Thursday, July 08, 2010

Through 2011

The IMF might be wrong, of course, but they're predicting 9%+ unemployment until the end of 2011.  If I had suggested such a prolonged period of unemployment at the end of  2008, people would have thought I was a nutter.  If anyone actually believed me they would have considered it to be economic armageddon.  Now it's just the new normal.

It's worth pointing out that in January 2009 the administration thought that without any stimulus unemployment would go back down to 7% by the end of 2011. This was not thought to be good enough, and that's why we had the stimulus.

And where were we just about 1 year ago today?

And what do these models say today? They are forecasting that the recession will end in the next few months. Administration officials aren’t quite so specific, but they are in a similar place.

Christina Romer, a senior Obama economist, argues that businesses that have spent the last few months drawing down their warehouse inventories will eventually need to rebuild them. Lawrence Summers, the top economics adviser, says that many consumers who have been delaying the purchase of a new car will eventually take the plunge. The government, meanwhile, will be pumping out close to $30 billion in stimulus money every month for months to come.

A big headline across the front page of Monday’s Financial Times summed up the position: “Romer upbeat on economy.”