Economic Week in Review: January 22-26, 2001
Current economic growth is "probably very close to zero," the chairman
of the Federal Reserve Board told a congressional committee this week.
Many observers say it is a foregone conclusion that the Fed's Open
Market Committee (FOMC) will lower interest rates next week, but Alan
Greenspan was coy when asked about the possibility. Much of the
economic news outside of Washington, D.C., was bad. The energy crisis
continued in California and some major corporations--including
Chrysler, Lucent, J.C. Penney, and AOL Time Warner--announced plans to
cut tens of thousands of jobs. Securities markets were mixed. The S&P
500 Index gained 0.9% for the week, closing at 1,355. The price of the
10-year U.S. Treasury note declined, as its yield rose 10 basis points
to 5.27% (as of 4:30 p.m. Friday).
Mr. Greenspan lent his support to the concept of cutting federal taxes-
-though not to any particular plan--during testimony Thursday before
the Senate Budget Committee. While the Fed chairman favors paying down
the national debt because it restrains long-term real interest rates,
he said that simultaneous "tax reduction appears required" in light of
credible, rising estimates of federal budget surpluses. In discussing
the slowdown in economic growth, Mr. Greenspan said the "crucial issue
. . . is whether that marked decline breaches consumer confidence." The
Conference Board is scheduled to release its reading on consumer
confidence on Tuesday.
In December, the index of leading economic indicators fell for the
third straight month--a turn of events that is sometimes judged to be a
sign of impending recession. But the index's keeper, the Conference
Board, noted that some of the latest decline was due to technical
factors. "The overall signal remains one of moderation in the pace of
economic activity, but no recession looming on the horizon," the
group's chief economist said. Of the ten factors that make up the
index, the largest contributors to the decline were average weekly
manufacturing hours and the index of consumer expectations.
Employment costs rose 0.8% during the fourth quarter and 4.1% for all
of 2000, the Labor Department said Thursday. Though the annual gain was
the largest in nine years, the rate of growth in wages and benefits
appears to be moderating. A separate report showed the resilience of
the job market. While the number of initial claims for unemployment
benefits rose 4% to 316,000 during the week ended January 20, the
number of claims remains well below the year-end peak of 380,000. The
four-week moving average of initial claims, which smooths weekly
fluctuations, fell to 336,000.
The pace of existing-home sales slipped more than 7% in December, the
National Association of Realtors said Thursday. Nonetheless, 2000 saw
tremendous activity in the housing market. More than 5 million existing
homes changed hands--second only to some 5.2 million in 1999--and the
median price of an existing house rose 4.7% to $140,000.
Economic observers will be busy next week. Most of their focus will
likely be on the FOMC, which meets on Tuesday and Wednesday. But
they'll also have a bevy of new data to consider, including the reading
of consumer confidence in January, as well as reports on gross domestic
product and new-home sales (Wednesday), manufacturing activity and
personal income and spending (Thursday), and employment (Friday).
Summary of Major Economic Reports: January 22-26, 2001
-----------------------------------------------------------------------
|Date Report Actual Expected 10-Year S&P 500 |
| Value Value Note Yield Index |
|---------------------------------------------------------------------|
|January 22 Leading -0.6% -0.3% +5 bp No change|
| Economic |
| Indicators |
| (December) |
|---------------------------------------------------------------------|
|January 23 +5 bp +1.3% |
|---------------------------------------------------------------------|
|January 24 +3 bp +0.3% |
|---------------------------------------------------------------------|
|January 25 Initial Jobless 316,000 325,000 |
| Claims (1/20) |
|---------------------------------------------------------------------|
| Employment +0.8% +1.1% |
| Cost Index |
| (4Q) |
|---------------------------------------------------------------------|
| Existing-Home 4.9 5.0 -5 bp -0.5% |
| Sales million million |
| (December, |
| annualized) |
|---------------------------------------------------------------------|
|January 26 Durable-Goods +2.2% -2.0% +2 bp -0.2% |
| Orders |
| (December) |
|---------------------------------------------------------------------|
| Weekly +10 bp +0.9% |
| Change |
-----------------------------------------------------------------------
bp = basis points.
Note: The economic statistics presented in this report are subject to
revision by the agencies that issue them. |
