- The Washington Times - Thursday, November 29, 2001

The U.S. economy weakened further in October and November as factories continued to slash payrolls and airlines, and hotels struggled to cope with aftershocks from the terrorist attacks, the Federal Reserve said yesterday.
The central bank presented a generally somber outlook of business conditions across the country since September 11, and found only small signs of a potential rebound.
Analysts said the Fed survey, prepared for the central bank's last meeting of the year on Dec. 11, virtually guaranteed an 11th cut in interest rates as the Fed continues to do what it can to combat the country's first recession in a decade.
"The Fed report highlighted how broad based the economy's problems have become from coast to coast," said Mark Zandi, chief economist at Economy.com.
The central bank has reduced its target for the federal funds rate, the interest that banks charge each other, 10 times this year, pushing it down to 2 percent, the lowest level in 40 years.
"Economic activity generally remained soft in October and the first half of November, with evidence of additional slowing in most regions outweighing signs of recovery in a few districts," the Fed said.
The report said that manufacturing, which has lost more than 1 million jobs since the spring of 2000, continued to cut output and jobs.
The survey said trouble in manufacturing had spread to other sectors of the economy, with airlines and other tourism-related industries hit particularly hard.
On Monday, the National Bureau of Economic Research officially ruled that the country was in a recession after a record 10-year economic expansion.
The Fed report did find a few hopeful signs, most notably in a record surge in auto sales in October, spurred by zero interest financing incentives.
But the survey found retailers growing more anxious about the Christmas holiday season in light of the sharp jump in unemployment. The jobless rate rose to 5.4 percent in October as 415,000 Americans were thrown out of work, the largest one-month total in 21 years.
The rising layoffs contributed to a fifth consecutive monthly drop in consumer confidence, the Conference Board reported this week.
Economists' expectations of further Fed rate cuts has increased in light of comments this week by various Fed officials.
Fed board member Laurence Meyer said it would have been misguided for the central bank to hold back on rate cuts simply because rates have already been pushed to such low levels. The Fed has cut rates in three half-point moves just since September 11.
William Poole, president of the St. Louis Fed, said in a separate speech, also on Tuesday, that "the only stopping place is zero and if going to zero is constructive, then we ought to do it."
Analysts say the Fed, which has already pushed interest rates to the lowest level since September 1961, will keep cutting rates until there is solid evidence the economy has stabilized and begun to rebound something expected to occur early next year.
Some economists said the December rate cut may be only a quarter percentage point, especially if Congress has ended its current stalemate and passed an economic-stimulus package.

Sign up for Daily Newsletters

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide