April 16, 2021

German Finance Minister Puts Focus on Unemployment

LONDON — A failure to tackle high youth unemployment could destroy democratic support for the European Union’s governments, the German finance minister, Wolfgang Schäuble, said Thursday, in an apparent concession that the euro zone’s focus on austerity must be tempered by other policies.

Speaking at an investment conference in London, Mr. Schäuble cited joblessness among young people as Europe’s biggest problem, arguing that the Continent faced the difficult task of “enhancing growth but in a sustainable way.”

“We will have to speed up in fighting youth unemployment, because otherwise we will lose the support, in a democratic way, in some populations of the European Union,” he said.

Mr. Schäuble, seen as one of the hawks among European finance ministers, said he supported recent moves by the European Commission, the bloc’s executive, to give some countries more time to bring down their budget deficits. But he also emphasized the need for more structural reform in Europe.

Across the Continent there are growing signs of austerity fatigue among voters amid worries that a focus on retrenchment is pushing economies into a downward spiral. Last month, José Manuel Barroso, the president of the European Commission, said austerity had hit the limits of public acceptance.

The unemployment rate in Greece reached 27 percent in February, according to figures released on Thursday, and the jobless rate for young people was more than 60 percent. The overall jobless rate is also expected to be 27 percent this year in Spain, where more than half of young people are out of work.

Speaking before a two-day meeting of Group of 7 finance ministers in Britain, Mr. Schäuble argued that progress in stabilizing the euro zone crisis meant that it would no longer be the main obstacle to global growth.

He struck a conciliatory tone over plans, supported by Germany, for a European financial transaction tax. Mr. Schäuble said there was “a long way to go” before any decision on the proposal, which Britain has challenged.

Article source: http://www.nytimes.com/2013/05/10/business/global/german-finance-minister-puts-focus-on-unemployment.html?partner=rss&emc=rss

Jobless Claims Fall

Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 323,000, the lowest level since January 2008, the Labor Department said on Thursday.

The third weekly decline, which confounded economists’ expectations for a rise to 335,000 last week, showed layoffs remained contained even as other parts of the economy such as manufacturing show strain from belt-tightening in Washington.

“The labor market is strengthening and the mandatory spending cuts from Washington have not made business more cautious when it comes to their hiring plans,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Coming on the heels of data last week showing surprising strength in the labor market, the claims report could help to further ease fears of an abrupt slowdown in economic activity early in the second quarter.

Employers added 165,000 new jobs to their payrolls in April and hiring in the previous two months was stronger than initially reported. The unemployment rate dropped to a four-year low of 7.5 percent.

Stocks on Wall Street opened lower, pausing for breath after a sustained rally that took the broader Standard Poor’s 500 index to record closing highs for five straight sessions.

The dollar rose against a basket of currencies, while U.S. Treasury debt price were little changed.


A Labor Department analyst said no states had been estimated last week and there was nothing unusual in the state-level data.

The four-week moving average for new claims – a better gauge of job market trends – dropped 6,250 to 336,750, the lowest level since November 2007, just before the economy slipped into recession.

The improvement in employment contrasts sharply with other data, including retail sales and manufacturing, that have suggested a cooling in the economy at the end of the first quarter, which persisted early in the April-June period.

“This suggests that companies see the slowing in growth as somewhat temporary, and are responding to it by reducing hours worked and hiring at a less rapid pace rather than increasing the pace of layoffs,” said Dean Maki, chief U.S. economist at Barclays in New York.

Separately, a number of top U.S. retailers reported disappointing April sales as consumers, whose incomes have been reduced by tax increases, gravitated toward discount chains.

That suggests April could be another weak month for retail sales.

Costco Wholesale Corp and Victoria’s Secret parent L Brands Inc reported smaller-than-expected sales gains. In contrast, so-called off price chains TJX Cos Inc, which operates T.J. Maxx and Marshalls, and Ross Stores Inc both easily beat Wall Street forecasts.

The slowdown in activity after the economy expanded at a 2.5 percent annual pace in the first three months of the year has been blamed on higher taxes which went into effect on January 1 and $85 billion in government budget cuts known as the “sequester.”

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid dropped 27,000 to 3.0 million in the week ended April 27. That was the lowest level since May 2008.

