the U.S. economy will be stronger this year than the consensus of private forecasters as the annual unemployment rate falls to the lowest since 2008.
The White House lowered its 2013 growth estimate to 2.3 percent from a 2.7 percent expansion projected in July and 3 percent seen 14 months ago, according to budget documents released in Washington today. The median forecast of 76 economists surveyed by Bloomberg News was for 2 percent growth this year, weaker than last year’s 2.2 percent increase. The budget predicted the nation’s jobless rate will average 7.7 percent for the year, compared with the economists’ survey median of 7.6 percent.
The $3.8 trillon budget sent to Congress says the world’s largest economy is “now on the mend.” It also underscores the fragility of the recovery as President Barack Obama and Congress wrestle over ways to cut deficits while seeking to sustain the expansion and boost employment.
“Our economy is adding jobs -- but too many people still cannot find full-time employment,” Obama said in a letter to Congress accompanying the budget. “As we continue to grow our economy, we must take further action to cut our deficits.”
A Labor Department report April 5 showing March payrolls rose at the slowest pace in nine months heightened concerns that federal budget cuts are sapping growth in the world’s largest economy. The jobless rate last month fell to 7.6 percent from 7.7 percent in February as the share of the working-age population in the labor force, known as the participation rate, sank to the lowest level since 1979.
The 2014 budget plan said that while the housing market is recovering and the auto industry is “once again resurgent,” families with good credit are still finding difficulty borrowing and businesses are struggling to find workers with skills to meet their needs.
“Although corporate profits are at an all-time high, wages and incomes for America’s middle class have continued to stagnate,” the budget states.
Obama’s budget proposes reducing Social Security recipients’ annual cost-of-living adjustments by changing the inflation calculation and cutting Medicare insurance program for the elderly by reducing payments to health-care providers and drug companies and imposing more costs on high-income beneficiaries.
The plan proposes to establish a network of manufacturing institutes to boost industrial innovation and also includes $50 billion in stepped-up spending on public works projects such as roads and bridges. That would create construction jobs and benefit equipment manufacturers such as Caterpillar Inc.
The budget’s economic assumptions are based on information available in November 2012. The Bloomberg survey of economists was conducted April 5-9.