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Chicago Fed sees housing sector improvement in 2011

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The housing sector, which has been deteriorating for five years, is expected to improve next year, according to an economic outlook released Monday by the Federal Reserve Bank of Chicago. The Fed forecasts that housing starts will reach 600,000 by the end of the fourth quarter of 2010 and increase to a total of 690,000 starts in 2011. The total number of housing starts in 2009 was 550,000. The Chicago Fed expects a dramatic increase in the amount of residential investment. "The consensus outlook shows residential investment is expected to decrease, at a rate of negative 4.7%, this year but then rise, at a 9.6% pace, in 2011," the report said. Industry leaders recently issued ominous reports that house prices will fall in 2011. With regard to employment, the Chicago Fed said numbers will also improve slightly bringing the unemployment rate down to 9.2% from the current 9.6% by the end of 2011. The Federal Reserve Bank of Philadelphia predicted Monday that the unemployment rate in two of its three jurisdictional states to fall by 10 basis points by the end of November. Pennsylvania's is expected to drop to 8.7% from 8.8% and New Jersey's is expected to drop to 9.1% from 9.2%. The Philly Fed Delaware's unemployment rate is likely to remain at 8.3%. All three states remain below the national average, which the Philadelphia Fed expects to increase, contrary to the Chicago Fed's belief, up to 9.8% from 9.6% in November. Write to Christine Ricciardi.

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