Obama economic team says recovery gaining steam
The Obama administration expects the U.S. economy to gain strength this year, saying in a new report that the financial headwinds that have slowed growth during the recovery are finally dying down.
While acknowledging that the nation's jobless rate remains "unacceptably high," at 6.6 percent, the president's Council of Economic Advisers noted that unemployment is at a five-year low.
"Five years removed from the worst of the financial crisis, the economy continues to strengthen and recover, with businesses adding 2.4 million jobs in 2013, the third straight year private employment has risen by more than 2 million," the White House economic team said in its annual report to Congress.
The CEA forecast that unemployment will average 6.9 percent this year and steadily decline to 6.4 by the end of 2015.
Growth is forecast to accelerate this year because Americans have made progress in paying off debt, which the White House said should help drive personal spending. Household debt has fallen from a peak of about 1.4 times annual disposable income in late 2007, shortly before the housing crash sent the economy reeling, to 1.1 times by the fourth quarter of 2013, according to the report.
More specifically, two key sectors that are crucial to economic renewal -- housing and transportation -- continue to rebound and are now contributing to growth, the CEA said.
Other factors that will lift the economy this year include a domestic "energy boom" and a reduction in fiscal drag, the council said, referring to the tax hikes and large federal spending cuts that held the economy back last year.
"While Congress could do substantially more to support job growth and economic opportunity, the economy is unlikely to face anything like the fiscal consolidation seen at the federal level in 2013, with deficit reduction continuing at a much more gradual pace going forward," the CEA said.
The report comes following generally upbeat employment data on Friday, when the U.S. Commerce Department said that the economy added 175,000 jobs in February. That eased concerns that the economy, which had seen a plunge in the pace of job-creation over the previous two months, was slowing down.
The CEA's growth forecast jibes with most private economic forecasts. Although severe winter weather is expected to dent GDP when the government releases its advance estimate for first-quarter growth in April, many experts think the economy will quickly make up ground when the spring thaw finally arrives.
"Following weather and inventory-related weakness in Q1, we expect above-trend growth averaging 3.5 percent over the balance of the year aided by a weather payback, receding uncertainty, improving financial conditions, significantly less fiscal drag and firming employment," Macroeconomic Advisers said Monday in a note to clients.
While they sought to highlight the country's recent progress, Obama's economic advisers noted that the economy faces major structural problems, such as wide income inequality. Many American families "are still struggling to join the middle class or to stay there, as they face the lingering after-effects of the crisis on top of a long-standing trend of widening inequality that has caused the rungs on the economic ladder to grow further apart," the CEA said.