Mitt Romney said today in a wide-ranging interview with Time magazine that he will reduce the unemployment rate to 6 per cent by the end of his first term as President, if elected this fall.
One problem with that: It’s pretty much what the government is projecting anyway under the current fiscal policy of Barack Obama. And it’s actually higher than what the Obama administration is projecting.
Now first, In January, the Congressional Budget Office forecasted the unemployment rate dropping over the next few years to 6.5 per cent by the end of 2016. Somewhere in 2017, that number will drop below 6 per cent, the CBO said.
Now take a look at the Obama administration’s projections, which have the rate plummeting to 6 per cent by the end of 2015 and to 5.5 per cent by the end of 2016.
Also, according to research from the Federal Reserve Bank of New York, the unemployment rate could fall to 6 per cent by next year, though that is a much rosier projection than the median forecast of 7.6 per cent by the end of 2013.
During economic recoveries, the flows into unemployment start to slow, and the outflow rate from unemployment (the drain) begins to dominate unemployment dynamics. We find that these increases in outflows explain the recent decrease in the unemployment rate and that this dominance of the outflow rate is likely to continue unless the economy experiences another recession. Furthermore, simulations based on historical patterns suggest that the fall in the unemployment rate could be quicker than many forecasters predict.
The recovery could look like this:
Photo: New York Federal Reserve
Meanwhile, Romney’s unemployment goes against his own words. When last month’s disappointing jobs report hit, he blasted Obama for claiming that the economy was improving. He said that “anything near 8 per cent or under 4 per cent is not cause for celebration.”
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