President Obama’s chief economic adviser has indicated that he expects unemployment to stay at elevated levels for “a few years”. In a candid interview with Nightly Business Report (click on the links for a video or a transcript), National Economic Council Director Larry Summers did not express much hope for a quick drop in unemployment:
After Lehman, the economic discussion was whether recession would turn into depression. Today, the economic discussion is when the recession is going to end, and most experts are looking for significant economic growth in the third and fourth quarters of the year. So I think we’ve come a long way. At the same time, with unemployment well above nine percent, likely to remain unacceptably high for a few years, no one can be satisfied with where we are. We’ve got a great deal of work to do, making sure to do stronger financial regulation. This just can’t happen again. Making sure this expansion is as robust, as firmly grounded as we possibly can.
When asked what further actions the Obama Administration has planned to address the unemployment situation, Mr. Summers added the following comments:
The administration’s economic overall program, the Recovery Act, has operated and functioned more rapidly, I think, than any economic expansion program in memory, but as yet, well under half of the funds under it are dispersed. They’re going to be dispersed going forward–and dispersed at a growing rate.
Essentially, this interview did not deviate greatly from the talking points made by numerous other Obama Administration officials, except for the fact that Mr. Summers seemed more candid regarding an extended period of persistently high unemployment.
It is also worth noting that Mr. Summers is widely admired outside the Democratic party. For example, Charlie Munger had the following to say about Mr. Summers in a recent interview (click on the links for a transcript or video download):
I am a right-wing Republican, and I like the fact that Obama has put into the White House Larry Summers, who is a ferociously smart human being and will try to do the right thing even if it offends some people. I think that’s a quality that we need right now.
Although few observers expect a quick drop in the unemployment rate, consensus expectations seem to predict a decline starting by the middle of 2010. Perhaps Mr. Summers did not intend to present a more negative view of the situation, but by stating that unemployment will remain “unacceptably high for a few years”, he certainly created that impression.
Economists counting on a quick recovery in consumer spending to boost GDP in the coming quarters may be disappointed.