The main reason for the downgrade: The first three months of 2007 got off to an extremely weak start. Economic growth at that time had skidded to nearly a halt, increasing at a rate of just 0.6%, the worst showing in more than four years.
Federal Reserve Chairman Ben Bernanke, the administration and private economists expect the economy to rebound in the months ahead.
Lazear said, "We've seen capital goods shipments increase and business orders increase -- and the best thing is orders ahead of the shipments, which suggests positive activity in the future."
He also cited a Commerce Department report showing an increase in investment in the U.S. from abroad.
The one wild card, though, is whether the nearly year-long housing slump -- which has been a damper on overall economic activity -- gets worse.
"So it is just not quite clear where we are in terms of the housing market, whether it has bottomed out," Lazear said.
The economy grew by 3.1% in 2006. The persistence of the housing slump is a factor behind the economy's projected loss of momentum this year.
The White House, however, expects the economy will regain speed and grow by 3.1% -- a solid performance -- in 2008 and 2009. Those forecasts are unchanged from previous estimates.
Gross domestic product measures the value of all goods and services produced within the U.S. It is the best barometer of the country's economic fitness.
Meanwhile, the nation's unemployment rate, which averaged 4.6% last year, a six-year low, is expected to dip to 4.5% this year under the administration's new forecast. That is slightly better than its old forecast that the unemployment rate would hold steady at 4.6%.
Next year, the administration predicts the unemployment rate will edge up to 4.7%. Still that's also a bit better than the old projection of a 4.8% jobless rate. In 2009, the White House believes the jobless rate will nudge up to 4.8%, unchanged from its previous estimate.
The employment climate has remained healthy even as the economy has endured a sluggish spell. That's because troubles have mostly been contained in the ailing housing and the struggling automotive sectors and have not spread widely, affecting other types of employers.
On the inflation front, surging prices for gasoline and other energy products prompted the administration to raise its inflation forecast for this year. The White House now expects consumer prices to rise by 3.2% this year.
That's higher than the 2.6% increase previously projected.
"Because of the robustness of the U.S. economy we've actually been able to survive high energy prices without a great deal of economic shock," Lazear said.
After this year, inflation should settle down. The administration expects consumer prices to rise by 2.5% in 2008 and edge down to 2.4% in 2009.
The White House's economic forecasts are issued twice a year. The projections were developed mainly by a team from the Council of Economic Advisers, the Treasury Department and the Office of Management and Budget. The administration's projections are in line with those offered by private analysts.