Urging quick passage of an economic stimulus package, White House economist Glenn Hubbard on Tuesday warned that U.S. unemployment rolls will continue to swell even as the economy recovers next year.

Citing the latest consensus forecast of the closely watched Blue Chip Survey, in which economists predicted the economy would grow slightly in the first quarter and moderately in the second quarter of next year, Hubbard urged lawmakers to quickly pass a stimulus package.

"Even with a recovery like that, rates of unemployment are likely to rise through much of 2002," Hubbard said in remarks at the Heritage Foundation, a conservative D.C.-based think tank.

Close to a million jobs have been lost since March, when a special panel of economists says the U.S. recession began.

Economists in a Reuters poll are expecting to government figures on Friday to show companies trimmed an additional 189,000 jobs during November, driving the unemployment rate up to 5.6 percent. That would follow a falloff of 415,000 jobs in October.

Amid concerns of rising unemployment, Hubbard warned that U.S. lawmakers must also maintain fiscal discipline when considering an economic stimulus.

"We believe that excessive spending does not buy growth insurance," he said. But he later told reporters that in the short-term a rising budget deficit can be expected.

"It's certainly true in the short-term we'd expect greater deficits because of the spending pressure of the war effort and the declining economy," he said. President Bush's economic and spending forecasts, outlined in a budget plan, are due out in February of next year.

Efforts Stalled

Even with a U.S. economy sunken into recession after the Sept. 11 attacks on the World Trade Center and the Pentagon, partisan squabbling in Congress has stalled efforts to pass a stimulus package.

But lawmakers had reached an agreement to proceed with negotiations on the matter.

The Republican-controlled House of Representatives, in a mostly party-line vote, has passed a $100 million package in line with a plan the Bush Administration has been pushing. That House bill includes business tax breaks and acceleration of some income tax rate cuts that were included in the $1.35 trillion tax cut signed into law earlier this year.

But Democrats, who control the Senate, have been pushing for more spending to expand unemployment benefits and help laid off workers pay for health insurance coverage.

"Any meaningful package needs to focus on paychecks not unemployment checks," Hubbard said, warning that boosting consumer and business confidence — damaged after the Sept. 11 attacks — is crucial in any policy.

Key economists, including many who participate in the Blue Chip economic forecast survey, support a temporary suspension of payroll taxes instead of either the Republican or Democratic plans or the package sought by President Bush, arguing such an approach would be more stimulative than other proposals.

A so-called payroll tax holiday would put more money in American's paychecks. Companies would also benefit from not having to pay their portion of payroll taxes, economists say. But Hubbard said the White House disagreed.

"We don't share that view," Hubbard told reporters. "We think that the combination of the (tax) rebates and the marginal rate cuts is very stimulative and I think there are a number of concerns, both policy and administrative, about the payroll tax cuts."