[WASHINGTON] The Obama administration is predicting that the US unemployment rate will fall this year to the lowest level since 2007 as stronger economic growth boosts hiring.
The jobless rate will average 5.4 per cent in 2015, according to an administration official, citing projections in President Barack Obama's budget proposal. That's lower than the 5.7 per cent the Obama administration predicted in July and down from an average of 6.2 per cent last year.
The world's largest economy will grow 3.1 per cent in 2015 from a year earlier, said the official, up from a 2.4 per cent expansion last year and slower than the 3.5 per cent expansion projected in July. Yields on 10-year Treasury notes, which were at 1.64 per cent late last week, will average 2.8 per cent this year, compared with 3.3 per cent projected for 2015 in July, said the official, who briefed reporters on condition of anonymity.
"The US economy is the only vibrant economy in the world," Harvard professor Lawrence Summers, a former top economic adviser to Obama, said in an interview on the Fox News program "Sunday Morning Futures."
Even so, "there's a real question how long the world economy can fly on a single American engine," he said.
The economic assumptions underpinning Mr Obama's US$4 trillion budget plan are largely in line with private forecasters. The median estimate of 84 economists surveyed by Bloomberg calls for 3.2 per cent economic growth this year, and a separate survey shows expectations for a jobless rate averaging 5.4 per cent for the year.
Stronger hiring and growth are helping reduce the budget deficit as a share of the economy. The shortfall will be 2.5 per cent of gross domestic product next fiscal year, down from 3.2 per cent this year, and will shrink to 2.3 per cent of GDP in fiscal 2017.
Growth hasn't been fast enough to boost inflation as Federal Reserve officials monitor weakening price gains in deciding when to raise short-term interest rates for the first time since 2006.
A government report on Monday may show the Fed's preferred price gauge, personal consumption expenditures, gained 0.8 per cent in December from a year earlier, the least since 2009, according to a Bloomberg survey of economists. The PCE has been below the central bank's 2 per cent target for 31 months.