Tags: obama | budget | economic growth | unemployment rate

Obama Budget Predicts Strongest Economic Growth Since 2005

Tuesday, 04 March 2014 12:11 PM

The U.S. economy will grow this year at its fastest pace since 2005, helping lower unemployment even as market interest rates rise, the Obama administration predicted.

Gross domestic product will expand 3.1 percent in 2014 after rising 1.9 percent last year, the administration said in forecasts accompanying its 2015 budget plan released today in Washington. The jobless rate will average 6.9 percent this year, compared with 7.4 percent last year, and average 6.4 percent in 2015, according to estimates based on information in mid- November.

The White House’s 2014 growth projection is higher than the 2.9 percent median forecast of economists surveyed last month by Bloomberg, while the jobless rate outlook for this year is less optimistic than the survey’s median of 6.4 percent.

“The recovery has been durable even in the face of headwinds that have emerged in recent years,” according to budget statement, citing the rebound in housing, stronger manufacturing and more oil production. “There are encouraging signs emerging across industries.”

The estimates in the budget plan showed the annual average yield on 10-year Treasury notes will advance to 3 percent in 2014, from 2.3 percent last year, and increase to 3.5 percent in 2015.

The 10-year yield rose six basis points, or 0.06 percentage point, to 2.66 percent at 10:19 a.m. New York time, after dropping to 2.59 percent Monday, the lowest since Feb. 4, according to Bloomberg Bond Trader prices.

Rough Winter

Harsh winter weather probably contributed to economic weakness early this year, though the extent of the impact is difficult to estimate, Federal Reserve Chair Janet Yellen said on Feb. 27. Lower temperatures and snow storms slowed housing, manufacturing and hiring, and disrupted air travel and construction plans.

Payrolls rose less than projected both in January and December, showing the weakest back-to-back gains in three years.

“Our economy is moving forward and businesses are creating jobs, but our top priority must be accelerating that growth while expanding opportunity for all Americans,” according to the budget plan.

In January, Treasury Secretary Jacob J. Lew said the economy this year isn’t restrained by the “real headwinds of budget cuts and other fiscal policies” that held it back in 2013.

Monetary policy has been supportive of growth, with the Fed keeping its benchmark short-term interest rate near zero since December 2008 while carrying out three rounds of bond buying aimed at keeping long-term borrowing costs low.

Fed policy makers, who released their estimates in December, saw economic growth of 2.8 percent to 3.2 percent this year and 3 percent to 3.4 percent in 2015. The central bankers’ forecasts are based on comparisons of the fourth quarter to the same period in the prior year.

President Barack Obama’s budget plan forecast 3.4 percent growth next year on an average annual basis.

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The U.S. economy will grow this year at its fastest pace since 2005, helping lower unemployment even as market interest rates rise, the Obama administration predicted.
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Tuesday, 04 March 2014 12:11 PM
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