[Congressional Record Volume 147, Number 60 (Friday, May 4, 2001)]
[Senate]
[Pages S4379-S4383]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE ECONOMY
Mr. GRAHAM. Mr. President, we have been receiving a disturbingly
consistent and an increasingly high volume of bad economic news. Even
what appeared to be good news at its base is bad news.
In today's Washington Post, is an article--and I ask unanimous
consent that this and the other articles to which I will refer be
printed in the Record immediately after my remarks.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
(See exhibit 1.)
Mr. GRAHAM. There was considerable enthusiasm a couple of weeks ago
when the Federal Reserve Board reduced interest rates for short-term
interbank borrowings by .5 percent. Today, we learn why the Federal
Reserve Board acted in that manner in an unusual format between its
regularly scheduled meetings.
The background is that the Federal Reserve Board Chairman, Alan
Greenspan, had, for weeks, directed the Federal Reserve staff to
closely track company earnings announcements and business executives'
comments about their plans for such things as capital spending.
Staff members have been working the phones, asking companies specific
questions about their future intentions. What the Federal officials and
the staff found out by early April was a disturbingly sour attitude
among corporate executives, suggesting that many of them were hunkering
down, concentrating on cutting costs and slashing investment plans. The
policy planners concluded that quick Federal Reserve Board action was
needed to try to break the psychological mindset lest it undermine the
drag we pick up in economic growth later this year. Many Federal
officials are hoping there will be a turnaround and that this action
was necessary in order to turn that hope into reality.
Unfortunately, today we have received some additional bad economic
news. To quote from the report of the New York Times:
The Nation's unemployment rate shot up by 4.5 percent in
April, the highest level in 2.5 years. Businesses slashed
their payrolls by the largest amount since the recession of
1991.
The Labor Department report of Friday--today--was the freshest
evidence that the economy, which started to slow in the second half of
the last year, continues to weaken. The increase of .2 percentage
points in the unemployment rate marks the second straight month the
jobless rate had gone up. In March, it had ticked up by 4.3 percent.
April's rate was the highest since October of 1998 when unemployment
also stood at 4.5 percent.
Similar reports are in today's online news reports from USA Today,
the Washington Post, all of which I have submitted for the Record.
Nobody likes to talk about bad news. I think what we need to be
talking about now is common sense.
What are likely to be the consequences of this accumulation of bad
news? I am afraid the consequences will include a further assault upon
consumer confidence, which has already declined precipitously, and a
further assault on the willingness of consumers to undertake serious
expenditures. We know that about two-thirds of our economy is
predicated on consumer spending. As the willingness of consumers to
spend is undermined by the kind of bad news they received this morning,
that will have an immediate and significant adverse effect on our
economy.
How have we been reacting--we Members of Congress and the new
administration--to this bad news? In my judgment, we have been
responding inadequately. We have been responding based on a denial of
the changes that are occurring in our economy and an unwarranted
commitment to pursue the ideas that were the product of a different
economic era.
I believe we should be seriously looking--not only looking but
acting--to provide new levels of economic assurance to the American
people and the economic capability to take advantage of that
reassurance. We should immediately institute a tax stimulus designed to
encourage consumers to increase their spending and, therefore, begin to
counter the softening consumer demand in our economy.
Unfortunately, the tax stimulus has been the stepchild of tax policy.
Why has it been the stepchild? I think, first, it has been the
stepchild because there has been an undue commitment to policies that
were developed in another time.
I remember a statement made by President Bush, which was a statement
made to indicate his constancy, his degree of unwavering support, for
his $1.6
[[Page S4380]]
trillion tax plan. That statement started with the fact that the
President indicated when he first announced his tax plan during the
winter of 1999, in preparation for the 2000 Iowa caucus, that he first
proclaimed his commitment to a $1.6 trillion plan and that commitment
had continued throughout the Republican primary process, the Republican
Convention, and the general election, and has continued until that date
in February of 2001.
What has happened is that while the plan has continued to be the same
from the winter of 1999 to the now almost summer of 2001, the economic
stage has changed. Stagehands have come on the stage and removed the
booming stock market, which in the winter of 1999 was giving us almost
daily new highs in stock market prices. The stagehands have also
removed what was almost an all-time low in unemployment and replaced it
with the unemployment circumstance we find today, which is 4.5-percent
unemployment, up three-tenths in just the last 60 days. We also have
replaced the gross domestic product, which had been running at rates of
5 or 6 percent, with one in which we now are approaching an anemic 2-
percent growth rate in our GDP.
