The Fed's Jobs Outlook

Friday's unemployment report, in which the official jobless rate ticked down to 9.0 percent, must have come as a bit of a surprise to the Federal Reserve. Just two days earlier, the Federal Open Market Committee had issued a forecast saying that unemployment would be between 9.0 and 9.1 percent for the remainder of the year, meaning that they don't expect any further improvement in the jobless rate. That would be very disappointing. Even in 2012, the Fed thinks unemployment will remain between 8.6 and 8.9 percent.

The Fed did raise its inflation outlook for the rest of the year. After projecting in June that inflation would run between 1.5 percent and 1.8 percent throughout 2011, last week the Fed inched that forecast up to 1.8 to 1.9 percent. That shouldn't be interpreted as a trend, though; long-term, the Fed doesn't see inflation on the rise. Its inflation projection for 2012 is 1.5 to 2.0 percent, and for 2013 is even lower, at 1.4 to 1.9 percent.

So the inflation forecast is good news for the economy, but the unemployment forecast is not. The Fed doesn't appear to have known when it made that forecast that the Labor Department would revise upward the jobs figures for August and September just two days later. Maybe that knowledge would have resulted in a rosier projection.