Fed says joblessness to rise, then decline

WASHINGTON, July 15 (UPI) -- The U.S. Federal Reserve predicted Wednesday unemployment would climb -- at least temporarily -- beyond the June rate of 9.5 percent.

In a staff economic outlook, officials projected unemployment would rise in 2009 but fall in 2010.

The Fed staff "revised upward" its economic outlook for the rest of 2009 and for 2010.

Consumer spending appeared to have stabilized since the start of the year, sales and starts of new homes were flattening out and businesses' capital spending hasn't been dropping as fast as it did six months ago, the staff said in a report.

"Recent declines in payroll employment and industrial production, while still sizable, were smaller than those registered earlier in 2009," the report said. "Household wealth was higher, corporate bond rates had fallen, the value of the dollar was lower, the outlook for foreign activity was better, and financial stress appeared to have eased somewhat more than had been anticipated."

The "projected boost" from these factors would more than offset the negative effects of higher oil prices and mortgage rates, the staff said. It projected real gross domestic product would decline at a "substantially slower rate" in the second quarter than it had in the first quarter and then increase in the second half of 2009.