High unemployment not the "new normal": Romer

WASHINGTON Sat Apr 17, 2010 1:15pm EDT

Men look over jobs listings while searching for employment at a jobs center in San Francisco, California February 4, 2010. REUTERS/Robert Galbraith

Men look over jobs listings while searching for employment at a jobs center in San Francisco, California February 4, 2010.

Credit: Reuters/Robert Galbraith

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WASHINGTON (Reuters) - The fragile economy is on the path to recovery but is still far from back to normal, White House economist Christina Romer said on Saturday.

Romer, chairwoman of President Barack Obama's Council of Economic Advisers, said the signs were improving but the economy is still suffering from a shortfall of aggregate demand as it emerges from what has been termed the Great Recession.

"By almost every indicator, the U.S. economy is finally on the road to recovery," Romer said at Princeton University in New Jersey. But citing a March jobless rate of 9.7 percent, she cautioned: "When it comes to the economy we are very far from normal."

Obama has made job creation a top priority, mindful that persistently high unemployment could mean heavy losses for his Democrats in November's congressional elections.

While acknowledging serious concern that some Americans face long-term unemployment, Romer pushed back against economists who have asserted that high joblessness is now built into the economy and has become the "new normal."

"The overwhelming weight of the evidence is that current very high and very disturbing levels of overall and long-term unemployment are not a separate structural problem but largely a cyclical one," Romer said in her speech. "That is far from being the 'new normal,' it is the 'old cyclical,'" Romer said.

She also made the case for congressional approval of financial regulatory reform, saying it was needed to "help curb destructive bubbles" that spurred the financial crisis.

Obama, in his weekly radio and Internet address on Saturday, accused Republicans of spreading misinformation about the Democratic financial reform bill, which is expected to come to a vote in the Senate within weeks.

Obama said Senate Republican Leader Mitch McConnell's insistence the bill would lead to more taxpayer-funded bailouts of financial firms was a "cynical and deceptive assertion."

In response, McConnell's spokesman, Don Stewart, said: "It's especially disappointing for the president to attack Senator McConnell for raising concerns about the bailout loopholes in the bill when just last night the White House agreed with Senator McConnell and its own treasury secretary and asked Senate Democrats to remove the $50 billion fund."

The bill proposes setting up a $50 billion fund to pay for liquidating distressed financial firms, a measure not favored by the White House. Republicans have said the fund presents the possibility of continued bailouts.

With debate heating up, regulators charged Wall Street giant Goldman Sachs with fraud on Friday.


Romer said the shortfall in demand reflects lingering effects of the crisis and headwinds the economy still faces. She outlined steps for boosting recovery, including more fiscal relief for states and further extending jobless benefits.

"There are fiscally responsible measures we can take that can make an important difference between so-so recovery and strong recovery," she said.

Romer said reducing the federal budget deficit and getting the government's "fiscal house in order" would be crucial.

"It would be penny-wise but pound-foolish to try to deal with our long-run problem by tightening fiscal policy immediately or foregoing additional emergency spending to reduce unemployment, she said.

"But a credible, comprehensive plan for deficit reduction would create a favorable climate for investment and ensure that the economy remains strong."

Though Obama inherited record deficits, Republican critics have charged that heavy government spending since he took office is digging an even bigger fiscal hole.

(Reporting by Matt Spetalnick; Editing by Doina Chiacu and Eric Beech)

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Comments (14)
yr2009 wrote:
“By almost every indicator, the U.S. economy is finally on the road to recovery,” Romer said …

-No kidding! I’d suggest a refinement to that statement, and say “almost every indicator, except those that really matter.”

Good job on those 4 million jobs saved… and good luck in the November elections!

Apr 17, 2010 12:54pm EDT  --  Report as abuse
txgadfly wrote:
The real question is — whose country is this anyway? Why is “our” government interested in the organizational health of companies that do not benefit the people? Our policies help enrich the already rich and powerful, who at the same time reduce the standard of living for everyone else.

How about less concern on keeping companies happy? What good are they? Let Goldman move to El Salvador or Albania, and good riddance.

Apr 17, 2010 12:59pm EDT  --  Report as abuse
LookDeeper wrote:
Institutionalizing poverty makes depressions worse. If you want to know how to end a depression examine Warren G. Harding’s presidency. He ended one of the most painful depressions the country has experienced within 2-1/2 years! His fiscal policy continued by his Vice President after his death. This fueled Roaring Twenties! It is no wonder he was erased from our modern history books; he is proof positive that small government and low taxes dramatically increases wealth across the board!

Apr 17, 2010 2:22pm EDT  --  Report as abuse
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