WASHINGTON, July 23 (Xinhua) -- The U.S. economy still faces strong headwinds despite some positive developments, the White House said on Friday.
Primarily due to the 862-billion-dollar economic stimulus package and aggressive actions by the Federal Reserve and the Treasury Department to stabilize financial markets, the U.S. economy has gradually recovered from its worst recession since the Great Depression, the Office of Management and Budget (OMB), which is in charge of the administration's budget issues, said in its mid-session budget review.
Despite positive signs in terms of output, employment and financial markets, the U.S. economy still faces "strong headwinds, " said the report.
The OMB listed four major challenges that may derail the fragile economic recovery: financial market uncertainty causes commercial banks and other private lenders to tighten credit standards; a large overhang of unsold property still drags on the housing market and holds back new construction; the economic downturn has forced fiscal consolidations that have reduced aggregate demand and slowed growth; and debt crisis in some European countries has stirred the global financial markets.
"Despite these headwinds, the administration expects economic growth and job creation to continue for the rest of 2010 and to rise in 2011 and beyond," said the report.
Real Gross Domestic Product (GDP) is expected to rise by 3.1 percent in 2010 and 4.0 percent in 2011. The growth rate is projected to rise to 4.3 percent in 2012 and 4.2 percent in 2013 as the economy returns closer to its potential output level, according to the report.
The OMB's forecast is basically in line with that of the central bank. The Federal Reserve projected the country's economy to grow 3.0 to 3.5 percent in 2010, and to grow 3.5 to 4.2 percent in 2011 and 3.5 to 4.5 percent in 2012.
"Despite the growth in output, unemployment is projected to decline slowly because," the OMB noted. The jobless rate is projected to average 9.7 percent in 2010. With continued healthy growth in 2011 and beyond, the unemployment rate is projected to fall, but it is not projected to fall below 6.0 percent until 2015, said the report.
Unemployment, at 9.5 percent in June, is a key concern of the Obama administration. To address this issue, the administration has launched a series of initiatives, including a measure signed by the president this week to extend jobless benefits to millions of Americans who are out of work for six months or more.