(Editing by Andrea Ricci)

Article source: http://www.nytimes.com/reuters/2013/05/09/business/09reuters-usa-economy-jobless.html?partner=rss&emc=rss

Economix Blog: Stock Markets Rise, but Half of Americans Don’t Benefit



Dollars to doughnuts.

The stock market has been doing well, reaching new nominal highs in recent weeks. Economists have been arguing that such equity gains make people feel richer, which might encourage consumers to pick up their spending despite their stagnant wages and recent tax increases.

One possible problem with this hopeful story: the share of Americans who actually have money invested in stocks has been falling in recent years.

Source: Gallup. Selected trends are from surveys conducted closest to April each year. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error is plus or minus 3 percentage points. Source: Gallup. Selected trends are from surveys conducted closest to April each year. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error is plus or minus 3 percentage points.

In its annual Economy and Finance survey, conducted April 4-14, Gallup found that 52 percent of Americans said they (personally or jointly with a spouse) owned stock outright or as part of a mutual fund or self-directed retirement account. That’s not statistically different from the share last year (53 percent), but is down substantially from pre-recession levels. It’s also the lowest recorded share since Gallup started asking this question in 1998.

Lydia Saad of Gallup suggests that Americans’ withdrawal from the stock market may be “more a function of their ability to buy it, than of whether its value is soaring,” and notes that high unemployment seems to correlate with low stock ownership rates.

I wonder also whether the experience of the financial crisis may frighten Americans away from riskier assets like equities for a while, long after the unemployment rate has returned to more normal levels. Research from Ulrike Malmendier and Stefan Nagel about the so-called “Depression babies” found that people who had experienced low stock market returns throughout their lives are less willing to take on financial risk, are less likely to take part in the stock market and invest a lower fraction of their liquid assets in stocks if they do take part.

There are signs that the appetite for risk is returning among more sophisticated investors and institutions, but that may not extend to the median American, who did not not recover as quickly or as fully (if at all) as the finance industry did.

Gallup also found, by the way, that recent declines in equity ownership had been largest among 30- to-49-year-olds and among middle-income Americans. The employed also had sharper declines than those who were not employed, although the latter started from a much lower base.

Source: Gallup. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error for the national sample is plus or minus 3 percentage points, and will be larger for subgroups. Source: Gallup. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error for the national sample is plus or minus 3 percentage points, and will be larger for subgroups.

Article source: http://economix.blogs.nytimes.com/2013/05/08/stock-markets-rise-but-half-of-americans-dont-benefit/?partner=rss&emc=rss

Off the Charts: Wage Disparity Continues to Grow

The Labor Department last week reported the levels of “usual weekly wages” reported by Americans questioned in the household survey that determines the unemployment rate. The figures are released quarterly, with details on the distribution of wages available since 2000.

Those figures are different from total income, in that they ignore investment income as well as bonuses or overtime that is not considered usual. The national median wage in the first quarter of this year was $827 a week. In 2013 dollars, the median wage 13 years before was $819, so the increase is about 1 percent. The figures include all workers over the age of 25.

The department said that to reach the 90th percentile — that is, to earn more money than 90 percent of those with jobs — a person needed to earn $1,909 a week. That figure was nearly 9 percent higher than in early 1980.

To reach the 10th percentile — earning less money than 90 percent of those with jobs — required an income of $387 a week. After adjusting for inflation, that figure is down 3 percent from 2000.

The accompanying charts show the trends over time for the 25th and 75th percentiles, as well as the median and the 10th and 90th percentiles.

Put another way, in 2000 a worker in the 75th percentile made 48 percent more than a worker at the median, or 50th percentile. Now, a worker in that group earns 58 percent more.

The trends have been similar within education groups. The median income of college graduates in the first quarter of this year was $1,189 a week. Adjusted for inflation, that figure was about 1 percent less than the median 13 years earlier. To make the 90th percentile, a college graduate needed to earn $2,585 a week, a figure that is about 8 percent higher than the 2000 earnings needed.

There were somewhat similar trends among those with only high school diplomas, who are shown in the chart, and among those who attended college but did not earn a bachelor’s degree. Only among high school dropouts was the pattern different. Their real wages have fallen at every percentile.