The second stage, which began in the late winter of this year, was
that at least we started with the rhetoric that we were interested in
tax stimulus, but no change in the tax plan. We were saying the same
plan that had been developed in the winter of 1999, which was defined
as a plan to give a rebate, refund, to the American people for
excessive taxes--that the same plan now was relabeled as being a tax
stimulus.
There was a glimmer of hope. That glimmer of hope occurred just
within the last few days when we heard that the conference committee
that was working on the melding of the House and Senate budget
resolutions was proposing that there be a $100 million tax stimulus and
that that tax stimulus was to start immediately. That glimmer of hope
was quickly shattered, because now we see that in the conference report
on the budget resolution, there is no $100 billion for a tax stimulus--
the $100 billion was folded into the $1.25 billion overall tax cut. A
tax cut of $1.25 trillion over 10 years has now absorbed the $100
billion that was supposed to be the tax stimulus and has grown. So we
have a tax reduction proposal in the budget resolution of $1.37
billion, but no specific tax stimulus.
Another source of disappointment is that in the budget resolution
that passed the Senate, we were talking about two tax bills between now
and October 1. There would be one in mid-May and another one prior to
September 30. That raised the hope, and there was some public comment
that that first tax bill would be the tax stimulus bill; it would be
the means by which we would respond rather than passively observe that
accumulation of very troubling economic news. That, too, has now been
eliminated in that the budget resolution apparently will only call for
a single tax bill. It is being suggested that tax bill should be
basically the winter of 1999 tax bill with minor modifications.
I am discouraged and disappointed at the current state of affairs,
but I am hopeful there will be a new day. Maybe that hope can be found
in the fact that we learned late last night that the conference report
on which the House was supposed to have voted and which we were
assumedly going to be debating some today and again on Monday and vote
on Tuesday was deficient; that there were, in fact, two pages of the
conference report that were mysteriously missing.
The hope is those two pages are the two pages that contain some
commitment toward an intelligent tax stimulative policy. If that is not
the case, then it is incumbent on us to come to our senses and to take
constructive action before it is too late.
I analogize the situation we are in to a business which has just
learned there is going to be built in close proximity a gasoline tank
farm. The business owner is looking at his insurance policy and asking
the question: Given the fact that I am now going to have a heightened
risk of a fire in the neighborhood in which my business is located,
would it not be prudent to acquire some additional fire insurance?
We are getting the message that there is additional vulnerability in
our economic neighborhood, and would it not be prudent under these
circumstances for us to buy some additional insurance, an insurance
policy against recession or an insurance policy against a deepened,
prolonged recession?
I believe, just like the business person, yes, it would be prudent
for us to do so. I suggest in doing so we should reexamine the proposal
that will soon be before us and say, first, it is not prudent to be
attempting to pass one gigantic tax bill, most of which benefits do not
occur until 5 years from now; rather, what we should be doing is
passing immediately an economic stimulus tax bill which will deal with
the No. 1 economic challenge to this Nation and most of our people, and
that is how to provide some additional economic encouragement and sense
of hope for Americans at a time of a sliding economy, increasing
unemployment, and declining gross domestic product.
I believe that first tax bill we pass should have the following
characteristics: It should be an immediate tax bill. It should be front
loaded with substantial benefits available immediately after enactment.
The President's original tax bill had only $187 million of tax
benefits in the calendar year 2001. I believe we need to have a
substantial tax cut of at least $60 billion in 2001 and in each
successive year. We need to place that tax cut primarily in the hands
of all American families through a reduction in their withholding tax.
This would result in the greatest likelihood that tax cut would, in
fact, be used to stimulate demand.
This plan needs to be simple. We are about to consider what will be a
very complicated plan, a plan that will have multiple provisions, most
of which will not have a significant economic impact until after the
year 2005.
I believe we need to have a simple, straightforward plan which will
have an impact immediately. The proposal Senator Corzine and I have
developed which we submit as meeting these characteristics will be
accomplished by taking a recommendation of President Bush, which is
that we add a new bracket to our income tax code, and that be a bracket
at the 10-percent level--that the first taxable dollars earned by
Americans would be at a 10-percent rather than a 15-percent level.
The President's suggestion should be modified in two regards. First,
the 10-percent bracket, as he has suggested it, will not go into full
effect until the year 2006. We suggest it ought to be in full effect as
of January 1, 2001.
Second, his proposal is limited to the first $6,000 of earnings for
an individual and the first $12,000 for a married couple. We increase
those numbers to $9,500 for an individual and $19,000 for a married
couple. The effect of that is to provide a $60 billion tax stimulus
reflected through reductions in withholding taxes and immediately
available to the American people.
We offer this as a commonsense solution to a very serious and
disturbing set of economic changes that are occurring. We offer this as
a means of providing to the American people the kind of support the
Federal Government can and should be providing at this time. We offer
it as a statement that we are not so disconnected from the lives of
Americans that we are unable to appreciate the anxiety which many of
our fellow citizens are suffering and the opportunity we have to
provide a constructive and immediate source of relief.
I suggest that we, the Members of Congress, are about to be tested.
Are we isolated, stuck on some plan that is now almost 2 years out of
date, or are we engaged with the American people; that we appreciate
the implications of the declining economy to their lives, and we are
prepared to act in a way that will give them the confidence that will,
in turn, be beneficial to all Americans because it is their confidence
converted into actions in the marketplace which have the best chance of
beginning to place some concrete under our economy and begin to lift us
out of this series of declines.
We are going to be tested. Next week is going to be the testing date.
I hope this Congress will receive positive grades on the report card we
are going to be issued because if we fail to do so, and if that tank
farm of declining economic statistics explodes this summer
[[Page S4381]]
or fall, the question is going to be asked of us: What did you do when
you had the opportunity to buy an economic insurance policy to help
avoid this consequence? We do not want to say we were blind and deaf to
the circumstances of the American people and failed to act.
I hope this news, as disappointing and distressing as it is, will
serve as a shock signal to this Congress to act and next week we will
show that we have heard the alarm.
I thank the Chair.
Exhibit No. 1
[From the Washington Post, May 4, 2001]
Fed's Legwork Led to Quick Rate Cut
firms surveyed before april surprise
(By John M. Berry)
When Federal Reserve policymakers surprise financial
markets with an unexpected change in interest rates,
investors and analysts often wonder, ``What do they know that
we don't?'' Usually, the answer is nothing.
But when the Fed caught the markets off guard on April 18
with a half-percentage-point reduction in short-term interest
rates, Fed Chairman Alan Greenspan and other central bank
officials did have some vital, privately gathered information
that convinced them an immediate rate cut was needed.
The chairman had expressed concern earlier this year that
businesses, worried about falling profits in a sluggish
economy, might cut their spending on new plants and equipment
so much that they would prolong the slump and forestall an
eventual rebound in growth. Anecdotal evidence reaching the
Fed suggested that could be the case.
To get a better reading, Greenspan had for weeks directed
Fed staff to closely track company earnings announcements and
business executives' comments about their plans for such
capital spending. Some staff members also had been working
the phones, asking companies specific questions about their
spending plans.
What Fed officials and the staff found by early April was a
disturbingly sour attitude among corporate executives that
suggested many of them were hunkering down, concentrating on
cutting costs and slashing investment plans. The policymakers
concluded that quick Fed action was needed to try to break
that psychological mind-set lest it undermine the gradual
pickup in economic growth later this year that many Fed
officials expect. And the officials decided they could not
wait until their next regular meeting, scheduled for May 15.
So on April 18, Greenspan convened an 8:30 a.m. conference-
call meeting of the Federal Open Market Committee, the Fed's
top policymaking group. That group lowered the Fed's target
for overnight interest rates by half a percentage point, to
4.5 percent. In a separate action, the Fed board reduced the
discount rate, the interest rate financial institutions pay
when they borrow directly from one of the Fed's 12 regional
reserve banks, by the same half-point.
This picture emerges from interviews with sources who spoke
on the condition of anonymity, Wall Street analysts and
public comments by several Fed officials.
The Fed's moves surprised financial markets, for two
reasons.
First, the most recently published economic statistics
suggested that, while the U.S. economy was still weak, some
sectors had begun to improve. Some private forecasters had
even begun to revise their predictions for growth upward
modestly.
Second, several presidents of the regional Fed banks had
made recent speeches noting the signs of improvement, which
the markets interpreted as suggesting that urgent action on
rates was not needed.
