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Guess What: Fed Hikes May Be Working
By John Crudele  
N.Y. Post
NEW YORK — The economy might finally be slowing down — a little, little bit.

If you're looking for signs that Alan Greenspan might soon be able to act more gently with interest rates, you're in luck. Economists say that the nation's economy — which Washington said roared ahead at an improbable 7 percent growth rate in the first quarter — might be moderating a bit.

The hints of a slowdown are nothing to get excited about if you want to see Greenspan lay off rates. And don't get worried yet about a recession. In fact, the signs of a slowdown are still so faint that you shouldn't even trot out the "soft landing" banner just yet.

But commodity prices are starting to back off recently high levels, and, the experts say, that usually means industry doesn't see the need for as much raw material as it had been using. In short, business may still be booming, but the boom may not be as ostentatious as before.

Anirvan Banerji, research director of the Economic Cycle Research Institute, confirms there are signs the economy is weakening a tad. That's the good news.

"But it's not enough to bring inflation down," he quickly adds.

Listen carefully to this guy. Geoffrey Moore, who died just a few weeks ago, was a close friend of Alan Greenspan. Moore headed up Banerji's organization and, in that role, was very influential with Greenspan.

"We are beginning to see glimpses of a slowdown in manufacturing," says Banerji. Others say that's the reason oil prices have come down in recent weeks, more so than because of any OPEC agreement to increase energy output.

On the other hand, ECRI says inflation is terrible right now. "No easing up. The inflation number is up again and is the highest since March of 1989," Banerji says. Greenspan's friend Moore devised a private index of future inflation that ECRI uses to this day.

If you look carefully at some of the economic numbers being released by Washington, you might notice a slowdown in the economy.

For instance, the Labor Department reported on Friday that 416,000 new jobs were created in March. That was higher than Wall Street expected, and other news organizations reported that this was the biggest jump in five years.

But look at the numbers more carefully.

Start with the February figures, which were revised to a growth of just 7,000 jobs. The original figures had been an already-disappointing 43,000.

And those figures are even weaker than they look.

Washington already adds about 160,000 new jobs to each month's count. That's something called the "bias factor," and it's supposed to account for jobs that are being created but that the government can't count. It's a way to "bias" the figures in a politically favorable direction.

The job figures released last Friday were especially deceptive.

For one thing, the 416,000 total included about 117,000 temporary jobs created to take the U.S. Census. And the period during which the Labor Department took its March survey was five weeks long, not the usual four, because of a calendar quirk. That added extra jobs to the tally.

Plus, there's those 160,000 bias jobs.

Will the economy continue to slow? Will Greenspan and the Fed be able to leave interest rates alone during the politically sensitive summer period?

It's too early to say. And the whiffs of an economic slowing that some people are starting to smell aren't strong enough yet to start making predictions.

But this tiny economic slowdown could turn important if the stock market behaves itself — meaning, if the bubble doesn't get any worse.

Last week's near meltdown in the equity markets could slow the economy. Or it could have the opposite effect.

Since the world didn't end for investors, they might become even more bold in the future. And bold isn't what Greenspan wants right now.

What's the bottom line?

Greenspan will continue to raise interest rates, but slowly and carefully. And if the economy slows in a more pronounced fashion, then he might even be able to leave borrowing costs alone from the summer through the November election.

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