Federal Reserve's top staff economist to step down

Reuters News
Posted: May 31, 2011 2:40 PM
Federal Reserve's top staff economist to step down

By Pedro Nicolaci da Costa

WASHINGTON (Reuters) - The Federal Reserve's top staff economist will step down in September after three decades at the U.S. central bank, leaving open a key post at a time when economic growth appears to be losing steam.

David Stockton, 57, is known for cracking a joke or two even in stern settings like Fed interest-rate meetings. He has been director of the Division of Research and Statistics for 11 years.

In that role, Stockton supervised economic analysis and research and was responsible for briefing the Federal Open Market Committee, the Fed's policy-setting arm, on the U.S. economic outlook as it decides on the path of borrowing costs.

"David Stockton is one of the finest economists I have known," said Fed Chairman Ben Bernanke in a statement. "My colleagues on the Committee and I have enjoyed the benefits of his penetrating and insightful analysis and impeccable judgment -- not to mention his superb sense of humor."

Transcripts of FOMC meetings offer some flavor of Stockton's light-hearted approach to policy-making. At times, his comedic flare even proved rather prescient.

"While channel surfing the other night, to the annoyance of my otherwise very patient wife, I came across a new television series on the Discovery Channel entitled 'Flip That House.' (laughter)," he said at a December 2005 meeting, just as a housing bubble that would come back to haunt the central bank was reaching fever pitch.

Stockton went on to say that only time would tell if the TV show and other signs were just a "head fake or are the start of our long-awaited slowdown in this sector."

He will retire on September 30., with the battered U.S. housing sector still showing few signs of life. Indeed, some indicators suggest things are getting worse, with data on Tuesday from the closely watched S&P/Case-Shiller survey implying a further fall in home values is dragging housing into a double-dip.

Although there has been some progress in bringing down the jobless rate, it remains at an elevated 9 percent, and some areas of the economy that had been showing strength, such as manufacturing, now appears to be fraying.

This poses a dilemma for the Fed, which has already deployed an unprecedented amount of monetary firepower in response to the global financial crisis and recession.

In his 30 years at the Fed, Stockton lived through both "the Great Moderation," an extended period of relative economic calm, and its aftermath -- the most severe meltdown since the Great Depression.

The Fed, while slow to recognize the crisis that struck with a fury in 2007 and lasted into 2009, eventually acted in force, bringing official rates down to zero and undertaking a host of unconventional measures to support growth, including some $2.3 trillion in government and mortgage bond purchases.