The U.S. economy will grow this year at its fastest pace since 2005, helping reduce the annual average unemployment rate for a fourth straight year even as market borrowing costs rise, the Obama administration predicted.
Gross domestic product will expand 3.1 percent in 2014 after rising 1.9 percent last year, the administration said in forecasts accompanying its 2015 budget plan released today in Washington. The jobless rate will average 6.9 percent this year, compared with 7.4 percent last year, and average 6.4 percent in 2015, according to estimates based on information as of mid-November.
The $3.9 trillion spending request anticipates an accelerating economy that’s boosting employment while moving up inflation to levels unlikely to concern Federal Reserve policy makers. The proposal says fixing the immigration system, investing in infrastructure, simplifying the tax code and improving job training would reduce the ranks of the unemployed even more.
“Our own forecast is for a less rosy outlook,” said Yelena Shulyatyeva, New York-based U.S. economist at BNP Paribas, who forecasts U.S. economy to grow 2.5 percent this year. Growth estimates made now instead of in November probably would be lower because “some activity will be lost due to the bad weather,” she said.
Fed officials, who released their estimates in December, saw economic growth of 2.8 percent to 3.2 percent this year and 3 percent to 3.4 percent in 2015. The central bankers’ forecasts are based on comparisons of the fourth quarter to the same period in the prior year.
The projected gain in GDP this year would be the biggest since 2005’s 3.4 percent. Obama’s budget plan today forecast 3.4 percent growth next year on an average annual basis.
Source: bloomberg.com
