UNEMPLOYMENT WAS ALWAYS GOING TO GO UP
July 9, 2004
Many critics complain that the current recovery is a "jobless" recovery and that unemployment is unacceptably high. Yet, according to Al Goyburu of the Heritage Foundation, unemployment was always expected to increase during the Clinton administration and is only slightly higher now than projected in 2000.
According to Goyburu, back in 2000, President Clinton's own Council of Economic Advisers understood its good fortune and admitted that 1999's unusually low unemployment rate probably was unsustainable:
- In a February 2000 report, the council projected that the year's unemployment would match 1999's 4.2 percent but eventually would rise to 5.2 percent by 2003 and stay there through at least 2006.
- They also freely admitted the critical importance of non-policy-related factors in preventing 1999's exceptionally low unemployment rate from triggering the inflation that usually heralds the onset of recession.
- These factors included "spare manufacturing capacity, new efficiencies in the labor market from expanded use of temporary help workers and Internet job search resources, higher-than-expected productivity growth and declining import prices."
President Clinton's economists assumed that these factors were temporary, which explains why they forecast higher unemployment in future years. The non-partisan Congressional Budget Office (CBO) agreed.
- In its January 2000 11-year forecast, CBO predicted a rise in unemployment to 4.7 percent by 2003 and 5.2 percent by 2010.
- In making these projections, CBO was required to assume that President Clinton's "sound" economic policy would stay in place throughout the 11 years.
- So even under the Clinton policies, the 4.1 percent unemployment rate was expected to rise by a full 1 percent over the next decade.
Source: Al Goyburu, "Forecasting Employment: What a Job," Heritage, Press Commentary, May 10, 2004.
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