Biden budget foresees unemployment climbing and the economy cooling

Jobless rate forecast to hit 4.3 per cent by year's end as separate report finds historic amount of job-cut announcements

President Joe Biden delivers remarks on his administration's budget proposals in Philadelphia, Pennsylvania. EPA

President Joe Biden is expecting a year of slow growth for the US economy, with a sharp rise in the nation's unemployment rate as inflation cools further.

The White House expects inflation to remain elevated at 4.3 per cent this year before it drops to 2.1 per cent in 2024, figures from the Biden administration's budget proposal showed.

Gross domestic product is projected to grow by 0.6 per cent in 2023 and 1.5 per cent in 2024.

The administration's economic projections were finalised in November. Government data released since then have stoked fears that a recession could be on the table this year.

“We’re confident we’ll get back to steady and stable growth, however the road there will continue to be a bumpy one,” Cecilia Rouse, chairwoman of the Council of Economic Advisers, told reporters.

The Biden administration also expects the nation's unemployment rate to climb to 4.3 per cent. Mr Biden has roundly praised the nation's resilient labour market and 53-year-low 3.4 per cent unemployment rate, putting him at odds with policymakers at the Federal Reserve who see unemployment as crucial to tamping down inflation.

Fed officials have raised interest rates at a historically aggressive pace since last March, contesting that a tight labour market contributes to inflationary pressures.

But raising interest rates also risks a surge in unemployment: About two million people could be out of work if the jobless rate climbs to the range of 4.6 per cent.

“Will working people be better off if we just walk away from our jobs and inflation rebounds?” Fed Chairman Jerome Powell asked Senator Elizabeth Warren during a terse exchange this week on Capitol Hill, underscoring the challenges facing the US central bank.

Data released by the Labour Department on Thursday showed initial jobless claims — an indicator of layoffs — rose by 21,000 to 221,000, driven by surges in New York and California.

A separate report from Challenger, Gray & Christmas estimated that US-based employers announced 77,770 job cuts in February, 410 per cent higher than in February of last year. It is also the highest total of announced job cuts since 2009, the group reported.

“Certainly, employers are paying attention to rate increase plans from the Fed. Many have been planning for a downturn for months, cutting costs elsewhere,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas.

The bulk of the job cuts have come in the tech industry, which has announced 35 per cent of all layoffs this year. The healthcare, retail and media industries have also seen increases in job-cut announcements.

The Labour Department on Friday will release its closely monitored unemployment report for February.

Ms Rouse said the White House will incorporate new data when it updates its economic forecast later this year.