Analysis: Sharp job drop suggests US economy in recession
Updated: 2008-03-09 14:50
In a hastily arranged appearance before television cameras Friday, Bush acknowledged that the US economy had slowed, but he insisted that his government will take action to boost the economy.
"Losing a job is painful and I know Americans are concerned about our economy. So am I," he said.
"It's clear our economy has slowed, but the good news is, we anticipated this and took decisive action to bolster the economy," he added.
Earlier, Edward Lazear, chairman of the White House Council of Economic Advisers, said the economy could contract in the current quarter.
"I'm still not saying that there's a recession," Lazear emphasized. "We are going to have a weak growth quarter, and whether you call that a recession or not is something that we won't know for many months."
To fend off a possible recession, Bush has signed a 168-billion-dollar economic rescue package that will soon deliver advance tax refunds of several hundred dollars to most taxpayers.
According to the stimulus package, individuals who pay income tax will get up to 600 dollars, working couples 1,200 dollars and those with children an additional 300 dollars per child.
Workers who make at least 3,000 dollars but do not pay taxes will get 300 dollar rebates.
The rebates were expected to cost about 100 billion dollars, and the package also includes close to 50 billion dollars in business tax cuts.
"We expect they will use it to boost consumer spending and that will spur job creation as well," Bush said in Friday's statement.
In addition, the Federal Reserve has been aggressively cutting short-term interest rates despite the inflationary pressure coming from higher oil and food prices.
Futures markets anticipate the Fed will cut its target for the federal funds rate by 0.75 percentage point from its current 3 percent when it meets March 18.
The Fed said Friday that the amount of money it will auction to commercial banks this month will be raised to 100 billion dollars from the previously announced 60 billion to help ease the credit crisis.
The central bank also vowed that it will increase these auction sizes further "if conditions warrant."
The auctions serve as short-term loans to get banks the cash they need to keep lending to their customers.
However, some lawmakers seem to be not satisfied with the recent actions taken by the Bush administration and the Federal Reserve.
Senator Richard Shelby of Alabama has said that he doubts whether the stimulus package would prove to be effective.
"Even if every consumer spends their 600 dollar tax rebate, I've equated it to pouring a glass of water in the ocean and expecting it to make a difference," Shelby said last month in a Congress hearing. "I hope I'm wrong."
"By every indication, things are getting worse," said Senator Harry Reid on Friday. "President Bush said this week that he doesn't think our economy is headed for recession. This morning, all signs say the president is wrong. But regardless of what label we use, there is no doubt whatsoever that people in America are suffering."
White House spokesman Tony Fratto, while accepting that the economy is in a difficult quarter, noted however that the new stimulus plan is just getting underway and it should restore economic growth.
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