The U.S. Federal Reserve (Fed) said Wednesday it expects unemployment will remain high over the next two years because Americans are likely to stay cautious, fueling only a moderate economic recovery. Fed policymakers said in the updated economic projections that it will take “some time” for the economy and the labor market to return to normal. They did not say how long that would be. Previously, they suggested it could take five or six years for economic conditions to return to full health, but a “sizeable minority” believes it could take longer for the labor market to rebound. Central-bank policymakers “expect that the pace of the economic recovery will be restrained by household and business uncertainty, only gradual improvement in labor-market conditions, and a slow easing of credit conditions in the banking sector,” the report said. The Fed expects the U.S. economy will grow between 2.8 and 3.5 percent this year. Growth will accelerate to between 3.4 and 4.5 percent next year, and record similar growth in 2012. Analysts say the economy would need to grow by at least 5 percent a year to significantly reduce the unemployment rate. The central bank's forecast said the unemployment rate this year could hover between 9.5 and 9.7 percent. Next year, it is expected to drop to between 8.2 and 8.5 percent. By 2012, the rate will range between 6.6 and 7.5 percent. A normal U.S. unemployment rate has historically been between 5.5 and 6 percent. While the forecast is similar to projections the Fed released in late November, the figures show that unemployment will remain elevated ahead of November's congressional elections as well as the 2012 presidential election.
