BK: Fed Findings, Speech Produce Mixed Signals On Economy
The U.S. economy grew moderately in most regions of the country this spring and companies kept hiring, according to a Federal Reserve survey released yesterday.
Also yesterday, however, the Federal Reserve's second-highest official laid out the case in Boston for the U.S. central bank to provide more support to a fragile economy as financial turmoil in Europe mounts.
The positive survey, which is anecdotal, makes it less likely that Fed policymakers will take further action in the coming months to lift the economy. The survey doesn't suggest the economy is in dire need of help, many economists said.
But in a speech yesterday at the Boston Economic Club, Janet Yellen, the vice chair of the Fed, cited risks from ongoing housing problems, a weak jobs market and worsening financial conditions. Her views carry great weight with Fed Chairman Ben Bernanke, and her comments suggest that the Fed may be close to easing policy again.
Yellen said the U.S. economy is growing at around a 2 percent rate and said the labor market seems to have stalled - and that is before the scheduled year-end expiration of various tax cuts that she said would be another "huge drag" on growth.
"There are a number of significant downside risks to the economic outlook, and hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where self-reinforcing downward spiral of economic weakness would be difficult to arrest," she said.
The Fed survey shows growth, however, in each of its 12 bank districts from April 3 through May 25. Growth picked up in 10 districts. It was steady in the Boston district, which includes most of New England, and slowed in the Philadelphia region, which includes Delaware, New Jersey and parts of Pennsylvania.
Hiring was steady or rose modestly, according to the Fed's report, known as the "Beige Book." That's in stark contrast to the government's jobs report last week, which said U.S. employers added just 69,000 jobs in May, the fewest in a year. Since averaging 252,000 a month from December through February, job growth has slowed to a lackluster average of 96,000 a month from March through May. (AP and Reuters)