For some investors and analysts, the clincher came from
William Poole, president of the St. Louis Federal Reserve
Bank, on April 10. After a speech in Dyersburg, Tenn., Poole
told reporters that the Fed's target for overnight rates
should be changed only at the FOMC's eight regularly
scheduled meetings each year, except in ``compelling''
circumstances.
``There are compelling times when quick action is
necessary, but this is not one of them,'' Poole asserted.
Remarks the same day in a speech by Jack Guynn, Poole's
counterpart at the Atlanta Federal Reserve Bank, also implied
a desire to act at regularly scheduled meetings rather than
at other times. And two weeks earlier, Anthony Santomero,
president of the Philadelphia Fed, had said, ``I do not think
the Fed should routinely take policy actions for the sole
purpose of boosting expectations or merely to affect
confidence.''
A few weeks earlier, at its March 20 meeting, the FOMC had
cut its rate target by half a point and hinted clearly that
it might cut rates again if necessary before the May meeting.
In the statement, the committee said that, given the weak and
uncertain economic outlook, ``when the economic situation
could be evolving rapidly, the Federal Reserve will need to
monitor developments closely.''
The FOMC had used similar wording in an announcement after
its mid-December meeting, intending to signal that it would
consider making a rate cut before its next regular meeting.
But more market participants did not pick up that signal and
were therefore very surprised when the Fed lowered its rate
target by half a point on Jan. 3. The reappearance of that
language in March initially convinced many investors and
analysts that another reduction was likely during the long
eight-week period between the March and May meetings.
But as April wore on, and the tone of new economic data
improved a bit and some Fed officials suggested no Fed action
was in the offering, market expectations for a rate cut
evaporated.
So when the Fed moved on April 18, some analysts concluded
that Fed officials must have decided that a rate cut would
have a greater impact if it came as a surprise to investors
and business executives. If that were the case, then the
president's remarks must have been part of a coordinated plan
intended to mislead market participants, the analysts said.
To most Fed officials, the notion of coordinating
statements of all the policymakers is almost laughable.
Public statements by one policymaker or another often leave
others in the group shaking their heads. That clearly was the
case when Poole so specifically ruled out an inter-meeting
move.
Furthermore, historically there has always been a certain
tension between Fed officials in Washington and the 12
Federal Reserve Bank presidents scattered across the country.
Some of that tension has involved issues of who has what
powers within the system, which is largely dominated by the
chairman.
The bank presidents carefully guard their limited
independence, even to the point of rarely conferring with one
another on monetary policy outside of formal meetings. Some
of the presidents do send drafts of the speeches to
Washington, where the Fed board and staff read them and may
make some suggestions for changes. But there is no attempt to
coordinate statements and the presidents are free to ignore
suggestions.
This geographic separation contrasts with the weekly Fed
board meeting in Washington, usually on Monday mornings, at
which reports on the state of the economy are presented by
the staff and discussed by the board members. Fed officials
would not discuss the extent to which the reserve banks'
presidents were apprised of the board staff's findings as it
gathered up details of corporate announcements and made
telephone inquiries about business investment plans.
Nor has there been any public indication of whether there
were any dissents registered during the April 18 conference
call. The minutes of that meeting, along with those from the
preceding regular FOMC session March 20, will be released two
days after the upcoming May 15 meeting.
The Fed's announcement following last month's unexpected
rate cut highlighted the policymakers' concerns about
business attitudes and spending plans, and mentioned other
uncertainties about consumer spending and the demand for U.S.
exports. After noting some of the same positive economic
signs the bank presidents had mentioned in their speeches,
the FOMC said:
``Nonetheless, capital investment has continued to soften
and the persistent erosion in current and expected
profitability, in combination with rising uncertainty about
the business outlook, seems poised to dampen capital spending
going forward. This potential restraint, together with the
possible effects of earlier reductions in equity wealth on
consumption and the risk of slower growth abroad, threatens
to keep the pace of economic activity unacceptably weak. As a
consequence, the committee agreed that an adjustment in the
stance of policy is warranted during this extending
intermeeting period.''
In addition to economic worries, the condition of the stock
market likely helps explain some of the timing of the April
rate cut.