The accompanying charts seem to indicate that real incomes went up for most groups during the financial crisis in 2009. That is, at least, a little misleading for several reasons. First, the number of people with full-time jobs declined. To the extent that those who lost jobs tended to be nearer the lower end of the wage distribution, that by itself would automatically raise the median income.

The second reason for that is that inflation virtually vanished during the crisis. The Consumer Price Index in the third quarter of 2010 was a little lower than it had been two years earlier. Because wages are “sticky,” they tend not to decline in nominal terms even if there is deflation. But when inflation returned, wage levels did not keep up.

It should also be noted that the people in the top 10 percent, or the bottom 10 percent, may change from one year to the next. It is possible that some people in the bottom 10 percent did better than the charts indicate, moving up to a higher percentile in later years. And, of course, some people presumably moved in the other direction as well.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/04/27/business/economy/wage-disparity-continues-to-grow.html?partner=rss&emc=rss

Today’s Economist: Casey B. Mulligan: The Wealthy Keep the Tax Man Guessing


Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Although wealthy people are a small fraction of the population, their behavior is of great practical interest to Treasury officials.

Today’s Economist

Perspectives from expert contributors.

Every year, the United States Treasury receives extraordinary amounts of personal income tax revenue in April as individuals file their returns and reconcile the taxes they owe with the taxes that were withheld from their paychecks during the previous calendar year. Most people do not owe much, if anything, when they file their return but a small group of taxpayers has large balances to settle.

The chart below shows the inflation-adjusted amount of individual income tax receipts by the Treasury in April of each year since 1998, as reported by in the Daily Treasury Statement. The amount has fluctuated wildly, from a low of $122 billion to a high of $235 billion. The standard deviation of these April receipts is $36 billion.

United States Treasury

The general state of the economy in the calendar year helps to predict the amount the Treasury receives in following April. At the same time, additional fluctuations in April receipts derive from the situations and behaviors of a small segment of the population not well represented in the unemployment rate and other measures of the business cycle: the wealthy.

First of all, taxes are withheld less often from asset income like dividends and capital gains than they are withheld from wages. The wealthy receive a larger share of their income from assets than from wages, not to mention that by definition the wealthy have more of both types of income. Second, much of the population does not owe any income tax – let alone owe extra in April – and the wealthy pay a disproportionate share of income taxes.

The wealthy have become an even more important driver of tax revenues in recent history, as an increasing share of the nation’s income has accrued to them. Thomas Piketty and Emmanuel Saez have compiled decades of data for the United States (and other countries). They find, for example, that the very wealthiest of America’s households — the top one-tenth of 1 percent — recently received about one-thirteenth of the nation’s income, while they received only one-fiftieth in the 1960s and 1970s.

The wealthy are sometimes idolized and other times envied, and for these reasons alone their behavior is of interest. But Treasury officials have another reason to stay abreast of the wealthy: their activities are an important determinant of the amount of revenue received by the Treasury, and when it is received.

If you have special insights into how the wealthy behave, consider applying for a job at the Treasury.

Article source: http://economix.blogs.nytimes.com/2013/04/17/the-wealthy-keep-the-tax-man-guessing/?partner=rss&emc=rss

Economix Blog: Job Openings Rise, but Unemployment Stays High



Dollars to doughnuts.

The Labor Department has released its latest report on job openings and labor turnover today, which showed that job vacancies were at their post-recession high in February. But we still have a strangely high unemployment rate relative to the job openings rate, at least when compared with the relationship these two variables had before the recession began.

Source: Bureau of Labor Statistics, Current Population Survey and Job Openings and Labor Turnover Survey, April 9, 2013.Bureau of Labor Statistics Source: Bureau of Labor Statistics, Current Population Survey and Job Openings and Labor Turnover Survey, April 9, 2013.

The chart above is the Beveridge Curve, named for the British economist William Henry Beveridge. It shows the relationship between the unemployment rate and the job openings rate. As I also explained in an earlier post, during an expansion the jobless rate is low and the job vacancy rate is high; a small share of workers are looking for jobs, and so when employers post a vacancy, the opening can be hard to fill (or alternately, if there are a lot of jobs available, people will not have much trouble finding work, leading to low unemployment).

In a recession, the reverse is true: there is a high unemployment rate and a low vacancy rate. Where you end up on the curve generally depends on where you are in the business cycle, but you will probably be somewhere on or near that line.

