This fed guy is "behind the curve". Greeny is too?
Economy Pessimism 'Overdone' -Fed's Guynn
Mar 10 1:58pm ET
By Barbara Hagenbaugh
NEW ORLEANS (Reuters) - Pessimism about the U.S. economy is overdone, the Atlanta Fed president said on Saturday in the latest optimistic comments from a Fed official this week.
While painful adjustments are taking place in the world's largest economy, the factors that have led the nation through its decade-long expansion are still in place and will continue to guide the economy in the future, said Jack Guynn, president of the Federal Reserve Bank of Atlanta.
"Yes, we are currently working our way through some temporary imbalances that are painful to some industries, companies, employees and investors," Guynn said in remarks prepared for the Money Watch Live 2001 conference.
"But the fundamentals of the U.S. economy remain in very good shape."
Guynn's comments came just 10 days before the Fed holds its next interest rate meeting. The Atlanta Fed president is not currently a voting member on the Fed policymaking committee, which rotates among the regional bank chiefs.
The Fed is widely expected to cut rates by a half-percentage point on March 20 after slicing rates a full percentage point in January in response to growing evidence that the once-booming U.S. economy has quickly lost steam.
A slew of Fed officials have painted rosy pictures for the future of the economy in recent days, although their words have not derailed expectations of the hefty rate cut.
Like Guynn, his colleagues predicted a rebound before the year is up. In Rome on Friday, Vice Chairman Roger Ferguson said he expected "a normal slowdown" in the first quarter and after that, "I would expect to see a gradual pickup."
AT LEAST MODERATE
Guynn said he expected economic growth will pick up speed to "at least" a moderate pace later this year.
The Fed said in its latest "Beige Book" report on economic conditions released Wednesday that the United States posted "sluggish to modest" growth in January and February. In the fourth quarter, the U.S. economy grew at a 1.1 percent annual pace, the slowest rate in 5-1/2 years.
Such meager growth has some economists worrying that the United States may be headed for a recession -- commonly defined as two consecutive quarters of contraction.
But Guynn said all the worrying may be going overboard, noting that the strong tradition of entrepreneurship in the United States is still alive and will continue to be a key factor in the success of the economy.
"I will concede that America's entrepreneurial spirit was a lot more apparent at this time last year, when everybody knew someone who chucked his or her career to go work for a start-up and the NASDAQ soared to over 5000," he said. "That was just as overdone as the pessimism we're witnessing now."
In addition to entrepreneurship, Guynn said he expected business investment will increase, leading to more gains in worker productivity, the star of the record expansion.
He also said consumer spending -- which accounts for two-thirds of U.S. economic output and has cooled in recent months -- will also pick up, despite a slight increase in the percentage of workers without jobs.
"While we're likely to see some uptick in unemployment rates as the economy continues its temporary adjustments, unemployment should remain low by historical standards," he said. "Consequently, the longer-term prospects for income gains, and therefore consumer spending, remain positive."
The government reported on Friday that the unemployment rate in February held steady at 4.2 percent, slightly above the 30-year-low seen last year. At the same time, the number of jobs created were higher than expected. The report led some analysts to upgrade their estimates of first-quarter growth and reduce forecasts for interest rate cuts later this year. |
