Chief White House Economic Advisor Admits Her Forecast on Unemployment Was 'So Far Off'
“Employment went from falling at a rate of 700,000 jobs per month to growing at the beginning of 2010. These swings from horrifying negatives to positives are a testament to the speed and effectiveness of the policy response,” she said during her final speech as the President’s chief economic advisor at the National Press Club on Wednesday.
“Compared to the problems we face, the turnaround has been insufficient. Though the unemployment rate has come down six-tenths of a percentage point, it is still 9-and-a-half percent--an unacceptable level by any metric. Real GDP is growing, but not fast enough to create the hundreds of thousands of jobs each month that we need to, to return employment to its pre-crisis level.”
Romer admitted that her original prediction of unemployment not exceeding 8 percent if Congress passed the $787 billion Recovery Act was “so far off.”
“What the act hasn’t done ... is prevent unemployment from going above 8 percent, something else that Jared [Bernstein] and I projected it would do. The reason that prediction was so far off is implicit in much of what I have been saying this afternoon,” she said.
“An estimate of what the economy will look like if a policy is adopted contains two components: a forecast of what would happen in the absence of the policy, and an estimate of the effect of the policy. As I’ve described, our estimates of the impact of the Recovery Act have proven to be quite accurate. But we, like virtually every other forecaster, failed to anticipate just how violent the recession would be in the absence of policy, and the degree to which the usual relationship between GDP and unemployment would break down.”