Economist Jared Bernstein had a discussion yesterday of a surprising forecast by researchers at Goldman Sachs. The forecast predicts that unemployment will continue to decrease for another three months or so, and then start increasing again.

What’s really telling to me is the reasoning for the forecast:

First, we expect the Euro-area crisis to weigh somewhat more heavily on growth than it has done so far, mainly via the financial channels. Second, we expect the pace of fiscal restraint to pick up in early 2012. We estimate that fiscal policy at the federal, state and local level subtracted about ½ percentage point from real GDP growth in the middle of 2011, but we expect this drag to increase to around 1 percentage point in early 2012. [Emphasis added]

Yup, we’re killing our own economy with foolish austerity measures. I think Bernstein summed it up nicely:

…it’s yet another crop of green shoots mowed down in its youth by political dysfunction generating terrible economic policy