I decided to quote the parts of the piece I found most interesting:
``People don't listen to politicians for guidance on what's happening to the economy,'' said James Glassman, economist at Chase Securities in New York, who said what matters most for consumers is whether they have work and how much money they have in the bank or in stock portfolios.
Glassman's firm predicts the economy will grow by around 1 percent in the first half of 2001, skirting a recession but just barely. Some economists label speed this slow a ``growth recession,'' where growth is still occurring but the country still suffers keenly as jobs are lost and spending falls off.
Whether or not they see a contraction, economists have been struck by the suddenness of the economy's loss of momentum.
``The deceleration in economic activity is the largest we've seen since 1981-82,'' Morgan Stanley's Berner said, referring to the recession at the beginning of the 1980s that came on the heels of double-digit inflation and an aggressive campaign by the Federal Reserve to crack down on high prices.
Highlighting the speed of the deceleration, the Fed on Dec. 19 made a dramatic shift in its official economic outlook.
The Fed, which at its November meeting said inflation and an overheated economy represented the greatest threat to the expansion, switched its view to cite economic weakness as the most significant risk. It passed over a more gradual option in which it could have said inflation and economic weakness were equal risks.
But the U.S. central bank also avoided a more aggressive alternative: trimming rates immediately at the December meeting. It may yet end up regretting the decision to hold its fire, which caused days of selling in the stock market.
However, many economists think the Fed can quickly make up for lost time. The bond market, which often prices in Fed moves ahead of time, is assuming sharp rate cuts on the order of a percentage point or more over the next 12 months.
``I think the Fed's going to ease aggressively starting early in the year and I think that -- plus the fact that market rates have come down as much as they have -- I think will be enough to enable the economy to avoid a recession,'' said Marty Mauro, senior economist at Merrill Lynch. |
