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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (2010)	9/5/2002 7:41:05 PM
From: Wally Mastroly	Read Replies (1) \| Respond to of 10065

A FED guy & stock market valuations? <G> Fed's McTeer Says U.S. Economy Undergoing `Jobless Recovery' By Brendan Murray and Liz Enochs Dallas, Sept. 5 (Bloomberg) -- The decline in U.S. stocks this year is restraining the economy's recovery and limiting job growth, said Robert McTeer, president of the Federal Reserve Bank of Dallas. ``So far, the recovery has been pretty close to a jobless recovery,'' said McTeer, a voting member of the Fed's policy- setting Open Market Committee, in a speech to business leaders in Dallas. ``The market at the moment is not being very helpful.'' McTeer didn't comment directly on Fed interest-rate policy. And he said the National Bureau of Economic Research, the group that charts U.S. expansions and contractions, doesn't expect to see the economy fall back into a recession. At some point the group will decide that the recession that began in March 2001 ended in January of this year. Fed policy makers next meet Sept. 24. Judging from trading in federal funds futures contracts for October, investors bet there is almost a 50-50 chance the central bank will lower the overnight bank lending rate by a quarter percentage point from the current 41-year low of 1.75 percent. The economy's main ``bright spot'' is productivity, which grew at a 1.5 percent annual pace in the second quarter, McTeer said. While McTeer said he prefers to judge that that the ``glass half full'' in uncertain times, economic data have rendered that optimistic outlook ``a bit of a stretch lately.'' Some signs in recent days suggest the recovery is faltering. The U.S. services industry, the largest part of the economy, grew last month at the slowest pace since January amid signs that consumers are paring spending. Services Weak The Institute for Supply Management today said its index for retail, financial services, construction and other non- manufacturing companies fell to 50.9 last month, close to the level of 50 that separates growth from decline. McTeer said his conversations in recent weeks with Texas companies suggest there's little reason for optimism. ``The straws in the Texas wind suggest that economic activity has weakened in the last few weeks,'' he said. Tomorrow, a monthly Labor Department report is expected to show payrolls expanded by 30,000 in August, while the unemployment rate probably rose to 6 percent, matching the eight-year high of 6 percent reached in April, a survey of economists by Bloomberg News showed. McTeer said he would prefer to see the recovery driven by companies adding jobs rather than boosting worker productivity. Little Job Growth ``Growth is not coming from employment to any great extent: That's the downside of productivity growth,'' he said. ``If I had my druthers, I rater take employment growth now, as long as the unemployment growth is elevated, and wait a little while until we get a little closer to full employment and have the growth come mainly from productivity.'' Fed officials are worried about the effects of a 23 percent drop this year in the Standard & Poor's 500 stock index on consumers, businesses and investors, McTeer said. The central bank ``does not, and probably could not'' use its policies to alter the trajectory of stock prices, he said. ``The stock market correction has been brutal and to that I say, enough already,'' McTeer said. ``I still think that the prospects for rapid productivity growth are favorable enough to justify higher than historical stock market valuation, but I don't know how much higher,'' he said. ``In other words, I don t see why the carnage can't stop before we get all the way back to where we started.''