Chicago Fed chief hikes jobless forecast

US unemployment is likely to peak at about 10.5 per cent and may not start to come down until the summer of 2010, according to Charles Evans, president of the Federal Reserve Bank of Chicago.

Mr Evans told the Financial Times he had been “a little surprised” by the _latest employment report, which showed unemployment at 10.2 per cent, and had edged up his forecast for the peak jobless rate accordingly.

“The best guess would be that we will probably plateau in the spring,” he said. “I would expect that we’ll level off and have the same unemployment rate for a few months probably, before it starts to come down. And it might even go up and down for a couple of months.”

He added: “Hopefully, by the summer we’ll see that the unemployment rate has peaked and begun to decline” – falling to about 9.5 per cent by the end of the year.

The Chicago Fed chief, whose views hold particular significance because he is close to the centre of the US central bank’s policymaking committee, said he expected economic growth of 3-3.5 per cent over the next 18 months.

Most of the uncertainties revolved around the first half of next year, which “could be a little uneven”. Mr Evans was “a little bit concerned” that hiring would continue to be weak in early 2010.

“That puts more risk on job prospects and the fundamentals for consumption spending,” he said. “So I think there is a bit of softness, a bit of risk there.”

However, he did not think there was much risk of a double-dip recession – and was optimistic of the recovery gaining traction.

http://www.ft.com/cms/s/0/41be5ad4-d7a0-11de-b578-00144feabdc0.html?nclick_check=1

 

He's a perpetual optimist.

 

Market obviously loved his report!

 

He should give more reports, more often.