Obama economic adviser predicts 2nd quarter contraction, increases in unemployment

Obama adviser sees increase in unemployment

WASHINGTON — Unemployment will increase in the next several months, but the pace of the nation’s economic slide will moderate and level out in the second half of the year, a top Obama economic adviser told Congress Thursday.

Christina Romer, the chairwoman of Obama’s Council of Economic Advisers, predicted another economic contraction in the second quarter of the year and delivered a downbeat assessment about unemployment. But she said the pace of the economic decline will moderate sharply over the next several months.

“Whether the recovery begins later this year, as most private forecasters predict, or takes a bit longer is hard to know,” she told Congress’ Joint Economic Committee.

Romer specifically pointed to increased consumer confidence and to signs that the housing sector appears to be reaching bottom as hopeful indicators.

Her testimony came in the wake of Wednesday’s report that that overall economic output in the United States declined rapidly in the first three months of this year. Her carefully modulated message — positive signs amid continued trouble — underscores the Obama administration’s aim to offer the public reassurance without overselling a recovery.

She warned that the country’s main economic measure, its gross domestic product, would likely grow before workers experience an increase in employment.

“The recovery will almost surely take a long time,” she said.

She conceded that the current spending has increased deficits and the national debt, but rejected suggestions from Sen. Sam Brownback, R-Kan., that the administration should reduce its stimulus spending next year if the economy begins to recover.

“We not only need growth in 2010, we actually need pretty rapid growth to bring the unemployment rate down,” she said. “If you think about where we’re likely to be in 2010, I don’t think anyone’s thinking of the economy being robustly healthy.”