The Federal Open Market Committee offered its thoughts about the U.S. economy once again on Wednesday, and—in cautious, Fed-speak terms—came out more optimistic than it’s been in a few months. The current state of the economy, the FOMC said in its statement, “suggests a return to moderate economic growth following a pause late last year. Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated.”
As part of its statement, the Fed also asserted that the economy isn’t quite strong enough for the central bank to back away from QE3, which is journalists’ shorthand for the ongoing Fed program of buying agency mortgage-backed securities to the tune of $40 billion per month and longer-term Treasury securities at a pace of $45 billion each month. Not quite all the members of the committee were on board with continuing QE3: Esther George, president of the Kansas City Federal Reserve, voted nay on the policy, citing the risks of future “economic and financial imbalances,” and long-term inflation.
Interest rates will remain low, too, despite the improvement in the economy. As Fed Chairman Ben Bernanke pointed out during the press conference after the FOMC statement was released, there have been false dawns after the recession before, notably the springs of 2010 and ’11. The central bank wants to make sure the recovery this time around isn’t another one of those.
Architects busier than before
The American Institute of Architecture reported on Wednesday that its Architecture Billings Index, which is a leading indicator for the economy and for real estate development, is still strengthening. The index was 54.9 in February, up slightly from a mark of 54.2 in January, and the highest level since 2007, before the recession.
The score reflects a strong increase in demand for design services, since any score above 50 indicates an increase in billings. It also points to the not-too-distant future in construction spending—in about nine to 12 months, since architectural billing tends to proceed construction spending by that span.
“Conditions have been strengthening in all regions and construction sectors for the last several months,” AIA chief economist Kermit Baker noted in a press statement, though he was a bit cautious as well. “We also continue to hear a mix of business conditions in the marketplace as this hesitant recovery continues to unfold,” he explained.
Government shutdown looks less likely
The Senate, after a fair amount of debate in recent days, passed a continuing resolution to fund the federal government until September, in lieu of a standard budget. Most of the amendments offered to the bill dealt with ameliorating the worst effects of sequestration, such as keeping all of the government’s meat inspectors on the job. Only a handful of the amendments passed, including the one about meat.
Now the measure goes on to the House, where it’s expected to pass. For all the recent bluster about the budget, and competing versions of what the federal budget should be, neither chamber seems to have the stomach for a full-fledged federal government shutdown, as happened in 1995.
Wall Street started back on its upward track again on Wednesday after a few days of stall, perhaps inspired by the as-yet unresolved Cyprus crisis in the euro zone. The Dow Jones Industrial Average gained 55.91 points, or 0.39 percent, while the S&P 500 was up 0.67 percent and the Nasdaq advanced 0.78 percent.