The Federal Reserve is expected revise down its growth forecast for the US economy at the meeting of its rate setting Federal Open Market Committee, on Tuesday. Meanwhile, nonfinancial US companies are reported to have been sitting on $8.4trn in cash as of the end of March, or about 7% of all company assets - - the highest level since 1963.

On Friday in Washington DC, it was reported that the jobless rate held steady at 9.5% in July. Household Survey employment contracted by -159,000, and the labour force shrunk by -181,000. The broad measure of unemployment was steady at 16.5% and job growth in the private sector was concentrated in manufacturing, which added a surprising 36,000 to payrolls, and services (38,000). This was the third consecutive sequential increase in services payrolls, suggesting some underlying momentum in services hiring may be taking place. Overall, although the headline numbers were well below consensus and net revisions were considerable, we continue to see a modest upward trend in hiring, which we expect to continue in the coming months, according to Michael Gapen of Barclays Capital.

Heather Boushey, Center for American Progress, commented on Friday: "The economy has added 654,000 jobs in 2010, but the sharpest gains were in March and April. While this is an improvement over this time last year, the rate of job creation remains less than about half of what it needs to be just to keep pace with population growth, let alone make significant progress on getting the unemployed back into jobs. The lack of increase in demand for temporary employees also indicates that employers are not feeling a need to ramp up hiring and provides a discouraging sign for the months to come."

Meanwhile, at a time of intense debate on the merits or negative impact of potential additional stimulus measures, two former Treasury secretaries said on Sunday that deficit-reduction measures and an overhaul of the tax code - - not more federal stimulus - - offer the best solutions for bolstering a still-struggling economy and bringing down the high unemployment rate.

Former Clinton Treasury secretary Robert Rubin, on CNN's "Fareed Zakaria GPS," said a second major stimulus package, such as that passed by Congress last year, could be "counterproductive," further undermining confidence in an economic recovery he termed as "slow and bumpy." Rubin said policymakers should begin developing a deficit-reduction plan that would go into effect by the end of President Barack Obama's first term.

"If you could do it and it was credible and people believed it and it was real, I think that could do a lot for confidence," Rubin said.

Paul O'Neill, President George W. Bush's first Treasury secretary, said he supported allowing Bush-era tax cuts to expire. O'Neill said that instead of focusing on which tax breaks should be allowed to expire, the White House should push for more, radical changes to the tax system.

"I think that would give reassurance to the markets that we're coming back and we're creating the basis for capital formation and ... savings as opposed to consuming everything in sight," O'Neill told CNN.

Rubin said he would favour keeping the lower tax rates for middle-class Americans to avoid further economic uncertainty.

"I think that given that vulnerability and the high unemployment rate ... I wouldn't want to have that contractive effect right now," he said.

The Obama administration supports extending the expiring tax cuts for middle and lower-income Americans, while allowing cuts for the wealthiest individuals to expire at the end of the year.

Paul O'Neill said on Sunday that he was happy he was fired in December 2002 for publicly voicing doubts about broad tax cuts and warning about looming deficits.

O'Neill said in a memoir in 2004 that he was pushed out of the administration for not being a team player and President Bush was so disengaged during Cabinet meetings that he was like a "blind man in a roomful of deaf people."

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Cash

The Wall Street Journal reports that nonfinancial companies were sitting on about $8.4trn in cash as of the end of March, or about 7% of all company assets, the highest level since 1963. Even before its bond issue last week of $1.5bn at the bargain-basement interest rate of only 1%, IT firm IBM had $12.3bn in cash and short-term investments, which accounted for about 12% of all its assets.

However, the downside for the economy is that savers are getting a pittance on their deposits, which is hindering the recovery in consumer spending. 

Discussing the changes the Fed needs to make in monetary policy, with Lyle Gramley, former Fed governor and William Ford, former Atlanta Fed president: