President Obama’s National Economic Council Director Lawrence Summers sent a mixed message on Friday when he told reporters that the economy is getting better but that unemploment will remian high for years.

From the Politico

The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously complicate Barack Obama’s ability to convince Americans that he’s beating back the recession.

 

“The level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.”

 

Summers’ comments came in a briefing with reporters ahead of Obama’s speech in New York City on Monday, marking the one-year anniversary of the collapse of Lehman Brothers, an event widely regarded as having created a panic that caused the global economic meltdown.

 

Even with his gloomy forecast for unemployment, Summers said the economy is getting better and made the case that Obama’s $787 billion stimulus package and other fiscal rescue steps headed off even more economic pain.

 

“We are making a clear transition from rescue as a priority of public policy to sustained recovery,” Summers said. “We have moved back from the brink of financial catastrophe.”

 

“Today, the question is, when will the recession phase end?” Summers said. He said the forecast is “for economic growth at a significant rate during the second half of 2009.”

 

But as is usually the case in economic recovery, job creation continues to lag. The national unemployment rate is at 9.7 percent, a 26-year high, and Obama has repeatedly said he ultimately expects it to hit double-digits before beginning to fall again.

 

The economy lost 216,000 jobs in the month of August, which was fewer than the July number of 276,000. Overall, 6.9 million jobs have been lost in the recession, which economists call the worst since the Great Depression.

 

With his remarks about sustained high unemployment, Summers touched on one of the most sensitive issues in the economy, closely watched by average Americans as a key reading of the nation’s economic health.

 

Unemployment is probably the single most important statistic for Democrats eyeing the mid-term Congressional elections next fall. If the unemployment rate begins to decline, the White House may have an easier time convincing voters that its enormous stimulus spending and massive federal intervention into the economy were effective. But if all the White House’s enormous efforts are unable to move the needle on unemployment, a so-called “jobless recovery” could seriously hamper the president’s party in the mid-terms.

White House spokesman Matthew Vogel said, “The President and the economic team are committed to tackling unemployment and are focused every single day on getting Americans back to work. Many economic indicators have turned positive, but employment is a lagging indicator and obviously the toughest nut to crack. We are confident that we are headed in the right direction, but that there’s no room for complacency even as we see a return to growth later this year.”

At the briefing, Summers walked a fine line between taking credit for the economic turnaround and declaring premature victory over the crisis.

 

“These problems were not made in a week or a month or a year,” Summers said. “They are not going to be fixed in a week or a month or a year.”

That may be true but it was the president that promised that he needed the stimulus to prevent unemployment from topping 9%.  We are well past that point with predictions that have the unemployment rate peaking at a whopping 10.2% and doesn’t include the millions of discouraged workers.  When the only evidence Obama and Summers can point to for an improving economy is that the pace of job losses are diminishing that isn’t exactly a receipe for success. 

Consumer confidence may be increasing but consumers still haven’t opened their wallets as freely as they did in the boom years which will continue to be a drag on the economy.  Also don’t forget the near record foreclosure rate which the president conveniently left out of his speech on Wednesday when he discussed the economy.  This too won’t be fixed overnight and will slow any economic recovery.

Obama and the Democrats seem to be convinced that spending massive amounts of taxpayer dollars will bring the economy back given enough time.  At the pace we are going though how much more time can the American public afford?

 

Post #2322

 

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