Since late 2009, though, the Beveridge Curve has shifted outward. That means that even though today’s job market is not great, there are still more vacancies out there than the unemployment rate alone would have predicted a few years ago.

It’s not clear why that’s the case, but the answer probably involves some combination of skill mismatch; whether all the people who are calling themselves unemployed today might have done so in previous years; and hiring paralysis at firms that have vacancies but are afraid of making a hiring mistake in a still-uncertain economy.

One of the bright spots in today’s Labor Department’s report was that the quits rate (the number of people quitting divided by total employment) held steady at the peak for the recovery period so far. Janet Yellen, vice chairwoman of the Federal Reserve, recently said that she was looking for a pickup in the quits rate as a “signal that workers perceive that their chances to be rehired are good — in other words, that labor demand has strengthened.”

Layoffs and discharges remain quite low; the problem in the job market remains too little hiring, not too much firing.

Here’s a look at the ratio of quits to layoffs/discharges, which as you can see has been generally rising in the last four years:

Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, April 9, 2013. Note: Shaded area represents recession as determined by the National Bureau of Economic Research.Bureau of Labor Statistics Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, April 9, 2013. Note: Shaded area represents recession as determined by the National Bureau of Economic Research.

The ratio peaked in August 2006, when there were 1.8 people quitting their jobs for each person laid off or discharged. It fell to 0.7 in April 2009, near the end of the recession, and is now about 1.4.

Article source: http://economix.blogs.nytimes.com/2013/04/09/job-openings-rise-but-unemployment-stays-high/?partner=rss&emc=rss

Hiring in U.S. Tapers Off as Economy Fails to Gain Speed

American employers increased their payrolls by 88,000 last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected.

It also was the start of a third consecutive spring in which employers have tapered off their hiring, even after the Labor Department adjusted the numbers for the usual seasonal changes. Slowdowns in the previous two years could be attributed to flare-ups in the European debt crisis, but this time the cause is unclear. The recent payroll tax increase or political gridlock in Washington could be to blame for the sudden slowdown, but neither seems to be showing up much in other relevant economic data.

“I’m at a bit of loss as to how to explain it,” said Paul Dales, senior United States economist at Capital Economics. “Even if this is the start of another springtime-summertime slowdown, we’re hoping it’ll be a bit more modest than it was in previous years, because the housing market is doing very well.”

The unemployment rate, which comes from a different survey, ticked down to 7.6 percent in March, from 7.7 percent, but for an unwelcome reason: more people dropped out of the labor force, rather than more got jobs.

The labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working. Baby boomer retirements may account for part of the slide, but discouragement about job prospects in a mediocre economy still seems to be playing a large role, economists say.

“The drop in the participation rate has been centered on younger workers,” said Joshua Shapiro, chief economist at MFR Inc., “many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.”

Stock market indexes were down in Friday afternoon trading.

Still, as always, economists cautioned not to draw too many conclusions from one month’s report, because the numbers will inevitably be revised.

“Remember that we’ve had a pattern of upward revisions,” said John Ryding, the chief economist at RDQ Economics, noting that the government on Friday revised January and February’s net growth upward by a total of 61,000 jobs. “Before we read too much into it, bear in mind we have at least two more cracks of the whip before the number is really finalized.”

March’s job gains were concentrated in professional and business services and health care, while the government again shed workers, as it has been doing for most of the last four years, though reductions at the Postal Service accounted for most of the latest decline. Economists expect more government layoffs in the months ahead as the effects of Congress’s across-the-board budget cuts make their way through the system.

Some policy makers have started to publicly address deficiencies in the quality of the jobs being created by the private sector, in addition to their quantity.

“It’s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech.

Relatively low-wage sectors like food services and retail businesses have accounted for a large share of the job growth in the last few years; a report in August from the National Employment Law Project, a liberal advocacy group, found that a majority of jobs lost during the downturn were in the middle range of wages, while a majority of those added during the recovery have been low-paying.

In March, in fact, jobs in food services and drinking places accounted for the largest share of total American employment on record. Today nearly one in 13 American jobs is in this industry.

Ms. Raskin also expressed concern about temporary jobs, which account for a growing share of total employment.

