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US Economy: Federal Reserve cuts growth forecast; White House says 2009 $787bn stimulus program has saved or created 2.5 to 3.6m jobs
By Michael Hennigan, Founder and Editor of Finfacts
Jul 15, 2010 - 5:55:58 AM
President Barack Obama meets with businessman Warren Buffett, in the Oval Office, July 14, 2010.
The Federal Reserve on Wednesday revealed its
staff had cut its growth forecast while some
highlighted the risk of deflation. Also in
Washington, the White House claimed
that its 2009 $787bn stimulus program has saved
or created 2.5 to 3.6m jobs since it was
enacted.
The Fed
published the minutes of its June meeting of
the rate setting Federal Open Market Committee
(FOMC) which show that the staff continued to
anticipate a moderate recovery in economic activity
through 2011, supported by accommodative monetary
policy, an attenuation of financial stress, and
strengthening consumer and business confidence.
It said that while the recent
data on production and spending were broadly in
line with the staff’s expectations, the pace of the expansion over
the next year and a half was expected to be
somewhat slower than previously predicted.
Growth will slow to 3.0 to 3.5% percent this
year, down from the 3.2 to 3.7% predicted just
months ago.
The minutes say that "changes to the outlook were
viewed as relatively modest and as not warranting policy
accommodation beyond that already in place.
However, members noted that in addition to
continuing to develop and test instruments to exit from the
period of unusually accommodative monetary policy, the Committee
would need to consider whether further
policy stimulus might become appropriate if the
outlook were to worsen appreciably.
Given the slightly softer cast
of recent data and the shift to less
accommodative financial conditions, members agreed that some changes
to the statement’s characterization of the economic
and financial situation were necessary. Nearly
all members judged that it was appropriate to
reiterate the expectation that economic conditions
- - including
low levels of resource utilization, subdued inflation
trends, and stable inflation expectations - - were likely to
warrant exceptionally low levels of the federal funds rate for an
extended period."
“A few participants cited some risk of
deflation,” the minutes noted. “Other
participants, however, thought that inflation
was unlikely to fall appreciably further, given
the stability of inflation expectations in
recent years and very accommodative monetary
policy.”
The Fed also
raised its end-of-year unemployment forecast
from
9.2 to 9.5% predicting that the labour market would recover more slowly than
expected.
Unemployment is not expected to fall below
7% before 2013, leaving millions of
Americans out of work.
Ideas on how to solve the jobs
and economic recovery problem, with Mort Zuckerman, U.S. News & World Report and
Steven Pearlstein, Washington Post:
This week a Washington Post-ABC News poll
showed only 43% of
those surveyed said
they approved of
Obama's handling of
the economy.
The White House is
seeking additional stimulus measures while much
of the public is concerned about the high debt
levels inherited from President Bush who saw a
doubling of the national debt in 2001-2008.
The White House
released a
report
estimating that
its economic
stimulus program
had saved or
created 2.5 to
3.6 jobs since
it was enacted
in early 2009,
over implacable
Republican
opposition.
The estimates in
the report are
consistent with
those of the
nonpartisan
Congressional
Budget Office.
However, Senate
Republicans are
continuing to
block
legislation to
extend
unemployment
benefits while a
poll by
Democracy Corps,
a polling group
run by Bill
Clinton's 1992
campaign manager
and his partner
Stan Greenberg,
found that
1,000 voters who
were asked in
mid-June how
well the term
"socialist"
fits President
Obama, 55% said
"well" or
"very well."
“I know what
they’re against,
but I don’t know
what they’re
for,” Vice
President Joe
Biden said of
the Republicans
as he unveiled
the report (pdf).
“I mean that
literally.”
The Obama administration’s
stimulus push has saved or created about three
million jobs and is on track to save an additional
500,000 by the end of the year, according to
a
new report by President
Obama’s
Council of Economic
Advisers.
The report shows that for every dollar spent
under the Recovery Act for renewable energy and
other projects the private sector is spending $3.
“The Recovery Act appears to be stimulating
private investment and job creation at a time when
the economy needs it most,”Christina Romer,
who chairs the Council of Economic Advisers, told a
Congressional committee Wednesday.
Romer said the best use of Recovery Act money is
in the areas of clean energy, economic development,
and building construction.
More
than 8m jobs have been lost since late 2007.
About half of the
FOMC now sees risks tilted to the downside, reports CNBC's Steve Liesman. Zane
Brown, of Lord Abbett, and James Bianco, of Bianco Research, share their views:
