Liberal pundits and bloggers may want to stop celebrating the recent drop in the jobless rate and come back down to earth. Charles Evans, Federal Reserve bank president in Chicago, foresees a rise in unemployment in the future with the current 8.5% rate probable by the end of the year.
"I'm a little concerned that the most recent improvement is going to be transitory and it might move up above 8.5 percent," Evans said in response to audience questions after a speech today in Carmel, Indiana.
Evans said he forecasts that "at the end of the year, we're not going to be very different from 8.5 percent unemployment."
Fed policy makers will discuss at their Jan. 24-25 meeting in Washington whether more steps are needed to bolster an expanding U.S. economy. Employers last year added 1.64 million workers, the best year for the American worker since 2006. Even with the gain, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.
The Labor Department said last week that the unemployment rate dropped to 8.5 percent, down from 8.7 percent in November, 8.9 percent in October and 9.4 percent in December 2010.
Speaking to reporters after his speech, Evans said he "can't discount the possibility" that the "headwinds" facing the economy could cause growth to slow, as happened in the summer of 2010 and 2011.
First time claims for jobless benefits rose last week to near 400,000. With business spending flat, and retail sales failing to hit their Christmas targets, it is likely that Evans is right and the unemployment rate will rise slightly over the next few months.
Of course, the real problem are the more than 8 million jobs that disappeared during the recession. How to create enough jobs to make up for that shortfall will be the job of the next president since Obama doesn't appear to have a clue how to go about it.