Soft landing remains possible

By John Cunniff The Associated Press
Tuesday March 06, 2001

What you can say for sure about the consumer’s state of mind is that it falls somewhere among the big C’s – confused, cautious, lacking confidence or suffering from a lost sense of control. 

It could be a bit of each, confusion being added to the mix after Tuesday’s congressional testimony by Alan Greenspan, when he indicated little urgency about the need for a quick, interim interest-rate cut. 

With consumer confidence and stock prices falling, Wall Streeters especially were surprised by the seeming complacency of Greenspan, who earlier had expressed worries that pessimism might worsen the downturn. 

Greenspan, the Federal Reserve chairman, never did promise the quick cut so widely anticipated; hopes for it simply grew on assumptions the economy was worsening and in need of a boost, and that he would respond before the scheduled meeting of the Fed on March 20. 

When he did not come through as hoped, disappointment was heavy, and the published expressions of the hopeful indicated that the man they had viewed as the hero of the great expansion had failed and confused them. 

The chairman did have some observations that helped explain why his anxiety of January seemed to have eased in February. Deterioration, he suggested, had not worsened in recent weeks, as indicated by still fairly strong home and car sales. While exports and consumption had weakened, investments in business equipment had not fallen as badly. 

Later information seemed to support the view. The Commerce Department announced on Thursday that January incomes grew by 0.6 percent, an improvement over December. And consumer spending rose strongly. 

In all, the picture remained mixed. New claims for state jobless benefits rose late in February, but January’s jobless rate of 4.2 percent ranked as one of the best in decades. Manufacturing jobs continued to be lost in February, but construction was up. 

This and other evidence suggests that what is viewed as weakening confidence among consumers might also include a large measure of confusion and a deepening caution that three years ago wasn’t part of the picture. 

Compared with what might be called average postwar years, the economy is still not devastated, as might appear to some. For several years, people were certain that times were improving. They felt in control of their lives and futures. And they miss that feeling. 

The fear of recession can’t possibly be avoided now, since it’s the talk of the town. And if it’s forgotten for a moment, it comes crashing back in the next headline or radio or TV newscast. 

But, say the more optimistic economists, there’s still a good chance things aren’t as bad as feared. 

It’s still possible, as Standard & Poor’s economist David Wyss once suggested, that a high-flying economy can be guided down to a landing that, compared to old standards, is at several thousand feet in the air. 

John Cunniff is a business analyst for The Associated Press