By Evelina M. Tainer, Chief Economist, Econoday
January 10, 2003

The employment situation turned out worse than expected, once again. The jobless rate was unchanged but nonfarm payrolls fell more sharply than previous months. Other indicators in the week, including factory orders and consumer credit, were generally more negative than expected. The December employment report is not sufficiently weak to change views among Wall Street economists and Fed officials that the economy will post moderate growth in 2003. But it certainly ends the year on an anemic note.

President Bush unveiled a new economic stimulus plan that would reduce income taxes across different groups. The plan highlighted an end to the double taxation of corporate dividends. While most economists agree that ending the double taxation of dividends was long overdue, political pundits decried the measure as helping only the rich. In fact, senior citizens are the group most likely to benefit at this time. In any case, it remains to be seen what kind of new tax plan will be enacted after Democrats and Republicans in the House and Senate are done putting in their two cents worth. In any case, a reduction in taxes that isn't accompanied by a reduction in government spending will certainly lead to increased government borrowing - one reason that bond investors are worried about long term interest rates.