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White House lowers "stale" jobless forecast

A man writes down his details at a booth during the "JobEXPO" job fair in New York
A man writes down his details at a booth during the "JobEXPO" job fair in New York

By Caren Bohan

WASHINGTON (Reuters) - President Barack Obama will forecast a U.S. unemployment rate averaging 8.9 percent in 2012 in his annual budget on Monday - but before the document was even released a top aide called the projection "stale" and said it should be lower.

"We would certainly lower our forecast of the unemployment rate from the figures that will appear in Monday's budget if we were to do another forecast today," top White House economist Alan Krueger said in an e-mail.

"The forecast of the unemployment rate that will accompany the budget should be considered stale and out of date," wrote Krueger, who is chairman of the White House Council of Economic Advisers.

In mid-November, when the economic forecasts were compiled, the nation's latest reported unemployment rate was 9 percent. Last month, the jobless rate dropped to a three-year low of 8.3 percent as employers added 243,000 new jobs.

Because of that, Obama's aides said their previous forecasts are already out of date.

Under pressure to reduce unemployment in an election year, Obama has welcomed a series of monthly reports showing unexpected declines in the unemployment rate.

The unemployment estimates that his administration will release next week underpin the White House forecasts on budget deficits and the national debt. In addition to projecting an average unemployment rate in 2012 of 8.9 percent, the official forecasts estimated the rate would average 8.6 percent in 2013.

But the economic assumptions, including the jobless rate and gross domestic product, were calculated many weeks before the budget is actually unveiled so they do not reflect the recent favorable data.

It appears the administration may leave people guessing about its more updated unemployment forecast.

However, the White House will seek to make the case that if its policies were adopted -- including the extension of a payroll tax cut for workers and new investment in infrastructure -- the country would see healthy job growth.

An administration official said that a report on the economy expected later this month would project payroll employment growth of 2 million in 2012 if Congress passed Obama's economic agenda.

Republicans vying to challenge Obama in the November 6 election, including frontrunner Mitt Romney, have repeatedly criticized the Democratic president's handling of the economy and made the problem of high unemployment a central theme of the campaign.

Each year since he took office in 2009, Obama has continued the ritual of making public his economic forecasts. But he suffered a political backlash for a forecast his top economists issued in early 2009.

Obama's aides said then that if Congress were to pass his $800 billion economic stimulus package, it would prevent the U.S. unemployment rate from surging above 8 percent.

The Democratic-led Congress quickly approved the stimulus package but the jobless rate ultimately climbed above 10 percent before eventually declining to its current rate of 8.3 percent.

(Reporting By Caren Bohan; additional reporting by Susan Heavey; Editing by Eric Beech and Vicki Allen)

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