White House Issues Upbeat Economic Forecast

WASHINGTON - The White House issued an economic forecast today that calls for “solid growth” through next year, a prediction that is more optimistic than that of the Federal Reserve and far more optimistic than those of many analysts on Wall Street.

The administration predicted that the economy will expand by 2.7 percent in 2008, that unemployment would remain below 5 percent and that the outlook would be even better in 2009. By contrast, Fed officials are predicting “subpar” growth through next year, starting with a sharp slowdown over the next six months. The “central tendency” of forecasts by Fed policy makers is for growth to slow to between 1.8 percent and 2.5 percent next year.

The White House was closer to the Fed on its estimate about unemployment, predicting that it would average 4.9 percent next year — up only slightly from 4.7 percent. But many analysts think the Fed’s unemployment forecast is itself too optimistic, because it is inconsistent with its forecast for slower growth.

“We are forecasting solid growth for 2008 of 2.7 percent, and that is good solid growth,” said Edward Lazear, chairman of the White House Council of Economic Advisers, in a conference call with reporters. He said the healthy growth was “especially significant,” given that the administration expects the housing market to be a drag on the overall economy throughout next years.

The administration did reduce its forecast for growth next year by about four-tenths of a percentage point. Mr. Lazear said the downward revision reflected the unexpectedly steep drop in the housing market as well as earlier downward revisions of growth in previous years.

“Obviously the housing market has been softer than people expected,” he said. “We are not the only ones who were surprised by that. For the most part, our revisions are in line with other revisions.”

White House Issues Upbeat Economic Forecast
By EDMUND L. ANDREWS | New York Times