CBO Projects Unemployment to Stay Above 8 Percent Until 2014
In January 2009, Congress passed a $787 billion stimulus plan that President Obama promised would bring unemployment down to 8 percent. Unfortunately, it is nearly three years later and the national unemployment rate continues to hover at 9.1 percent. According to the Congressional Budget Office (CBO), unemployment “will remain above 8 percent until 2014.”
The CBO released its annual summer update of the budget and economic outlook on Wednesday, August 24. Their projections reflect modest economic growth that will result in a slow reduction in unemployment. They project the unemployment rate to fall to 8.9 percent in the fourth quarter of 2011 and to 8.5 percent in the fourth quarter of 2012. They predict that it will remain above 8 percent until 2014.
“We can look at this as the ‘glass half full’ or the glass half empty,’” said Amy Murphy, director of Corporate and Community Services for Joliet Junior College (JJC). “I suspect that for most of the American people, this is a half empty glass. While it is encouraging to see unemployment go down, it is unfortunate for those who are unemployed that the economy cannot produce more jobs at a faster rate.”
Nevertheless, some will see some hope in the report. According to the CBO report, deficits will “drop markedly as a share of GDP” over the next few years. Based on the assumption that current law will not change, the CBO’s baseline projections predict that deficits will fall to 6.2 percent of GDP next year and 3.2 percent in 2013. They also project that deficits will average 1.2 percent of GDP from 2014 to 2021. Their report says:
Those projections incorporate the effects of the deficit reduction measures in the recently enacted Budget Control Act of 2011; they also reflect the sharp increases in revenues that will occur when provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 tax act) expire.
While deficit reduction is a good thing for the economy in general, the CBO does not see it translating into a faster rate of job growth. And private sector economists such as JP Morgan are predicting an unemployment rate of 9.5 percent in 2012.
For some, the high unemployment rate is due, at least in part, to the extension of the Bush tax cuts. Time Magazine writer Sean Gregory writing for The Curious Capitalist blog quotes CBO director Douglas Elmendorf from a recent blog post on the CBO website. Elmendorf said that the “CBO pointed out that tax and spending cuts which House Speaker John Boehner and other Republicans championed are at least partially responsible for the grim employment picture.” But the CBO also cites the recently passed Budget Control Act in 2011 for a projected deficit reduction. The bill was at least partially designed by Boehner and other Republicans.
“We seem to be in an economy that is hard to predict and yet, we must make some decisions about what to do next,” said Murphy. “Many of our clients are interested in upgrading the skills of current employees only. They are not in need of training new hires and, for many, they want training to be redesigned to meet the needs they have today – not yesterday. This is a direct result of uncertainty about our economic future.”
Part of JJC’s response to the needs of today’s employers can be found in the revised Frontline training program designed to prepare first-time supervisors for their new roles as leaders. “We took out some of the modules that no longer apply to most employers today and combined a couple of modules so that the program is more streamlined and tailored to the needs of today’s employer,” said Murphy. “We also reduced our price to reflect these changes.”
For more information on how JJC can help you develop a more streamlined and less expensive training solution, call Amy Murphy at (815) 280-1418. You can also e-mail her at amurphy@jjc.edu.
This story draws much of its information from the sources listed below. For more information, go to the following links:
Congressional Budget Office
http://www.cbo.gov/doc.cfm?index=12316
PDF of entire report
http://www.cbo.gov/ftpdocs/123xx/doc12316/08-24-BudgetEconUpdate.pdf
Business Insider
http://www.businessinsider.com/chart-of-the-day-cbo-unemployment-projection-2011-8
The Curios Capitalist – Sean Gregory, Time Magazine
http://curiouscapitalist.blogs.time.com/2011/08/24/congressional-budget-office-get-used-to-8-unemployment/
Newsmax.com Washington Times
http://www.newsmax.com/Newsfront/cbo-unemployment-jobs-obama/2011/08/24/id/408568