Fed warns of higher unemployment

| February 18, 2010 | 0 Comments
Fed warns of higher unemployment

In its latest forecast for the world’s largest economy, the US central bank, the Federal Reserve, has said economic growth will be between 2.8% and 3.5% in 2010 - better than its previous forecast of 2.5% to 3.5%.

However, the Fed has warned that despite strong growth for this year, unemployment will remain high.

Earlier this month, the Labor Department said the US unemployment rate fell from 10% in December to 9.7% in January - its lowest level in five months.

The Fed is forecasting an unemployment rate of between 9.5% and 9.7% in 2010, easing to 8.2% to 8.5% in 2011.

“The pace of the economic recovery will be restrained by household and business uncertainty, only gradual improvement in labour market conditions, and a slow easing of credit conditions in the banking sector”, the Fed said.

US President Barack Obama recently pledged to make job creation his top priority but has admitted many in the US were “struggling”.

Yesterday, the President defended his $787 billion (£500 billion) economic stimulus package and argued that the scheme had prevented a “catastrophe”.

On the first anniversary of the controversial legislation, the president said: “Millions of Americans are still without jobs, millions more are struggling to make ends meet.

“It doesn’t yet feel like much of a recovery. I understand that,” he added.

However, figures show that jobs are being lost at a much slower pace than this time last year and the Obama administration insists that the stimulus measures has saved or created 2 million jobs in the first year, with a further 1.5 million due this year.

Last month, official figures revealed that the US economy grew 5.7% in the final three months of 2009 - the fastest pace in six years and higher than analysts expectations.

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