A lethargic first quarter economic growth compelled the Bush administration to lower its US economic growth estimate for 2007. The White House has announced that it expects real gross domestic product to expand 2.3 percent this year, against its earlier forecast of 2.9 percent. However, despite the sluggish first quarter, the White House seems to be confident about a robust economic growth outlook for the rest of 2007. The Bush administration in its official communique stated that the critical slowdown in economic growth in the first three months of the current year has been the major rationale for the downgrade of its projection for gross domestic product.
However, Federal Reserve Chairman Ben Bernanke, the administration and private economists assume that the economy will bounce back in the months to come. Nevertheless, the housing slump, which was set off in late 2005, will remain a major concern that could impede optimistic economic growth outlook.
The White House’s reconsideration suggests the slowdown in economic growth to the weakest rate in four years in the first three months of the year, followed by a weakening in home sales. The latest forecast brings the administration nearer to the consensus of other analysts. The International Monetary Fund in April cut back its 2007 US growth anticipation to 2.2 percent, from 2.9 percent. However, the Bush administration still expects the economy to grow by 3.1 percent in both 2008 and 2009. And these forecasts are unmoved from previous estimates. In 2006, the US economy expanded by 3.1 percent.
Inflation could edge higher to 3.2 percent; up from 2.6 percent previously projected, due to rising energy prices, but core inflation should stay at moderate levels, according to the combined forecast of the Council of Economic Advisers, the Treasury Department and the Office of Management and Budget. The Treasury Secretary Henry Paulson has said in a statement, ‘this forecast shows strengthening growth, a healthy job market, and contained inflation. I’m encouraged by the solid underlying fundamentals of the US economy and I think this bodes well for American families and business.’
In the meantime, the unemployment rate of US, which averaged 4.6 percent last year, marking a six-year low, is expected to slip to 4.5 percent this year, according to the administration’s latest projection. The revised estimate for the job growth is somewhat better than its earlier projection that the unemployment rate would hold steady at 4.6 percent. The administration is estimating job growth of 131,000 per month this year, the same speed witnessed in the first five months of the year.
The employment environment has stayed solid even as the economy is reeling under a long slow-moving period. The main reason behind the healthy job growth environment is that troubles have mostly been restricted in the sluggish housing and the struggling automotive sectors and have spilled into other sectors, affecting other types of employers.
