WASHINGTON - The US economic recovery is likely to extend into 2010 but with growth held back by high unemployment and other factors, analysts said after Tuesday's downgrade to third quarter data.

The Commerce Department reported third quarter growth was weaker than initially estimated, cutting its estimate to a 2.8 percent annual pace of expansion.

The gross domestic product (GDP) figure was revised from last month's estimate of 3.5 percent growth. Despite the revision, the report confirmed the first expansion for the economy after four straight quarters of contraction.

The data from the July-September period show the world's biggest economy appearing to emerge from recession, but with less momentum than previously thought.

Sal Guatieri, economist at BMO Capital Markets, said the new figure does little to change his outlook for steady if less than spectacular growth. "We still think the economy will expand at a three percent annual rate in the fourth quarter," he said.

"We're looking for modest growth in 2010 of about 2.5 percent."

Briefing.com's analyst Patrick O'Hare said the report was disappointing because "it shows the US economy, while growing, is still growing below its potential, which is not a positive consideration as far as prospective job growth is concerned."

Separately, the Federal Reserve raised its outlook for US economic growth in 2010 to a range of 2.5 to 3.5 percent, and said the troubles in unemployment appeared to be near a peak.

In a new forecast accompanying minutes from the Fed's policy meeting November 3-4, the central bank said participants "anticipated that economic recovery would be gradual."

The range for 2010 growth was boosted slightly from a July projection of between 2.1 and 3.3 percent.

The new forecast also suggested that unemployment, which hit a 26-year high of 10.2 percent in October, could ease in early 2010.

"Participants generally anticipated that the unemployment rate would rise somewhat further during the final months of 2009 and then decline steadily over the next few years," said the forecast accompanying minutes from the Federal Open Market Committee meeting.

The new forecast indicates unemployment would drop to a range of 9.3 to 9.7 percent over the course of 2010. Joblessness would still remain high in 2011, in a projected range of 8.2 to 8.6 percent.

Growth in 2011 was expected to pick up to a more favorable pace of 3.4 to 4.5 percent, according to the forecast which also called for tame inflation through 2012.

Fed members said the economy has suffered lasting damage from the crisis that would take many years to recover.

"Most participants anticipated that about five or six years would be needed for the economy to converge fully to a longer-run path characterized by a sustainable rate of output growth and by rates of unemployment and inflation consistent with their interpretation of the Federal Reserve's objectives," the Fed said.

Other members said this "might well require even longer," the central bank said.

Some analysts said the economy is still struggling.

"For all the fiscal and monetary stimulus, the best we could do was 2.8 percent," said David Rosenberg, chief economist at Gluskin Sheff & Associates.

"It's sad really but to be completely expected amid a collapse in private sector credit and shrinking household balance sheets. Strip out the government-administered medication, and the economy was flat on the quarter... Even if the recession is over, and we have yet to be fully convinced, there is no recovery."

Although many economists say the US recession is over, an official declaration has yet to come from the private National Bureau of Economic Research, seen as the official arbiter of business cycles.

The NBER panel does not use the definition employed in many countries of recession as two consecutive quarters of declining GDP.

It says a recession is "a significant decline in economic activity spread across the economy," with drops in output, income, employment and sales.