While Greenspan and other Fed officials maintain they are
not in the business of targeting stock prices, they readily
acknowledge that the market can have a significant impact on
the economy and that does concern them. For example, the
weakness in the stock market over the past year is a factor
in business investment decisions because the market can be a
source of inexpensive funding for new plants and equipment.
But if investors were still driving stock prices downward--
as appeared to be the case until the first part of April--a
surprise rate cut might have had little impact on the market.
Like an intervention in foreign exchange markets to affect
the value of a currency, officials felt it would be better to
wait until the market appeared to have hit bottom and was on
its way up.
As the market began to improve during the week before the
rate cut, another factor came into play--Easter. The market
was to be closed on Friday, April 13, and was to close early
the day before, and under such circumstances trading volume
is usually low. So if one goal, likely a subsidiary one, was
to give the market a boost, the following week was probably a
better bet.
Now, of course, attention has turned to what the Fed will
do May 15. Most analysts expect a further reduction in the
target for overnight rates, by either a quarter of a point or
a half-point. The latter would bring the rate target down to
4 percent, it lowest in seven years.
Some analysts think the Fed will stop at 4 percent, whether
it gets there in one step or two. That could well be the case
since a significant member of Fed officials believe economic
growth will gradually improve in the second half of the year,
though they generally stress the uncertainty of the outlook.
[[Page S4382]]
A smaller group of analysts thinks the economy will prove
stubbornly weak and that the target for overnight rates will
bottom out at 3.5 percent.
But with rates as low as they are likely to be after May 15
and only six weeks until the subsequent FOMC meeting in late
June, a third surprise rate reduction between meetings this
year can be only a very remote possibility.
____
[From the Washington Post, May 4, 2001]
Wall Street Feels Labor Pain
(By Jessica Doyle Belvedere)
The government released fresh evidence this morning the
U.S. economy continues to weaken.
The April employment report handed Wall Street a bag of bad
news. The labor market showed the steepest job losses in over
a decade as the unemployment rate vaulted to a high not seen
since October 1998.
Non-farm payroll jobs plunged 223,000, rebuffing
expectations of a gain of 21,000 and pushing the unemployment
rate to 4.5 percent, up from 4.3 percent in March. That is
the highest jobless rate since October 1998 and higher than
the consensus 4.4 percent forecast. Meanwhile, average hourly
earnings rose 0.4 percent.
Manufacturing was the hardest hit sector of the economy, as
employment fell 104,000 in the ninth consecutive monthly
decline and the largest since August. The report also showed
that job losses were widespread. However retail and
government operations added to their payrolls.
Wall Street is particularly tuned into this morning's
report since the labor market is a key driver of consumer
confidence, which in turn impacts spending patterns. With the
economy weakening since last summer, consumers may curtail
spending, which accounts for two-thirds of economic activity.
Thus far, consumer spending has been resilient and helped to
buoy the overall economy.
The report also raises the stakes that the Federal Reserve
will make another aggressive interest rate cut later this
month. The Fed has acted four times this year to stimulate
the flagging economy.
Gerald D. Cohen, Senior Economist at Merrill Lynch believes
the Fed will cut rates by 50 basis points at its May 15th,
and by August fed funds will stand at 3.5 percent. ``We still
don't think the economy is going into recession. Spending has
softened but it will be ok. The Fed will help spur growth
when the rate hikes come on line. And enough sectors are
holding up that they will keep the economy from slipping into
a recession.''
Wall Street is bearing the brunt of the weaker-than-
expected reading. As of 9:50 a.m. EDT, the Dow Jones
industrial average had fallen 104 points or nearly 1 percent.
Meanwhile, the Nasdaq dropped 48 points, or 2.19 percent,
after losing 3.4 percent on Thursday.
The drumbeat of anemic labor data continued Thursday,
prompting investors to question the odds of an economic
rebound, and therefore an earnings rebound in the latter half
of the year.
Thursday's report on the labor market showed new claims for
unemployment benefits rose by 9,000 to 421,000 for the week
of April 28. The report's 4-week moving average, with
smoothes out statistical blips, rose to 405,000, the highest
level of unemployment claims since October 1992.
Additionally, a job-placement firm that tracks layoffs
reported that businesses in April announced plans to
eliminate 165,600 jobs, a record in the survey's 8-year
history.
Another economic indicator proved troubling to investors.