Usually an increase in temp hiring is considered a good thing, at least at the start of a recovery, because it indicates that employers are thinking about taking on permanent workers. So far, though, employers seem to be sticking with those temporary contracts.

“Temporary help is rapidly approaching a new record,” said Diane Swonk, chief economist at Mesirow Financial, who noted that there was also a rapid increase in temp hiring during the boom years of the 1990s. “That of course means more flexibility for employers, and less job security for workers.”

Article source: http://www.nytimes.com/2013/04/06/business/economy/us-adds-only-88000-jobs-jobless-rate-falls-to-7-6.html?partner=rss&emc=rss

It’s the Economy: Do Millennials Stand a Chance in the Real World?

These habits, judging by both anecdote and literature, were generational. My grandmother was born in 1917 and entered the work force during the Great Depression. I’ve been thinking of her generation — the one that saved rather than spent, preserved rather than squandered — a lot lately. In the past year or so, data have come in regarding how my own generation, often called Generation Y, or the millennials, has adapted to our once-in-a-lifetime financial crisis — the one that battered career prospects, drove hundreds of thousands into the shelter of schools or parents’ basements and left hundreds of thousands of others in continual underemployment. And some of that early research suggests that we, too, have developed our own Depression-era fixation with money.

The millennials have developed a reputation for a certain materialism. In a Pew Research Center survey in which different generations were asked what made them unique, baby boomers responded with qualities like “work ethic”; millennials offered “clothes.” But, according to new data, even though the recession is over, this generation is not looking to gorge; instead, they are the kind of hungry that cannot stop thinking about food. “Call it materialism if you want,” said Neil Howe, an author of the 1991 book “Generations.” It seems more like financial melancholy. “They look at the house their parents live in and say, ‘I could work for 100 years and I couldn’t afford this place,’ ” Howe said. “If that doesn’t make you focus on money, what would? Millennials have a very conventional notion of the American dream — a spouse, a house, a kid — but it is not going to be easy for them to get those things.”

This condition is becoming particularly severe for the group that economists call younger millennials: the young adults who entered the job market in the wake of the recession, a period in which the unemployment rate among 20- to 24-year-olds reached 17 percent, when graduate school competition grew more fierce and credit standards tightened. Many also saw their parents struggle through a pay cut, a job loss or another economic disruption during the recession.

These troubles, many economists fear, left serious scars, and not just psychic ones. Now that the economy has entered a steady but slow recovery, younger millennials wonder if they can make up that gap. Lisa Kahn, a labor economist at the Yale School of Management, studied the earnings of men who left college and joined the work force during the deep recession of the early 1980s. Unsurprisingly, she found that the higher the unemployment rate upon graduation, the less graduates earned right out of school. But those workers never really caught up. “The effects were still present 15 or 20 years later,” she said. “They never made that money back.”

Kahn worries that the same pattern is repeating itself. And new research from the Urban Institute augurs that this emerging income gap is compounding into a wealth gap. The institute’s research shows that even as the country has grown richer, Generations X and Y, meaning people up to about age 40, have amassed less wealth than their parents had when they were young. The average net worth of someone 29 to 37 has fallen 21 percent since 1983; the average net worth of someone 56 to 64 has more than doubled. Thirty or 40 years from now, young millennials might face shakier retirements than their parents. For the first time in modern memory, a whole generation might not prove wealthier than the one that preceded it.

Annie Lowrey is an economics reporter for The Times. Adam Davidson is off this week.

Article source: http://www.nytimes.com/2013/03/31/magazine/do-millennials-stand-a-chance-in-the-real-world.html?partner=rss&emc=rss

Fed to Maintain Stimulus Efforts Despite Jobs Growth

“We need to see sustained improvement,” the Fed’s chairman, Ben S. Bernanke, said at a news conference on Wednesday. “One or two months doesn’t cut it. So we’re just going to have to keep providing support for the economy and see how things evolve.”

The Fed’s policy-making committee said much the same thing in a stilted statement issued just before Mr. Bernanke took questions, announcing that it would continue to hold down short-term interest rates and buy $85 billion a month in Treasuries and mortgage-backed securities.

Mr. Bernanke’s remarks suggested that the Fed would reduce its asset purchases if job growth continued at the current pace, the first time he has said that the central bank is likely to reduce the amount of monthly purchases before it stops buying entirely.

