White House GDP forecasts look low: Goolsbee

By Alister Bull

WASHINGTON (Reuters) – President Barack Obama’s top economist gave a clear hint on Friday that White House growth forecasts would be raised later this year, potentially good news as the 2012 U.S. election campaign gets underway.

“The official forecast we locked in November, that was the one that was in the budget, that now looks very conservative for 2011 and 2012,” Austan Goolsbee, chairman of the White House Council of Economic Advisers, told Reuters.

Goolsbee was speaking after a stronger-than-expected March payroll report underlined the progress made by the U.S. economy since pulling out of a severe 2007-2009 recession.

Data released by the Labor Department showed U.S. nonfarm payrolls advanced 216,000 last month, the largest increase since May, following a solid gain of 194,000 in February.

The healthier tone of the U.S. labor market helped bring the U.S. unemployment rate down to 8.8 percent in March, which is a full percentage point lower compared with November.

This was welcome news for Democrat Obama, who must convince voters that his policies will safeguard their welfare if he is to secure a second term in the White House.

A poll released by Gallup on Friday showed 58 percent of Americans surveyed disapprove of his handling of the economy, reflecting nagging anxiety amid a still-high U.S. jobless rate that has been compounded by rising gasoline prices.

Pump prices have pushed toward $4 a gallon amid conflict in Libya and unrest in the wider Arab world.

This could dent consumer confidence by sapping household spending if prices remain high, and Obama sought to address that threat in a speech on Wednesday that urged policies which would foster greater U.S. independence from foreign oil.

But his reelection prospects should be in good shape if the current pace of economic improvement continues, especially if no strong Republican opponent emerges to challenge him in November 2012, as has so far been the case.

TWO-TERM PRESIDENT?

“If the unemployment rate in November 2012 is within hailing distance of 7.5 percent, Barack Obama will be a two-term president,” said William Galston, a senior fellow at The Brookings Institution in Washington.

The unemployment rate in January 2009, when Obama took office, was 7.8 percent. It had risen from a low of 4.4 percent in May 2007, as the collapse of the country’s housing market and ensuing global financial crisis inflicted the steepest recession since the 1930s Great Depression.

Galston said that the rate of unemployment was not the only thing that mattered to U.S. voters. They are also keenly aware of the state of their personal income and treat gasoline prices as a crude but important proxy for the health of the economy.

“Gas prices are surprisingly influential in shaping people’s attitudes toward the economy, and if gas is $4.25 or $4.50 a gallon next fall, then that would probably be enough to negate the good feeling of 7.8 percent unemployment,” he said.

Goolsbee, mindful of the pitfalls of over-promising on the economy, declined to forecast what pace of growth to expect this year and next.

The White House, when the president delivered his budget proposal to Congress on February 14, predicted real growth of 2.7 percent in 2011 and 3.6 percent next year.

“I don’t speculate what we’re going to do. We will update that in August in the mid-session review, with whatever is the best information we have,” Goolsbee said.

“But it is totally public knowledge and verifiable that the forecast we made at that time looks way on the low end.”

The latest consensus estimate of the Blue Chip survey of private sector economists forecasts growth of 3.1 percent this year and 3.3 percent in 2012.

The White House budget numbers were “locked” before an $858 billion tax package struck between Obama and Republican lawmakers in December that economists say could have added up to a percentage point to U.S. growth this year.

(Reporting by Alister Bull, Editing by Eric Walsh)

White House GDP forecasts look low: Goolsbee