To: tejek who wrote (134690 ) 3/21/2001 1:26:05 AM From: tejek Respond to Walking the Line Between Main Street and Wall StreetThe subsequent statement leaves open the possibility of an intermeeting move. There were two elements of the Fed's statement that will encourage such speculation. What about the stock market? The Fed acknowledged that the decline in the equity market, caused by "persistent pressures on profit margins," was restraining investment and consumption. First, only about half of American households own shares. Second, equity ownership is heavily concentrated. It is only when median household income is near $100,000 that equity ownership become substantial, in excess of $10,000. Third, in many of those households that do own shares, they are owned in a retirement account and are unlikely to be used for consumption purposes. The kind of consumption that is likely restrained by the equity slide is for luxury goods, vacation homes and the like. The real source of the wealth effect that propelled consumption in recent years has been the incredible job creation. Not only are a record number of Americans working, but wage increases have generally outstripped consumer prices over the last couple of years. My analysis suggests that of the upcoming data, an outright decline in nonfarm payrolls would be a likely spur to get the Fed to move between meetings. The Federal Reserve seemed to walk a careful line between the anxiety of Wall Street and the realities on Main Street. The $10 trillion U.S. economy is not contracting, although the manufacturing sector is. Main Street knows better. Yes, the economy is slowing, but there's no need to panic.
