Fed's Bullard: U.S. jobless data at recession levels

BLOOMINGTON, Indiana (Reuters) - Federal Reserve Bank of St Louis President James Bullard said on Thursday that inflation needs close watching, but recent readings from the labor market show the economy may face recession.

"The jobless claims, that number is at recession levels," he told reporters after delivering a speech.

"When unemployment starts going up at the rate it is here, that is usually a recession indicator, and nonfarm payrolls have been declining all year. So the labor market part does look like recession. ... I have become a little bit more pessimistic on that issue," he said.

Bullard also repeated remarks that he did not favor a Fed interest rate cut from current levels of 2 percent, because it would stoke an inflation problem next year.

"I'd be concerned about the 1 percent number. The 1 percent number was the one that was in place earlier this decade, and was at times associated with creating a lot of problems. So I think that is something to keep in mind as a policy-maker."

(Reporting by Alister Bull, editing by Leslie Adler)