Treasury Secretary Timothy Geithner: Unemployment Could Go Up Before It Comes Down

Geithner cautions unemployment could rise as more people enter the labor force.

ByABC News via GMA logo
August 2, 2010, 4:56 PM

August 3, 2010— -- Treasury Secretary Timothy Geithner acknowledged that it is still a "tough economy" for most Americans, and warned it's possible the unemployment rate will go up for a couple of months before it comes down as more people enter the labor force.

"When they see a little hope that there may be jobs out there, they start to come back in again. And that can cause the measured unemployment rate to go up — temporarily," Geithner told "Good Morning America's" George Stephanopoulos in an exclusive interview. "But what we expect to see, and I think most forecasters expect this…is an economy that's gradually healing, gradually strengthening, businesses starting to add people back."

The economy is not rebounding as quickly as Geithner and the Obama administration would like, he said. Last week's economic report card showed the Gross Domestic Product grew at a rate of 2.4 percent, slower than it had earlier this year. But amid that bad news, Geithner said, were signs of growth in the private sector.

"If you look at the numbers last week that tell you what's happening to the economy as a whole, what they showed is the private sector is getting stronger. So if you'd add together business investment and consumption, that part of the economy, which is what matters for the future, is getting progressively stronger and that's very important," Geithner said.

CLICK HERE for George's Bottom Line on his interview with Sec. Geithner.

Many opponents say President Obama's unwillingness to extend all of the Bush era tax cuts, including to the top earners, will only increase the unemployment rate.

Former Speaker of the House Newt Gingrich said it would be "crazy" to raise taxes in the midst of high unemployment, even on individuals making more than $200,000. Over the weekend Mayor Mike Bloomberg suggested extending all the tax cuts for the next few years while pairing it with "long-term solutions" to reduce debt.

But Secretary Geithner rejected those claims by saying a short extension on all tax cuts could lead to an indefinite one.

"What the President believes is the best strategy for the country is to extend the tax cuts that go to more than 95 percent of Americans, more than 95 percent of small business. Keep taxes on capital income low going to moderate," Geithner said.

Geithner would not go as far as to threaten a presidential veto should Congress pass an extension on all the tax breaks set to expire at the end of the year.

"I know you don't want to give a veto threat right now. That's pretty clear?" Stephanopoulos asked.

"I would be happy to give a veto on so many things, George," Geithner said. "You have no idea."