WASHINGTON (AP) With layoff notices mounting and consumer confidence plunging, the promise of President Bush”s tax cut may be coming in the nick of time to avert a full-blown recession, economists said yesterday.
Analysts said the activity surrounding Bush”s rollout of his $1.6 trillion plan and the favorable comments tax relief is generating in Congress should give an immediate, badly needed boost to sagging consumer confidence even before any votes.
“We have gone from fighting about who will be president, which played a role in deflating consumer confidence, to talking about how large the tax cuts will be and when they will come,” said Mark Zandi, head of Economy.com, a Pennsylvania forecasting firm. “That is a refreshing change that should help boost confidence.”
There is no doubt that the once high-flying economy is in need of a boost.
The government reported last week that the overall economy had skidded to a barely discernible 1.4 percent growth rate in the fourth quarter last year. Federal Reserve Chairman Alan Greenspan has warned that growth in the current quarter could be “very close to zero.”
Consumer confidence has fallen for four straight months, the unemployment rate in January crept up to a 16-month high and some of America”s biggest companies are announcing even more layoffs.
For January, the number of layoff notices shot up to 142,208, the highest total in the past eight years, Challenger, Gray & Christmas, a private Chicago placement firm that tracks layoff notices, said yesterday.
Since a recession is usually defined as two consecutive negative quarters for the gross domestic product, analysts said the talk about impending tax cuts could be enough to lift consumers” moods before a weak winter is turned into a negative spring.
“Right now, things are too close for comfort. When you get down to these low levels of growth, it doesn”t take much to turn economic weakness into an actual recession,” said David Wyss, chief economist at Standard & Poor”s Corp. in New York.