The non-manufacturing portion of National Association of
Purchasing Management's monthly report fell to a reading of
47.1 percent in April from 50.3 percent in March. Any reading
below the 50 percent benchmark signals economic contraction,
and the gauge indicated that the economic downturn may be
broadening.
____
[From the Wall Street Journal, May 3, 2001]
Fed Finds Slowdown Is Widespread in U.S.
(By Greg Ip)
WASHINGTON.--Despite a flurry of upbeat news, the economy's
worst days may not be behind it after all.
The Federal Reserve's latest report on regional economic
conditions offered little evidence that the slowdown is over.
``Almost all districts report a slow pace of economic
activity in March and early April,'' the Fed said yesterday.
``Labor-market tightness has eased in almost every
district.''
The report, known as the beige book, summarizes economic
conditions in the 12 Federal Reserve districts and is used by
policy makers to determine monetary policy. the policy makers
meet next on May 15.
To be sure, much of the news lately has been positive. The
economy grew at a 2% annual rate in the first quarter, double
expectations; in April, stocks had one of their best months
in years; and the latest signs from manufacturing suggest the
sector is bottoming out. Yesterday, the Commerce Department
said factory orders rose 1.8% in March from February,
seasonally adjusted, thanks mostly to transportation.
On closer inspection, however, the picture is less
comforting. While consumer spending was surprisingly
resilient in the first quarter, it weakened as the quarter
progressed. In March and April, a key variable in the
spending equation--employment--worsened.
Last Friday's report on first-quarter gross domestic
product ``is telling you what's going on outside your window
over the past few months. It's not a good leading
indicator,'' said Lakshman Achuthan, managing director at the
Economic Cycle Research Institute in New York. By contrast,
initial claims for unemployment insurance ``are going the
wrong way fast,'' he said. Claims topped 400,000 in late
April, the highest in five years and up 44% from a year
earlier.
Mr. Achuthan noted that while the National Association of
Purchasing Management's index of manufacturing activity rose
a touch in April from March, the employment portion fell.
That suggests job cuts are broadening.
Yesterday's Fed report said that retail sales, after
weakening in March, picked up in April. But this may have
been due to ``Eastern sales and better weather,'' according
to businesses in the Dallas district. The beige book found
housing demand remained firm, but auto sales were more mixed,
``Almost across the board . . . districts note that higher
gas prices appear to have reduced demand for new SUVs, luxury
vehicles and trucks.''
In the St. Louis district, layoffs have hit both the Old
and New Economy alike: steel, timber, electronics, plastics
and high-tech companies. In the Boston district, discount
retailers said that ``demand has softened because their
lower-income customers are facing a fuel-price squeeze.''
Still, the fact the economy grew as much as it did in the
first quarter does suggest improved prospects for avoiding a
recession, which is often defined as two consecutive quarters
of declining GDP.
``Much of the inventory correction is behind us, as the
ratio of real inventories to private final sales has now
fallen back to the level of the first half of the last
year,'' noted forecasting firm Marcoeconomic Advisers LLC of
St. Louis, which said it is more comfortable with its
relatively upbeat forecast. It also cited a number of
positives: The Fed cut interest rates half a percentage point
April 18; stocks are recovering; and a tax cut is more
likely.
Federal Reserve Bank of San Francisco President Robert
Parry said yesterday that he ``seriously doubts'' that the
nation's economy will plunge into a recession, given the
Fed's four rapid and aggressive rate cuts this year.
Separately, the Federal Reserve Bank of Chicago said its
gauge of business activity had improved to a level suggesting
the likelihood of recession had fallen.
The economy has benefited from the fact that consumer
spending held up while businesses slashed inventories.
Consumer spending may weaken now, but inventory cutting is
less likely to compound that. ``Production and demand are
kind of weaving around each other, and if you keep getting
that you probably won't have a recession,'' said Edward
McKelvey, senior economist at Goldman Sachs. ``The bid
intellectual battle is more, `How firm a recovery can you
expect?' '' Stock and bond markets are anticipating a solid
recovery, but ``we think the economy is in for an extended
period of sluggishness.''
One of the factors likely to keep growth anemic is cuts to
capital spending. Though business investment in equipment
fell less than expected in the first quarter, there is no
turnaround in sight. Technology shares have rallied, but more
on hopes that the sector has hit bottom than actual signs of
increased demand. Semiconductor prices, for example, have
actually weakened in recent weeks, suggesting those hopes are
premature.
factory orders
Here are the Commerce Department's latest figures for
manufacturers in billions of dollars, seasonally adjusted
------------------------------------------------------------------------
Mar. (p) Feb. (r) Percentage
2001 2001 chg.
