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The New York Times Economic Adviser Predicts 10% Jobless Rate reported yesterday that,

“Unemployment is likely to remain at its severely elevated level” through the end of next year, predicted Christina Romer, chairwoman of the White House Council of Economic Advisers, at a hearing of the Joint Economic Committee of Congress

…And she warned that the rebound in jobs could actually be even slower than what White House officials and private forecasters had been predicting.

Well, in my October 2, 2009 post (3 weeks earlier than anyone else) 14.5 million Jobless and Counting I stated exactly that. The situation is so bad that Obama Administration should start thinking whether they will make it to a second term.

Why is it so bad? Well, if the Obama Administration does not do something radically different from the previous Administrations of the last 50 years, unemployment will only reduce at the time tested average rate of 0.06% per month after it stops increasing. Or 0.72% per year and 5 years to get 6.1%.

The unemployment will be around 7.6% on re-election day assuming unemployment peaked last month. This is not good news for the Obama Administration. These numbers are optimistic as they assume that the prime mortgage foreclosures do not accelerate bank closures and subsequent credit tightening and financial services layoffs. That is unemployment will most likely be at or above 8% on re-election day. My guess is that the financial services industry will lay off another 30,000 people in the next 18 months.

Quoting the New York Times, “the rebound in jobs could actually be even slower than what White House officials and private forecasters had been predicting“. Economist and private forecasters have been consistently too optimistic and that has eroded our ability to recognize the seriousness of this unemployment problem.

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Disclosure: I’m a capitalist too, and my musings & opinions on this blog are for informational/educational purposes and part of my efforts to learn from the mistakes of other people. Hope you do, too. These musings are not to be taken as financial advise, and are based on data that is assumed to be correct. Therefore, my opinions are subject to change without notice. This blog is not intended to either negate or advocate any persons, entity, product, services or political position.
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