NEW YORK (MainStreet) — Those hoping to finally see some real economic growth in 2011 may have to wait a little bit longer: The Congressional Budget Office has a new report concluding that the economy will continue to improve this year, but not enough to significantly lower the unemployment rate or ease the nation’s budget woes.
The CBO predicts that the economy will add roughly 2.5 million jobs each year between 2011 and 2016, but even with that growth in the labor market, the unemployment rate is expected to stay above 9% through the end of this year, hitting 9.2% in the fourth quarter, and eventually falling to 8.2% by the end of 2012.
Obviously any improvement in the job market will come as a relief to Americans frustrated by more than a year of near double-digit jobless rates, but unemployment levels won’t approach the 5% mark that Americans were accustomed to before the recession until sometime in 2016, the CBO reports.
After previous economic downturns, jobs have typically returned at a faster rate, with the labor market increasing by an average of 4.4% in the 18 months following the end of the recession. But this time around, the country had just a 0.06% gain in employment, a net increase of 70,000 jobs in the 18 months after the Great Recession ended, compared to the 7.3 million that were lost.
“The recovery in employment has been slowed not only by the moderate growth in output in the past year and a half but also by structural changes in the labor market, such as a mismatch between the requirements of available jobs and the skills of job seekers, that have hindered the reemployment of workers who have lost their job,” the CBO reports.
So even as the economy continues to improve, many workers may need to undergo some job retraining courses to make their way back into the workforce.
Meanwhile, the national deficit, which has been a primary focus of the Republican Party, is expected to hit a new all-time high this year of $1.5 trillion, up from $1.29 trillion in 2010. If so, our deficit will represent 9.8% of our nation’s gross domestic product, a frightening percentage but still slightly below what it was in 2009, when the deficit accounted for 10% of the GDP, a 65-year high.
There is some good news in the report though. According to the CBO, the deficit will begin to decrease the following year, dropping to $1.1 trillion by the end of 2012, and eventually falling to $533 billion by 2014, which would represent just 3.1% of the nation’s GDP.
However, these estimates are based on the assumption that tax cuts, unemployment extensions and tax credits passed by the previous Congress will expire by the end of 2011, as is currently scheduled. But of course, there is always the possibility that these measures may be extended, which could keep our deficit high for years.
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