The US economy’s steep plunge appears to be ending, a top presidential adviser said on Thursday, but he refused to predict how high the unemployment rate will rise before a sustainable recovery begins.
Lawrence Summers, director of US President Barack Obama’s National Economic Council, said there have been some encouraging signs the dive in economic activity that began late last year was drawing to a close.
“There has been a substantial anecdotal flow over the last six to eight weeks of things that felt a little bit better,” Summers told the Economic Club of Washington. “The sense of a ball falling off a table, which is what the economy has felt like since the middle of last fall ... we can be reasonably confident that that is going to end within the next few months and we will no longer have that sense of a free-fall.”
But Summers refused to predict how strong the rebound will be or when it will take hold.
The economy, as measured by GDP, has to be grow at a rate of around 2.5 percent to keep the unemployment rate constant. A GDP growth rate of 1 percent, while in positive territory, means the unemployment rate would still rise, Summers said.
The unemployment rate surged to a 25-year high of 8.5 percent last month, the government reported last week. That followed a fourth quarter when the GDP plunged at an annual rate of 6.3 percent, the biggest drop since 1982.
The Federal Reserve expects the unemployment rate to “rise more steeply into early next year before flattening out at a high level over the rest of the year,” minutes from last month’s central bank meeting showed.
Many private economists expect the jobless rate to keep rising, even if the economy begins growing later this year, and it will likely peak at more than 10 percent early next year.
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