CHART OF THE DAY: The CBO’s Laughably Optimistic Unemployment Projections

button more charts
button chart prev
button chart next

Yesterday’s report from the Congressional Budget Office was widely derided for “dated optimism.” Reuters columnist James Pethokoukis wrote: “The rosy economic forecast is one reason I place little confidence in the CBO’s budget projections.”

Let’s go over the unemployment projections.

The CBO sees the rate dropping to 8.5% in 2012. Although more pessimistic than past estimates, this figure is optimistic compared to Wall Street estimates of 9.25% from Goldman and 9.5% from JP Morgan.

But what’s really controversial is the claim that unemployment will return to a steady 5%. This assumes that unemployment is entirely cyclical and disregards well-known structural factors such as changes in technology, skill mismatches and global trade shifts.

chart of the day, cbo unempolyment projections, aug 2011