Fed officials see higher unemployment

Federal Reserve officials see signs of a turnaround in the economy but expect unemployment to remain high through 2010, according to minutes of their June meeting released Wednesday.

The officials predicted a range in unemployment of between 9.7 and 10.5 percent for the rest of 2009, and a range of 8.5 to 10.6 percent in 2010, according to the minutes.

The outlook was worse than what was forecast in April by Fed officials. Unemployment projects were about one-half a percentage point higher across the board.

The unemployment rate in June hit 9.5 percent, and the Department of Labor reported an unexpectedly high 467,000 lost jobs for the month.

Members of both parties increasingly are looking at jobs data and economic projections for signs of an impact from the $787 billion economic stimulus package. The job-loss figures have emboldened Republicans to argue the stimulus was a bust.

Transportation Secretary Ray LaHood defended the stimulus Wednesday, but acknowledged it’s hard to tell how effective it has been so far.

“It may be hard to grasp how effective this program is because we don't really know how much worse off we'd be without it, and because the full effect of the program will not be felt for several more months,” he said in an address at the Center for National Policy.

LaHood said his department is continuing to churn out funds from the stimulus, and predicted that five years from now Americans will look back on the bill as a “turning point.”

Within the Democratic Party, some voices are already debating what another stimulus should look like, though LaHood on Wednesday echoed statements from Obama that more time should be given for the last stimulus to have an impact.

House Speaker Nancy Pelosi (D-Calif.) said last week that she’s committed to making the first stimulus work and to passing a healthcare bill.

Asked about another stimulus, she said she’d like to see the House do the transportation bill.

That $500 billion bill, written by House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.), would provide money for road, rail and mass transit projects for the next six years. It would be a significant increase in spending over the current six-year transportation reauthorization bill, which expires at the end of September and called for $286 billion in projects.

But the White House, not eager to tackle another bill that will require more taxes, has called for an 18-month extension of expiring legislation. That proposal won the recommendation of the Senate Environment and Public Works Committee on Wednesday.

Another stimulus would pose political complications for Democrats, since it would suggest problems with the earlier bill.

Still, some rank-and-file House Democrats say the job numbers suggest another stimulus may soon be necessary.

Rep. Brad Sherman (D-Calif.) said that President Obama should be suggesting another package focused on giving aid to states. Providing money directly to state governments could help them avoid laying off public workers, an option that California and other big states facing budget crises are considering, said Sherman, a senior member of the House Financial Services Committee. And unlike with infrastructure projects, the impact of state aid on employment would be immediate, he said.

“Nothing is as shovel-ready as not firing a teacher,” Sherman told The Hill. “It's not a Bridge to Nowhere, it's a bridge to the 21st century.”

Rep. Mike Honda (D-Calif.) said another stimulus could be helpful, especially if it aids small businesses.

“They've been taking it in the shorts,” he said.

Honda suggested that a tax credit, not just low-interest loans, would help small businesses keep employees.

One form of stimulus doesn't preclude the other, said Rep. Jan Schakowsky (Ill.), a chief deputy whip in the House Democratic Caucus. She noted that states are clearly in trouble, pointing to possible cuts in state services and proposed tax increases in Illinois.

Another stimulus could even be considered this year, Schakowsky said.

“Later in the year, if we see more unemployment numbers, see the states struggling ... we should not shrink from the imperative of pulling us out of that,” she said.