US unemployment 'to stay high despite economy growing'

The Fed says unemployment will remain a long-term problem

The US economy is still on target to grow strongly during 2010, but unemployment will remain high, the US Federal Reserve has warned.

In its latest forecast, the Fed said that the economy would expand between 2.8% and 3.5% in 2010, better than its previous estimate of 2.5% to 3.5%.

Yet the unemployment rate is expected to remain between 9.5% and 9.7% in 2010, easing to 8.2% to 8.5% next year.

President Barack Obama earlier admitted many in the US were "struggling".

'Some time'

Despite the US exiting recession last year, the Fed said unemployment would remain high while both consumers and firms were still wary to increase their spending.

This was not the plan Americans asked for or the results they were promised Mitch McConnell Senate Republican leader

The most recent official figures showed that the US unemployment rate in January was 9.7%, slightly down from 10% in December.

The Fed said in its latest economic forecast that it would take "some time" for the economy and the jobs market to get back to normal.

"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 predicted.

'Missed promises'

Speaking earlier in the day, Mr Obama hailed the success of his continuing $787bn (£500bn) US economic stimulus package.

But, speaking on the first anniversary of the passing of the American Recovery and Reinvestment Act, he admitted problems remained in the economy.

"Millions of Americans are still without jobs, millions more are struggling to make ends meet," said the president.

"It doesn't yet feel like much of a recovery. I understand that."

So far under the stimulus package $179bn (£113bn) has been spent on increased government projects - ranging from road-building schemes to job training initiatives and more funds for healthcare.

In addition, $93bn (£59bn) worth of tax cuts for both individuals and companies have been issued.

Republicans say the plan has not done enough to help create jobs..

Senate Republican Leader Mitch McConnell said the stimulus package was "not the plan Americans asked for, or the results they were promised".

"Americans have lost millions of jobs, the unemployment rate continues to hover near 10%, the deficit continues to soar, and we're inundated with stories of waste, fraud and abuse," he said.