Financial Times FT.com.US Economy & FedClose..IMF warns of contagion threat to US
By Alan Beattie and James Politi in Washington Published: July 8 2010 14:28 | Last updated: July 8 2010 18:16 The US economy has rebounded faster than expected but faces the threat of contagion from sovereign debt problems in Europe, the International Monetary Fund has warned. In an advance summary of its annual health check of the US economy, the IMF said: “While still modest by historical standards, the recovery has proved stronger than we had earlier expected, owing much to the authorities’ strong and effective macroeconomic response.” The release of the report on Thursday was accompanied by a piece of good news about the US economy, which contrasts with a run of disappointing data. The number of Americans filing for jobless claims last week fell more than expected, offering some measure of comfort that the recovery in the labour market is advancing, albeit slowly. But the IMF warned that, along with risks of renewed weakness in the US housing market, international events of recent months had introduced risks to the recovery. “Sovereign strains in Europe have become an increasing concern, potentially impacting the United States through financial markets and, in a tail risk scenario, trade links,” the fund said. “Tail risk” usually refers to an extreme scenario that may be more probable than standard assessments predict [i.e., "black swans" or "uncertainty"]. The fund also said that, since it was less optimistic than the US administration about the capacity of the US economy, fiscal policy should be tightened more than the White House was currently planning. [So much for "the authorities’ strong and effective macroeconomic response”: it should be reversed, at least on the fiscal level.] The US Treasury noted that the report’s release, which is at the discretion of the country being analysed, “is consistent with the United States’ longstanding, strong support for enhanced transparency of the IMF”. For the first time this year’s report also includes an assessment of the stability of the financial sector, the summary of which was broadly complimentary to recent US financial regulatory reform. The labour department on Thursday said initial jobless claims fell by 21,000 to 454,000 in the week ending July 3. Economists were expecting claims to drop to 460,000. The strength of the labour market recovery has been called into question recently as payroll data showed sluggish private sector job creation for two consecutive months in May and June. Meanwhile, the unemployment rate is still at 9.5 per cent, unusually high for the US. [So much for "the authorities’ strong and effective macroeconomic response,” in a different way: it's too feeble.] Weekly jobless claims – at stubbornly high levels in recent months – are a useful, if volatile, real-time indicator of the pace of job cuts by US employers. The less volatile four-week moving average was reduced from 467,250 to 466,000, also an encouraging sign. While the improvement in weekly jobless claims may be transitory, it comes in the wake of a string of bad news on the US recovery. [Jobless claims fell partly due to falling eligibility for unemployment insurance benefits.] Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others. .."FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms © Copyright The Financial Times Ltd 2010. -- Jim Devine "All science would be superfluous if the form of appearance of things directly coincided with their essence." -- KM _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
