EoW March 2011

At the World Economic Forum in Davos, Switzerland, Treasury Secretary Timothy F Geithner acknowledged as much in a TV interview. “During the financial crisis, [American] companies cut deeply into the employment base with brutal force,” he said – a situation“that is going to consign us to a tragicallymoremoderate reduction in unemployment as the economy recovers.” But as things continue to improve, the job market will likewise improve, said Mr Geithner, whose perception of a want of confidence on the part of business people is shared by many economists. “Firms have the cash to hire,” Augustine Faucher, the director of macroeconomics at Moody’s Analytics Inc (San Francisco) told the New York Times . The 2010 tax deal negotiated by President Barack Obama with opposition Republican lawmakers helped set up a self-sustaining expansion in 2011. Mr Obama has increased US publicly traded debt toa record$8.86 trillion tosustain theexpansion. Republicans have told the president and Democratic legislators that they will require specific budget cuts as a condition of endorsing the rise in the debt limit. Dorothy Fabian USA Editor

The economy

The US economic recovery continues to gain strength despite a lagging labour market The United States saw its economy accelerate in the last quarter of 2010, driven by rising exports and the biggest gain in consumer spending in more than four years. According to a Department of Commerce report released 28 th January, gross domestic product (GDP) grew at an annual rate of 3.2% in the October-December period, up from 2.6% in the third quarter. That broad measure of all the goods and services produced in the country indicates that overall economic output in the US has matched its pre-recession peak. With their modestly higher paychecks and somewhat improved returns on investments, Americans are buying again and cutting back on saving. And businesses have increased their spending on equipment and software. Economists are hoping that outlays of this kind – and for replenishing inventories, which ran low at the end of last year – will soon be followed by hiring or re-hiring of workers.

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EuroWire – March 2011