The White House remains optimistic about the U.S. economy, despite its forecast that the gross domestic product will drop from 2.9% to 2.3% for 2007. Chairman of the Council of Economic Advisors Edward Lazear shared his insights with CNBC’s Liz Claman on “Morning Call.”
Although Lazear acknowledged disappointing growth in the first quarter, the administration has “seen a lot of indication that that’s already turned around.”
The rest of the economy helped minimize housing and energy shocks last year, Lazear explained: “That seems to be the pattern in the economy,” he said. “We see one sector decline, but we see one sector pick up.”
Construction, for instance, has been the most sensitive – yet, “even in construction, we haven’t seen major declines because nonresidential construction has offset what we saw in residential construction.”
Meanwhile, Lazear indicated the housing market might be picking up. Housing starts are actually higher than they were six months ago, he said. And upbeat business surveys like the ISM show strong results; foreign investment in the U.S. economy also ticked up.
Lazear pointed to the service sector as a strength to the U.S. economy: “It’s primarily a function of the fact that manufacturing productivity has been so strong, and as a result, we’ve been able to produce more goods with the same amount of labor,” he said. That labor can then be released to go into services and produce activity there.”