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28 FED CONTINUES CUTBACK DESPITE POSSIBLE SLOWDOWN Officials at the Federal Reserve voted to continue cutting back its stimulative monthly asset purchases despite signs of a slowdown in economic growth to start the year. Citing the "cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions" since the start of the current stimulus program in 2012, the Federal Open Market Committee (FOMC) decided at its March meeting to reduce purchases of agency mortgage-backed securities to a pace of $25 billion per month and to dial back purchases of long-term Treasury securities to a pace of $30 billion each month, starting in April. e two cuts, made evenly, add up to another $10 billion reduction in monthly asset purchases. e decision was made despite a noted stumble in growth during the winter months, which the committee said "in part [reflects] adverse weather conditions." Overall, the consensus opinion of the labor market was that indicators remained "mixed but on balance showed further improvement," though the unemployment rate remains elevated. e unemployment rate ticked up to 6.7 percent in February despite a more promising showing in payrolls than in January and December. With the unemployment rate hovering just above the 6.5 percent threshold originally set by the Fed as one of its markers for holding down interest rates, the committee also updated its forward guidance to shift its goal to one more subjective: "maximum employment." In a press conference following the release of the latest committee statement, Fed Chair Janet Yellen remarked that while the 6.5 percent mark "had a very useful impact in helping markets understand our expectations and shaping their own," its use shrank as the economy approached that milestone so quickly. "e committee has never felt that the unem- ployment rate is a sufficient statistic to the labor market. In assessing the real state of slack in the labor market . . . it's appropriate to look at many more things," Yellen explained. "e closer we get as we narrow in on coming closer to the target we want to achieve, we will be carefully considering many indicators." Among those indicators, she says: the share of the labor force working part-time involuntarily, the number of discouraged and marginally attached workers, the long-term unemployment rate, and overall labor force participation. While some of those negative factors are seeing "exceptionally high" numbers, "the dial on virtually all of those things is moving in a direction of improvement," she said. e markets may take a little more convincing than that. In the minutes following the release of the FOMC statement, both the Dow Jones and NASDAQ saw declines—brought down even further by hints that the entire program could be finished as soon as October. CONSTRUCTION SPENDING INCREASES IN FEBRUARY Construction spending rose for the month of February, realizing a 0.1 percent increase after a downward revision to January's figures. is analysis was presented by the Wells Fargo Economics Group, which found monthly non-residential construction spending rose 0.6 percent, while residential construction fell 0.7 percent month-over-month. Total residential construction increased by 13.1 percent, year-over-year. e group noted that the 0.1 percent increase in February amounted to a $945.7 billion annual pace, the highest level in five years. "Total outlays are now up almost 9 percent on a year-ago basis," the group said. Although experiencing a decline in residential spending, the Wells Fargo Economics Group believes the housing recovery is still on track. It says that private residential spending is still up for the year, at 13.5 percent over last year. Private, nonresidential construction also increased for February. e group comments that spending increased by 1.2 percent, with power, communication, and lodging leading the way. "However, forward-looking nonresidential outlays paint a more somber picture," the group cautioned. e group added, "Billings for institutional architectural services and nonresidential employ- ment remain weak. In contrast, leading residen- tial construction indicators are showing signs of continued improvement."

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