------------------------------------------------------------------------
All industries........................ 370.52 363.83 +1.8
Durable goods......................... 206.29 199.37 +3.5
Nondurable goods...................... 164.23 164.47 -0.1
Capital-goods industries.............. 72.57 65.70 +10.5
Nondefense............................ 61.38 58.87 +4.3
Defense............................... 11.20 6.83 +63.9
Total shipments....................... 366.51 365.05 +0.4
Inventories........................... 490.85 493.70 -0.6
Backlog of orders..................... 597.79 593.78 +0.7
------------------------------------------------------------------------
p-Preliminary. r-Revised.
____
[From the New York Times, May 4, 2001]
Unemployment Rate Rises to 4.5% in April
WASHINGTON (AP).--The nation's unemployment rate shot up to
4.5 percent in April, the highest level in 2\1/2\ years.
Businesses slashed their payrolls by the largest amount since
the last recession in 1991.
The Labor Department report Friday was the freshest
evidence that the economy--which started to slow in the
second half of the last year--continues to weaken.
The increase of 0.2 percentage point in the unemployment
rate marked the second straight month the jobless rate had
gone up. In March, the jobless rate ticked up a notch to 4.3
percent. April's rate was the highest since October 1998,
when unemployment also stood at 4.5 percent.
Both the increase in the unemployment rate and the cut in
jobs surprised many analysts. They were predicting that the
unemployment rate would rise to 4.4 percent and that
businesses actually would add jobs during the month.
Businesses cut their payrolls in April by 223,000 jobs, the
largest reduction since February 1991, when payrolls fell by
259,000. It was the second month in a row that businesses
trimmed their payrolls. In March, payrolls fell by 53,000,
according to revised figures, a smaller reduction than the
government previously reported.
[[Page S4383]]
In April, job losses were widespread except in retail and
government, which added to their payrolls.
The unemployment numbers follow the Federal Reserve's
surprise interest rate cut by one-half point last month--the
fourth reduction this year in the Fed's campaign to ward off
recession. Analysts have said further rate cuts are likely at
the central bank's May 15 meeting.
With unemployment expected to continue inching up, some
economists worry that consumers might rein in spending and
further weaken the struggling economy.
Consumer spending accounts for two-thirds of all economic
activity and has helped buoy the economy during the downturn.
Some companies are coping by sharply cutting production,
leading to reductions in workers' hours and overtime, and
forcing thousands of layoffs.
The New York Times announced this week that it would cut
100 jobs after already laying off 100 people at its online
unit and offering buyouts to other employees. That followed
recent announcements at Morgan Stanley, Honeywell
International Inc., LM Ericsson and Texas Instruments Inc.
Friday's report showed that manufacturing, which has been
bearing the brunt of the economic slowdown, continued to
hemorrhage, losing a huge 104,000 jobs last month. Declines
since June have totaled 554,000 and two-thirds of those job
losses have occurred in the past four months.
Construction, which had been adding jobs over the last
several months, lost 64,000 jobs in April. The government
said the drop may reflect in part heavy rains over part of
the country. The construction and housing businesses have
remained healthy during the economic slowdown--a key force in
keeping the economy out of recession.
Business services cut 121,000 jobs in April. Temporary
employment services experienced another sharp decline of
108,000 last month, and have lost 370,000 jobs since
September.
Seasonal hiring in amusement and recreation services and
hotels was well below normal last month, with unemployment
declines of 30,000 and 13,000, respectively.
Average hourly earnings, a key gauge of inflation, rose by
0.4 percent in April to $14.22 an hour. That matched the gain
in March. The length of the average workweek was unchanged at
34.3 hours in April.
The PRESIDING OFFICER (Mr. Kyl). The Senator from New Hampshire.
Mr. GREGG. Mr. President, I will speak about the education bill.
Mr. BYRD. Will the Senator yield?
Mr. GREGG. I yield to the Senator from West Virginia.
Mr. BYRD. About how long will the Senator speak, so I know when to
return.
Mr. GREGG. I say to the Senator, I will probably speak 15 to 20
minutes.
Mr. BYRD. I thank the Senator.
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