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Unemployment would have hit 10.8% — higher than December's 10% rate — without Obama's $787 billion stimulus program, according to the economists' median estimate. The difference would translate into another 1.2 million lost jobs.
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But almost two-thirds of the economists said the government should do more to spur job growth. Suggestions included suspending payroll taxes for Social Security and Medicare, increasing spending on infrastructure, enacting a flat tax on income and extending jobless benefits.
The economists expect the jobless rate to remain in double digits until the third quarter.
David Berson, chief economist at PMI Group, worries that the housing market and the economy will suffer when the government's tax credit to first-time home buyers expires in April and the Fed stops supporting the housing market by purchasing mortgage-backed securities by March 31.
Bill Cheney, chief economist at John Hancock Financial Services, is relatively optimistic. He sees unemployment falling to 8.9% by the fourth quarter of this year. Cheney says other economists are "nervous Nellies," shell-shocked by the length and depth of this downturn. They've forgotten that "the deeper the recession, the faster you come out of it."
But Diane Swonk, chief economist at Mesirow Financial, says creating jobs is tougher than it was the last time unemployment passed 10% in the early '80s. The reason: The 1981-82 recession was engineered by the Federal Reserve to tame inflation through high interest rates. The Fed brought the economy back simply by reversing course and cutting rates.
This time, the Fed has pushed short-term rates to near zero and has flooded markets with money. But the financial system is so damaged by the Wall Street meltdown that it isn't converting easy money into loans and economic growth: "It's like the Fed is dropping money from a helicopter and it's getting caught in the trees," Swonk says.
The economists don't expect Fed chief Ben Bernanke to take his foot off the accelerator — and push rates up — until the third quarter. So they don't expect any change in the Fed's zero-interest-rate policy when its Open Market Committee meets Tuesday and Wednesday.
"Bernanke and his colleagues are very committed to doing the right thing," Cheney says. They learned from Japan's long 1990s slump, during which policymakers kept declaring premature victory and raising rates and taxes: "It's really important not to snuff out a recovery before it gets going."
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