U.S. jobless rate to peak at 10.5 pct, Fed on hold - poll

By Lucia Mutikani

WASHINGTON (Reuters) - Unemployment in the United States will shoot to 10.5 percent by the middle of next year, constraining the Federal Reserve's ability to raise interest rates, according to economists surveyed by Reuters.

The survey's findings, drawn from a sample of around 50 economists across the U.S. and Europe, come on the heels of a government report on Friday showing that the nation's jobless rate jumped to a 26-1/2-year high of 10.2 percent in October.

Stubbornly high unemployment has raised fears that the economy's recovery from the most brutal recession since the 1930s may be accompanied by little job creation and slow down the growth momentum next year.

If the unemployment rate rises to 10.5 percent as predicted in the survey, it will be just shy of the 10.8 percent peak during the 1982 recession, which was the highest since 1948.

In the previous poll, economists were expecting the jobless rate to top 10.1 percent by the first quarter of 2010.

With the unemployment rate yet to peak, the survey predicted the Federal Reserve would not start raising interest rates before the third quarter of next year. That was unchanged from the findings of October's poll.

The U.S. central bank last week held overnight interest rate close to zero and said it expected to keep them low for an "extended period."

GROWTH TO SLOW