Economist Who Said Unemployment Wouldn’t Top 8% Now Says It Won’t Go Below 8% Before 2012 Ends
Washington (CNSNews.com) – The White House economic adviser who said in 2009 that unemployment would not go above 8 percent with the help of the economic stimulus law, now says he was wrong and that he does not think unemployment will even go below 8 percent before the end of 2012.
Jared Bernstein, the former chief economist and economic advisor to Vice President Joe Biden, wrote a report along with Christina Romer, the chairwoman of President Barack Obama’s Council of Economic Advisors, in January 2009 predicting the less-than-8-percent unemployment rate. On Monday, Bernstein told CNSNews.com that his projection was flawed.
The report was entitled The Job Impact of the American Recovery and Reinvestment Plan.
When asked by CNSNews.com whether unemployment would fall below 8 percent before the end of 2012, Bernstein said, “Unlikely that it would go below 8 percent before the end of 2012. I think the most optimistic forecast would be for about eight-and-a-half percent.”
On page four of the 2009 Romer/Bernstein report a chart states that the unemployment rate nationwide with the $821-billion economic stimulus package would peak at 8 percent.
Below the chart, the report says, “First, the likely scale of employment loss is extremely large. The U.S. economy has already lost nearly 2.6 million jobs since the business cycle peak in December 2007. In the absence of stimulus, the economy could lose another 3 to 4 million more. Thus, we are working to counter a potential total job loss of at least 5 million.”
“As Figure 1 shows, even with the large prototypical package, the unemployment rate in 2010Q4 is predicted to be approximately 7.0%, which is well below the approximately 8.8% that would result in the absence of a plan,” reads the report.
President Barack Obama signed the American Recovery and Reinvestment Act, the economic stimulus, in February 2009. The current unemployment rate is 9.1 percent. Since June 2009, unemployment has been 9 percent or higher in every month except for two.
The administration, and most other economists at the time the Bernstein/Romert report was released, just had bad information for making projections about employment, Bernstein said.
“Look, we made that projection back in 2008 at a time when the most recent information about the economy was that it was contracting at a rate of less than 1 percent,” Bernstein said. “At the time, we simply didn’t have good information. We now know with revised data that in the very quarter where we made that wrong projection, the economy was contracting at almost 9 percent.”
“So the statistics were way off at the time,” Bernstein continued. “It’s also the case that that forecast that we gave back then was the consensus forecast of the economics community. I mean, it wasn’t just that we were wrong. Everyone was wrong. And I think it’s largely because we just didn’t have a clear picture yet of how bad this recession actually was going to be.”