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Obama: Unemployment Likely to Keep Rising

President Barack Obama says the U.S. unemployment rate is likely to continue rising for several months, even as the economy recovers from its worst recession in decades.

President Obama says he expects the nation's jobless rate, which is the highest it has been in 26 years, to get still worse before it gets better.

"My expectation is that we will probably continue to see unemployment tick up for several months," Mr. Obama said.

Unemployment is 9.5 percent in the United States, and Mr. Obama says hiring is usually one of the last areas of a struggling economy to bounce back.

"Even after you start moving into a recovery-positive growth-hiring typically lags for some time after that. That has been the historic norm," Mr. Obama said.

The president spoke in the Oval Office, after meeting with Dutch Prime Minister Jan Peter Balkenende.

More than 2 million jobs have been lost since Congress passed Mr. Obama's $787 billion economic recovery act in February.

Still, the president says there are reasons for optimism. Among them are signs of stabilization in the U.S. financial markets.

"That means that companies can borrow, and banks are starting to lend again. Small businesses that might have worried just a couple of months ago about closing doors, they are now able to get a little more financing," Mr. Obama said. "That means they are less likely to lay off workers."

Other glimmers of economic hope appeared Tuesday. The Commerce Department says retail sales rose 0.6 percent in June, about twice what economists had expected. The increase appeared to be driven by a 1.8 percent spike in wholesale prices, largely due to higher energy prices.

Still, Mr. Obama is focused on creating jobs, a central message on his Tuesday visit to the economically-devastated state of Michigan.

The president is promoting his initiative to reform and strengthen community colleges, which offer training in various trades and professions. The goal is to help an additional 5 million Americans earn degrees and certificates in the next decade, better qualifying them for the jobs of the 21st century.

"We have got to find new models of economic growth, particularly at a time when consumers are just not going to be spending as much as they were, and that had been driving a lot of economic growth over the last several months," Mr. Obama said.

Unemployment in Michigan is the highest of any of the 50 states - 14.1 percent-largely because of job losses in the U.S. auto industry, which is based in Michigan. However, Mr. Obama says he sees promising signs there, too.

"We are pleased to see that GM and Chrysler have gotten out of bankruptcy. They have an opportunity to compete internationally," Mr. Obama said. "Had it not been for the steps that we took with respect to GM and Chrysler, the situation in Michigan, I think it is fair to say, would be far worse."

Meanwhile, Steve Rattner, whom Mr. Obama appointed in February to oversee the bailouts of GM and Chrysler, announced Monday he is stepping down. He will be replaced by Ron Bloom, a former union official.