Summers Says Economy Hasn’t Hit Bottom, Job Losses May Continue
By Timothy R. Homan and Margaret Chadbourn
March 15 (Bloomberg) -- President Barack Obama
’s top economic adviser said it’s impossible to predict when the recession will end and cautioned that monthly job losses of about 600,000 are unlikely to end soon.
, director of the White House’s National Economic Council, said on ABC’s “This Week” program that job cuts are “probably not going to stop imminently.”
When asked if the economic downturn is over, he said, “no one can make that judgment.”
The Standard & Poor’s 500 stock index jumped almost 11 percent last week, the biggest weekly advance since November, as investors saw signs the U.S. downturn that began in December 2007 may be nearing and end. Summers struck a balanced tone, saying any recovery will take time and require attention to the nation’s financial system.
Summers also said the Obama administration’s economic policies will help dispel China’s concern about the value of its investments in U.S. Treasury notes. Chinese Premier Wen Jiabao
last week said he was “worried” about the safety of China’s holdings of U.S. debt.
“You just have to look, even in the midst of a financial crisis like this, at the way funds are flowing into the United States, that the dollar has strengthened even in a period of great difficulty for our banking system,”
Summers said in a separate interview on CBS’s “Face the Nation” program. U.S. Treasuries are the “asset of choice for people around the world,” he said.
The jobless rate climbed to 8.1 percent last month as U.S. employers cut 651,000 workers from payrolls. U.S. gross domestic product is forecast to contract this quarter after shrinking at a 6.2 percent annual pace from October to December, the most since 1982.
White House chief economist Christina Romer
said the Obama administration is staging a “wonderful battle” against the recession and predicted the stimulus plan will help revive growth.
“It is an economic war,” Romer, chairwoman of the White House’s Council of Economic Advisers, said in an interview on NBC’s “Meet the Press” program. “We haven’t won yet. We have staged a wonderful battle.”
The economy’s “fundamentals are sound,” though “we know that temporarily we’re in a bad situation,” Romer said. She said she stands by an administration forecast that the $787 billion spending and tax-cut plan will save or create 3.5 million to 4 million jobs.
Romer said the administration tomorrow will announce plans to help small businesses get access to credit.
“We know we’re doing a lot of help for banks, we’re doing a lot of help for homeowners,” Romer said. “Small business people need it, too,” she said.
“That’s all going to be announced tomorrow,” Romer said, adding that the money allocated will be “a significant amount.”
Romer also discussed the need to jumpstart consumer spending, which accounts for about 70 percent of the economy, saying Americans “have not done a lot of spending” in the last 14 months.
Purchases contracted at a 4.3 percent annual pace in the fourth quarter, the most since 1980, after shrinking at a 3.8 percent pace in the previous three months, according to the Commerce Department.
“We know consumers have lost a lot of wealth,” Romer said.
U.S. household wealth fell by a record $5.1 trillion from October to December,
almost twice the decrease in the previous quarter, as home values and stock prices plunged, Federal Reserve figures showed last week.
“It’s fair to say we’ve that misjudged the severity of the crisis all the way along,” said Mark Zandi, chief economist at Moody’s Economy.com. “We are still misjudging it. While the policy steps that we’ve taken are quite good, they won’t be enough and we should prepare for the possibility that we will need more stimulus,” he said on “Fox News Sunday.”
Senator Bob Corker
, a Tennessee Republican, said on the Fox program that the Obama administration has not fully explained its plan to help banks unclog their balance sheets. Treasury Secretary Timothy Geithner
last month outlined plans for “public-private partnerships” to purchase assets.
“I had some of the country’s leading bankers in our office, they have no idea how this public-private partnership is going to work,”
said Corker, a member of the Senate Banking Committee.
Geithner, in an interview yesterday with Bloomberg Television, said he will soon provide details of his plan.
“We’re going to move quickly to lay out a new financing program to deal with these legacy assets,” Geithner said during a meeting of Group of 20 finance ministers in Horsham, England. “We have and expect to see a lot of support for this program” among potential buyers of the assets, he said.
Romer and other Obama officials have said they “inherited” the economic and financial crisis from the administration of George W. Bush
. Former Vice President Dick Cheney
took issue with that view today.
“I don’t think you can blame the Bush administration for the creation of the economic circumstances,” Cheney said in an interview on CNN. “It’s a global problem.”
“The notion that you can throw it off on the prior administration is interesting rhetoric but I don’t think anybody cares about that,” Cheney said. “What people care about is what is going to work.”
To contact the reporter on this story: Timothy R. Homan
in Washington at [email protected]Margaret Chadbourn
in Washington at [email protected]
Last Updated: March 15, 2009 12:43 EDT