The Federal Reserve warned today that the nation's economy is even worse than thought and predicted it would deteriorate throughout 2009. The Fed's bleak estimates indicated that unemployment could climb as high as 8.8 percent this year and that the economy would contract for a full calendar year for the first time since 1991. Recovery will be "unusually gradual and prolonged," it said.
The Fed's forecast, which sees no sign that the housing market will stabilize, says the unemployment rate will climb to between 8.5 and 8.8 percent this year. The old prediction, issued in November, estimated it would rise to between 7.1 and 7.6 percent. The Fed also believes the economy will contract this year between 0.5 and 1.3 percent. The old forecast said the economy could shrink by 0.2 percent or expand by 1.1 percent.