- The Congressional Budget Office forecasted that the unemployment rate will not fall below the 3.5% it once was in February 2020 for the rest of the decade.
- It also forecasted quicker economic growth this year, a sign the economy may be on better footing than many analysts expected.
- Economists are still urging the federal government to approve more relief spending to mitigate long-term economic damage.
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The US unemployment rate will not hit pre-pandemic levels this decade, according to official projections from the Congressional Budget Office, a nonpartisan government group.
Before the pandemic swept the US, unemployment stood at 3.5% in February 2020, a half-century low. The analysis suggests that many people could struggle to find work or re-enter the labor force even after the coronavirus outbreak is contained with vaccinations.
The CBO also forecasted quicker economic growth this year, a sign that the economy may be on stronger footing than many analysts had expected at the outset of the pandemic. The economy will grow 4.6% this year, the CBO said.
The projections did not factor in the likely prospect of additional government spending to combat the pandemic this year. The unemployment rate, the CBO said, will fall to 5.7% this year and 5% in 2022. It will average 4.7% from 2026 to 2031.
Still, economists are urging additional federal relief to prevent long-term damage to the US economy.
“CBO projections are completely consistent with the view that the risks of going too small dramatically outweighs the risk of going too big,” Gene Sperling, a former top economic advisor to Presidents Bill Clinton and Barack Obama, said in a press call with reporters on Monday.
He pointed to Federal Reserve projections indicating that workers in the bottom-wage quartile are experiencing a Depression-era unemployment rate of 20%. That’s in stark contrast to the 5% jobless rate for workers in the top wage quartile.
The CBO analysis may play a role in stimulus negotiations between the Biden administration and Congress. President Joe Biden is seeking a $1.9 trillion emergency funding package. It includes measures like $1,400 stimulus checks, $400 federal unemployment benefits, aid to state and local governments, and vaccine funds.
But Republicans are balking at the plan’s hefty price tag as well as certain provisions they argue is unrelated to the pandemic, such as a bump in the minimum wage to $15 an hour. Many in the GOP support only targeted spending to combat the pandemic.
A group of 10 centrist Republican senators made a $618 billion counteroffer to the Biden administration on Monday, and they are scheduled to meet with the president in the afternoon.
White House press secretary Jen Psaki said at a news conference on Monday the CBO projections are “not a measure of how each American family is doing and whether the American people are getting the assistance they need.”