AP survey: Next president faces high unemployment

By Christopher S. Rugaber

Associated Press

Published: Wednesday, July 4 2012 12:00 a.m. MDT

Fifty-fix percent of the economists surveyed by the AP said the unemployment rate wouldn't return to 6 percent until 2016 or later. Thirty-one percent said it would take until 2015.

The economists said high unemployment remains a persistent problem for several reasons. The biggest factor: The economy isn't growing fast enough to cause employers to expand and hire much.

Beth Ann Bovino, deputy chief economist at Standard & Poor's, forecasts growth of about 2 percent this year and next. She doesn't think it will get much better before 2015.

"You need something closer to 4 percent to make a dent in unemployment," she said.

Consumers, businesses and governments are all cutting back on spending to reduce debts, Bovino said. That creates a vicious cycle: Less spending by consumers results in less revenue for companies. Businesses then reduce hiring. And that means fewer people with paychecks to spend.

And even if hiring does pick up, several economists said the unemployment rate will be hard to bring down. That's because millions of Americans have given up looking for work and are no longer counted as unemployed.

Many of those "discouraged workers" will likely resume their job searches as employers start hiring more. But because most won't be hired immediately, the unemployment rate will stay elevated.

Andrew Kohut, president of the Pew Research Center, said presidents find themselves under pressure almost immediately after taking office to improve the economy and job market.

If elected, Romney will likely point out that he inherited a weak economy, Kohut said. Obama has tried the same approach. But voters "still want to know, what have you done for us lately?"

Allen Sinai, chief global economist at Decision Economics, said the United States is in a squeeze: It needs to stimulate growth. Yet it also needs to rein in government spending and budget deficits over the long run.

"I don't envy the next president, whoever he is," Sinai said. "He is going to have one heck of a problem to fix."

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