Recession End In Sight?
The American economy is on its way to recovery and the recession is close to being over, Commerce Secretary Donald Evans said Sunday.
"We're probably a little closer to the end (of the recession) than we are the beginning. There are the signs that we're beginning to turn the corner," Evans said in an interview with NBC's "Meet the Press."
Evans said U.S. retail sales "continue to be pretty strong" and that auto and home sales are also strong, and inventories of goods are way down.
"So if consumers continue to participate in the economy, sooner or later we're going to start having to build these inventories up again," he said.
Consumer spending fuels two-thirds of the American economy.
Federal Reserve officials have suggested in recent speeches that the worst may be over for the U.S. economy, but they have also cautioned that it is still too soon to declare victory.
Federal Reserve Chairman Alan Greenspan said Friday the economy still is facing significant risks.
In prepared remarks, the nation's top central banker left open the possibility that the Fed might cut rates again to solidify the recovery.
"There are sound reasons for concluding that the long-run picture remains bright, and even recent signals about the current course of the economy have turned from unremittingly negative through the late fall of last year to a far more mixed set of signals recently," Greenspan said.
"But I would emphasize that we continue to face significant risks in the near term," he said.
Greenspan identified some of those threats as weak profits and business investment and restrained household spending caused by rising unemployment.
"Despite a number of encouraging signs of stabilization, it is still premature to conclude that the forces restraining economic activity here and abroad have abated enough to allow a steady recovery to take hold," Greenspan said.
The chairman's comments appeared to leave the door open to a further rate cut, possibly at the Fed's next meeting on Jan. 29-30.
The current recession, which ended a record 10-year period of U.S. prosperity, has officially been dated as starting last March. But Greenspan noted in his comments that the economy has been struggling with weak growth ever since the summer of 2000.
The Fed clearly demonstrated its worries about the economy last year by undertaking its most aggressive credit easing in nearly two decades. But some central bank officials have sounded more upbeat in recent days, leading to speculation that the Fed's 11th rate cut on Dec. 11 may well be the last.
Earlier in the week, Anthony Santomero, the president of the Fed's Philadelphia regional bank, told an audience of economists in Washington he was optimistic partially because of the $1.35 trillion, 10-year tax cut that Congress passed last spring.
"One of the reasons I and others have indicated a recovery is well in train in 2002 is because of the fiscal expansion that Congress has put in pace," Santomero said.
Starting just over 12 months ago, the U.S. central bank embarked on a sustained round of 11 interest-rate reductions that brought its federal funds lending rate to a 40-year low of 1.75 percent last month.
With the Fed's policy-setting Federal Open Market Committee scheduled to meet again Jan. 29-30, financial market participants believe that even if the cuts are not quite over, there might be no more than another quarter-percentage-point trim.
Government data from Thursday showed the number of new workers applying for unemployment benefits fell last week by 56,000 to a seasonally adjusted 395,000 from 451,000 a week earlier. While the Labor Department said the figure may have been distorted by California workers holding off on filing their claims until a state law that increases benefits becomes effective, the fall was still bigger than analysts expected.
Economists said this underlined how labor markets, while still struggling, are in better shape than late last year when hundreds of thousands of jobs were wiped out in the wake of the economic hit from the Sept. 11 attacks.
As well, figures released by chain stores implied the holiday shopping season was not quite as dismal as thought earlier - a point of importance because continued strong consumer spending is vital to the economy's health.
The mixed data - not an unusual phenomenon when the economy is at a potential turning-point - helped focus attention on Greenspan's address to the Bay Area Council, which includes more than 250 executives from West Coast firms.
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