- The Washington Times - Friday, August 7, 2009

The U.S. economy will continue to jettison jobs even after growth returns and President Obama’s economic stimulus cash kicks in, a top White House economist said Thursday.

“Recovery will be a long, hard process,” Christina D. Romer, chairman of the White House Council of Economic Advisers, said Thursday in a speech at the Economic Club of Washington.

Noting that forecasters are predicting that the nation’s gross domestic product will resume growing by the end of the year, Mrs. Romer warned: “Even once GDP begins to grow, it will likely take still longer for employment to stop falling and begin to rise.”

Private forecasters agree.

“Unfortunately, the number of unemployed is likely to continue growing, albeit more slowly, even after a recovery begins,” said John A. Challenger, chief executive officer of global outplacement consultant Challenger, Gray & Christmas Inc.

Mrs. Romer also predicted that “it will take a substantial time to restore employment to normal and bring the unemployment rate back down to usual levels.”

Mr. Challenger agreed. “The reason is that a recovery will entice more job seekers who had given up and officially left the labor pool to resume their searches,” he said. “For this reason, the unemployment rate is likely to continue growing even as the number of employed Americans increases.”

The U.S. economy has lost 6.5 million jobs since the recession began in December 2007. The unemployment rate has nearly doubled, rising from 4.9 percent to 9.5 percent in June. Total employment has already plunged by 4.7 percent. That is a much steeper descent than the 3.1 percent of jobs that were lost during the 1981-82 recession and the 2.8 percent employment decline during the 1973-75 downturn.

In a vigorous defense of the administration’s economic stimulus, Mrs. Romer said an additional 485,000 jobs could have been lost in the second quarter if the stimulus were not enacted.

The White House economist also said the stimulus was “important” in reducing average monthly job losses from nearly 700,000 in the first quarter to 436,000 in the April-June period. “The movement in job loss from the first quarter to the second was the largest in almost 30 years,” she said, providing a chart to make her point.

Calling the stimulus plan “a lifesaver,” Mrs. Romer cited private-sector estimates from Goldman Sachs, Moody’s Economy.com and Macroeconomic Advisers showing that the stimulus package “added between 2 and 3 percentage points to real GDP growth in the second quarter.”

She said tax cuts and spending from the stimulus package will average about $100 billion during each of the next five quarters.

Mrs. Romer delivered her speech as the Labor Department reported initial claims for unemployment benefits declined by 38,000 to 550,000 for the week ending Aug. 1, indicating layoffs were subsiding. However, the number of jobless workers collecting continuing benefits in regular state programs jumped by 69,000 to 6.31 million for the week ending July 25.

The Labor Department will report July employment data Friday. Citing consensus estimates, Mrs. Romer said “hundreds of thousands of jobs” were probably lost in July.

In a sign that the worsening unemployment situation continues to affect consumer spending, the International Council of Shopping Centers reported Thursday that U.S. chain-store sales in July were down 5 percent from July 2008 levels. While Wal-Mart no longer reveals monthly sales figures, Target reported a 6.5 percent decline, Macy’s sales were down 11 percent, J.C. Penney’s sales fell 12 percent and Abercrombie and Fitch said its July sales plunged 28 percent.



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