White House economist Romer says economy has turned a corner
The nation鈥檚 GDP grew in the third quarter. But Obama's chief economist Christina Romer says the US is 'still in for more bad news' on jobs until GDP grows even more.
Washington
The fact that the nation鈥檚 gross domestic economy grew in the third quarter is 鈥渋ncredibly important,鈥� according to President Obama鈥檚 chief economist.
If nothing else, it shows that the US economy has turned the corner, moving from contraction to growth, said Christina Romer, chairman of the administration鈥檚 Council of Economic Advisers (CEA).
鈥淚t鈥檚 a wonderful milestone. But it鈥檚 just a milestone. There鈥檚 a long distance to go before we鈥檙e back to normal,鈥� said Ms. Romer at a meeting for reporters hosted by 海角大神.
Unemployment numbers for October will be released next week, and while they may report a decrease in lost jobs from September, they will still show an unemployment rate that is far too high, according to Romer.
The US unemployment rate hit a 26-year high of 9.8 percent last month.
鈥淲e鈥檙e still in for more bad news before we see positive [job] growth,鈥� said Romer. The number of lost jobs is so great that it will take many months, if not years, to replace them.
Right now, most economic forecasters are predicting US GDP growth of 2.5 to 3 percent through most of next year. Since it takes 2.5 percent growth just to keep employment steady, such a growth level would not do much to shrink the unemployment numbers.
鈥淵ou need four to five percent GDP growth to get job growth,鈥� said Romer.
That means the current unemployment rate might remain near the current number as next year鈥檚 mid-term elections approach.
Right now, the government spending of the stimulus package is doing much of the heavy work of propping up the economy. Ideally, private sector activity will also now start picking up, with bank lending increasing, said the CEA chief.
If that does not happen, the administration will consider further measures, from rearranging the timing of spending on already-approved stimulus funds, to 鈥渙ther options,鈥� in Romer鈥檚 words.
She neither called for nor ruled out a second stimulus package.
鈥淭he president has said he will do whatever it takes to get us through this,鈥� said Romer.
Roughly half of the stimulus package passed by Congress in February is still to be spent, so there is a lot of government spending still to come.
Personal consumption spending was up in the third quarter, noted Romer, which is a good sign. Some of that was driven by the government鈥檚 cash-for-clunkers program. Some wasn鈥檛.
鈥淚t may be a sign that consumers are starting to come back,鈥� said Romer.
She said that she was heartened by seeing that business spending on equipment and software -- a key indicator of private sector investment -- rose in the third quarter. It had dropped by 39 percent in the first quarter.
Some of that was due to business tax incentives contained in the stimulus bill. But, as with consumer spending, some wasn鈥檛 driven by government actions.
鈥淵ou don鈥檛 get that kind of movement just on business tax incentives,鈥� said Romer.
Commenting on a Senate deal that would tentatively extend a tax credit for first-time homebuyers, while offering a next credit of up to $6,500 for some existing homeowners, Romer said it was good that the extension was limited to contracts struck before April 30.
鈥淚t鈥檚 important this not become permanent,鈥� she said.
While the first-time buyer credit has brought new purchasers into the market, it has not had a huge effect, unlike cash-for-clunkers, according to Romer.
鈥淎 big part of a recovery in housing is going to be the recovery of the general economy,鈥� she said.
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