Edward Lazear: Lower growth expected for 2008
White House may soon take new steps to deal with the troubled housing market, president's chief economist hints.
Andy Nelson/ The Christian Science Monitor
WASHINGTON - With a national election less than a year away, this is a sensitive time to be the president's chief economist.
The revised forecast released Thursday by Edward Lazear, chairman of the President's Council of Economic Advisors, predicts the US economy will continue to move forward in 2008. But the Bush economic team has lowered its expectations for economic growth next year and boosted its predictions for unemployment. Softening growth and rising unemployment do not tend to put voters in a cheery mood.
The administration is predicting that inflation-adjusted gross domestic product will grow 2.7 percent in 2008, down from an earlier estimate of 3.1 percent. The unemployment rate is predicted to climb to 4.9 percent in 2008, up from a historically low 4.6 percent rate this year. The housing market's woes played a key role in triggering both changes, Mr. Lazear said.
The administration forecast is somewhat more optimistic than the 1.8 to 2.5 percent growth range Federal Reserve policymakers are predicting for 2008. And it is far more bullish than the view expressed earlier this week by former Treasury Secretary Lawrence Summers. In a Financial Times essay, Mr. Summers wrote, "The odds now favor a US recession that slows growth significantly on a global basis."