Still, a 125-point cut in short-term interest rates (a three-quarter point cut the prior week plus a half-point cut after the regular Federal Reserve meeting) is a very big event, and one that doesn't occur except once in a blue moon. The need for unusual action was underscored by the report of only 0.6 percent GDP growth (annualized) in the fourth quarter and fear that growth is not much stronger in the first quarter of 2008.
Such fears were compounded by news later in the week that employment declined in January. It wasn't just a decline in construction and manufacturing. Jobs in services, excluding health and education, fell. That isn't likely to quiet nervous consumers. Altogether, the news in late January suggests that the slow economy is likely to be around for a while, perhaps even all year.
Growth prospects elsewhere around the globe aren't as sluggish. While the U.S. suffered job losses in the latest employment rate, Germany saw its unemployment rate fall again. But, partly because growth is stronger, euro-zone inflation hit 3.2 percent, a number that clearly is precluding interest rates in Europe from coming down, as they have domestically. This is not just occurring in Europe. Rising prices, especially for food, precluded the Reserve Bank of India from dropping rates. Thus, the ECB and the RBI failed to follow the actions of the Federal Reserve. Finally, stock markets around the globe had what can only be described as a tumultuous month. The BBC Global 30 index fell a little more than 9 percent in three weeks, but recovered more than a third before the month ended.
It's not just the economy that's making people nervous. The worst snow fall in half a century in China couldn't have come at a worse moment. Many workers were stranded trying to get home for the new year holiday. It can only get better. Could it get worse?
