Yellen: Housing woes have stalled economy

Recent market shocks have “all but stalled and could contract” the U.S. economy, said Janet L. Yellen, president of the Federal Reserve Bank of San Francisco. “Until recently, the deflating housing bubble had not spilled over to the rest of the economy, but now it has,” she said during a speech at the Stanford Institute for Economic Policy Research in Stanford, Calif. “Based on monthly data that cover most of the first quarter, it appears that growth consumption and business investment spending has slowed markedly after years of robust performance,” Ms. Yellen said. She predicted a slight pickup over the second half of the year, but pointed out that overall economic activity for 2008 would be sluggish as a result of the damage already done. She attributed the economic downturn not only to the crisis in the housing market, but to the shrinking labor pool as well as the increasing cost of food, energy, and other essential goods. “Consumer spending also appears depressed by all of the bad economic and financial news, as national surveys show that consumer confidence has plummeted,” Ms. Yellen said.