But such a change remains at least a few months away, and quite possibly longer. The Fed is wary of pulling back too soon, a mistake it has already made several times in recent years. It is waiting to assess the impact of the federal spending cuts that began this month. And Mr. Bernanke said the members of the Federal Open Market Committee, which makes policy for the Fed, “have not been able to come to an agreement” about the goals of the asset purchases or, by extension, when they should end.

Mr. Bernanke, who has made job growth the Fed’s top priority for the first time in its 100-year history, spoke about the issue in personal terms. Asked when he last had spoken to an unemployed person, he said that one of his own relatives was out of work.

“I come from a small town in South Carolina that has taken a big hit from the recession,” Mr. Bernanke said. “The last time I was there, the unemployment rate was about 15 percent. The home I was raised in had just been foreclosed upon. I have a great concern for the unemployed, both for their own sake but also because the loss of skills and the loss of labor force attachment is bad for our whole economy.”

Mr. Bernanke also may have provided some insight into his own future. Asked repeatedly about his interest in a third term as Fed chairman, Mr. Bernanke demurred several times before telling one reporter, “I’ve spoken to the president a bit but I really don’t have any information for you at this juncture.”

The Fed said last year that it planned to hold short-term interest rates near zero at least as long as the unemployment rate remained above 6.5 percent. The rate stood at 7.7 percent in February and has barely budged in half a year. Most economic forecasters do not expect the threshold to be reached before 2015.

The asset purchases are intended as a short-term measure to catalyze faster job growth; the Fed has said it will slow increasing its collection of Treasuries and mortgage bonds, a policy known as “quantitative easing,” once it is convinced that employment is increasing at a sustainable pace.

The unusual rigidity of this basic course has diminished the importance of the Fed’s regular meetings, and it has to some extent created a problem of foreshortening. The next change in policy is necessarily the major subject of discussion among Fed officials, analysts and investors. But that may make the next change seem nearer than it really is. It is quite possible that the year could pass without any significant change.

“In one line: Sustainability, sustainability, sustainability,” Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors, wrote in a note to clients. “Mr. Bernanke clearly does not want even to consider slowing Q.E. until he is convinced that any such run of strength now is a permanent shift.”

The decision, of course, does not rest with Mr. Bernanke alone. And he noted on Wednesday that there was no consensus on the policy-making committee about how much longer asset purchases should continue. “We’ve not been able to come to an agreement about what guidance we should give,” he said.

As is often the case, Fed officials are not just debating how to respond to economic circumstances. They are debating the nature of those circumstances.

The economy has grown more robustly in recent months — the committee hailed “a return to moderate economic growth following a pause late last year” — and job growth has increased since the Fed began its latest stimulus campaign in September.

But even as spending by consumers and businesses drives growth, the Fed noted that fiscal policy “has become somewhat more restrictive.”

“The committee continues to see downside risks to the economic outlook,” the statement said.

The Fed separately released economic forecasts by 19 of its senior officials showing that their expectations had actually soured slightly. They predicted growth of 2.3 percent to 2.8 percent this year, down from a forecast in December of 2.3 percent to 3 percent. The consensus forecast for 2014 also fell. Officials now expect growth of 2.9 percent to 3.4 percent in 2014, compared with a December forecast of growth from 3 percent to 3.5 percent.

Concerns about inflation remained in abeyance. Fed officials do not expect inflation above 2 percent over the next three years, well below their self-imposed ceiling of 2.5 percent inflation. At the same time, officials were modestly more optimistic about job growth. They predicted that the unemployment rate would rest between 6.7 and 7 percent at the end of 2014. In December, they predicted that the rate would sit between 6.8 and 7.3 percent at the end of 2014.

Against concerns that the pace of growth remains subpar, the Fed continues to weigh the possibility that its efforts will destabilize financial markets by encouraging excessive risk-taking.

So far, support on the committee for the stimulus remains strong. The decision to press forward was supported by 11 of the 12 voting members of the Federal Open Market Committee. Esther L. George, the president of the Federal Reserve Bank of Kansas City, recorded the only dissent, as she did in January, citing concerns about stability and future inflation.

Article source: http://www.nytimes.com/2013/03/21/business/economy/fed-maintains-rates-and-strategy.html?partner=rss&emc=rss