The U.S. unemployment rate, currently at 10 percent, is unlikely to drop below 8 percent before 2012 unless Congress takes further steps to boost the economy in the short term, the non-partisan Congressional Budget Office said on Thursday.
The estimate is likely to give increased urgency to Democratic lawmakers' efforts to create jobs before they face voters in November. The House of Representatives passed a $155 billion jobs bill in December and the Senate is expected to act in coming weeks.
Speaking to House Democrats at a conference on job creation, President Barack Obama vowed to do more to help Americans who are still struggling.
We are going to have sustained and relentless focus over the next several months on accelerating the pace of job creation, Obama said.
CBO's estimate shows unemployment is likely to remain high for several years as the country gradually recovers from the worst downturn since the 1930s. The unemployment rate stood at 4.9 percent before the recession took hold in December 2007.
The 8 percent figure remains unchanged from the office's August 2009 estimate, when a $787 billion stimulus bill had just begun to affect the economy.
The effects of that stimulus bill will peak in the first half of this year, CBO said, but further efforts could help hasten the recovery.
Increased spending on safety-net programs for the jobless will likely have the most immediate impact as the beneficiaries would spend that money quickly, CBO said. Each dollar spent on that approach would yield between 70 cents and $1.90 in economic activity, CBO estimated.
That element is included in the House jobs bill, along with increased infrastructure spending and aid to cash-strapped states. Those two approaches also could boost the economy but would have less of a short-term impact, CBO said.
House Democrats could yet pass more job-creation measures as they wait for the Senate to act.
What we need to do is very much focus on the steps needed to create jobs and just take every possible effective step that we can, said Representative Sander Levin.
A payroll tax credit to encourage businesses to create jobs, which was not included in the House bill, would be among the most effective approaches, CBO said.
Tax cuts, especially for the affluent, would have less of an impact as households would be likely to save the money rather than spend it, CBO said.
Any stimulus efforts are unlikely to add to inflation but would worsen the budget deficit, which came in at a record $1.4 trillion in the fiscal year that ended September 30, 2009, CBO said.
(Additional reporting by Donna Smith and Ross Colvin; editing by Mohammad Zargham and Eric Beech)