The White House cut its forecast for U.S. economic growth this year and indicated President George W. Bush's successor will face the dual headwinds of rising unemployment and faster inflation.
U.S. gross domestic product will grow 1.6% this year and expand 2.2% in 2009, the White House's Council of Economic Advisers said in a mid-year review today. The forecasts were slashed from an outlook in February for 2.7% growth this year and 3% for 2009.
The effects of the economic slump have worsened the job market, and the White House forecast the jobless rate will average 5.3% this year and 5.6% in 2009. The unemployment rate averaged 5.1% in the first six months of 2008 and was at 5.5% in June, unchanged from the 3 1/2-year high reached in May.
"The U.S. economy has continued to expand, but growth has slowed as a result of the sharp housing decline, disruptions in financial markets, and high energy prices," the report said. "Because of the recent slower economic growth, the labor market is likely to remain sluggish for a period of time before returning to better performance."
The consumer price index will rise 3.8% this year, compared with a February forecast for 2.7%, the White House said. Next year, the cost of living will increase 2.3%, faster than the 2.1% gain predicted five months ago.
The nation's unemployment rate, as an annual average of monthly figures, hasn't exceeded 5.3% since 2004, when it reached 5.5%.
The White House's latest forecast for GDP growth was similar to private economists for this year and more optimistic for 2009.
The economy will expand 1.6% in 2008 and grow 1.7% in 2009, according to the median estimate of economists surveyed by Blue Chip Economic Indicators this month.
