While the economy will begin growing again by the end of 2009, the unemployment rate will continue to expand into next year, the Congressional Budget Office reported Thursday.
The CBO projects Americans will continues to lose jobs through mid-2010, with the umemployment rate peaking at 10.5 percent next year, CBO Director Doug Elmendorf said in testimony before the House Budget Committee.
The CBO's March assessment initially predicted unemployment would peak at 9.5 percent.
"We think it will be a slow, a painfully slow recovery," Elmendorf told the committee, citing the ongoing crises in the housing and credit markets.
He added that the financial system is still in a "weakened state" even though it "has crawled back from the edge of the abyss."
"All of those factors will lead to a tepid recovery, somewhat more tepid than we thought and assessed the conditions a few months ago," Elmendorf noted.
He said employment numbers are often a lagging indicator of economic recovery, noting a number of positive trends including stabilizing manufacturing output, signs of life when it comes to consumer spending and confidence and that the decline in housing construction may be close to bottoming out.
The current unemployment rate is 8.9 percent. The Labor Department on Thursday reported 631,000 new jobless claims last week.
The Federal Reserve said Wednesday that the unemployment rate could rise to 9.6 percent this year and remain elevated until 2011. Some private economists told The Associated Press they expect the rate to reach 10 percent by the end of this year.