Many had hoped that the new U.S. administration under incoming President Barack Obama would change the economic momentum, not only in the U.S., but also on a global basis. As many view the U.S. as the epicentre of the current global recession, many business and investment professionals scrutinize U.S. developments for indications of stabilization or recovery.

Economic statistics throughout the quarter continued to spiral downward, with U.S.and Canadian employment statistics particularly worrying. In the U.S., initial jobless claims exceeded 600,000 for 8 weeks in a row, and overall unemployment surged to more than 5.7 million. Statistics Canada reported that more than 82,000 Canadians lost their jobs in February, well above analysts’ estimates of 55,000.

In mid-March the U.S. Federal Reserve announced a plan to buy US$300 billion in longer-dated Treasury securities. Falling into the category of quantitative easing, the intent is to drive down longer-term interest rates by increasing the quantity of the money supply. Similar quantitative easing plans have also been announced by Britain, and Canada, and are one of the few tools available to central banks since they have lowered rates to close to zero. The risk to this strategy is inflation, and while there are fears of deflation (decreasing prices), recent statistics show that prices are rising only modestly, allaying fears of either uncontrolled inflation or deflation.

Also in March, U.S. Treasury Secretary Timothy Geithner unveiled a long awaited initiative aimed at helping the financial sector. The plan proposes a partnership with the private sector, where the Treasury will match private investment, combined with guarantees from the Federal Deposit Insurance Corporation (FDIC), to buy troubled assets from financial institutions. Funding for the US$500 billion plan will come from last year’s Troubled Asset Relief Program (TARP).

Late in the quarter there were some economic numbers that could be considered glimmers of hope. U.S. durable goods orders rose by 3.4% in February—described by Treasury Secretary Geithner as a slowdown in the pace of economic deterioration. And while small, U.S. consumer spending numbers showed consecutive increases for both January and February. Given the importance of consumer spending to the U.S. economy, these increases are considered to be significant by many analysts.

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