Paulson Retains Positive Economic Outlook

9/7/2007 2:35:17 PM While Wall Street gasped after employment data that left many investors running to fixed income, US Treasury Secretary Henry Paulson merely sighed. Paulson said he does not find Friday's weak report surprising, despite the fact that employment fell by 4,000 jobs in August. Rather, chalking it up to recent strains on the economy.

“There are real strains in the capital markets and across some of the credit markets and I think this will take a while to play out and almost certainly over time this will have an impact on our economy," Mr. Paulson said in an interview on Nightly Business Report on PBS Thursday night.

Paulson reinforced that sentiment earlier today in an interview with Bloomberg television. He downplayed today's report as a surprise piece of data, implying that it is merely a small piece in a larger puzzle full of strong economic data.

“Occasionally, you're going to find some surprises,” Paulson said. “As I said, this was not totally surprising.”

However, last night in the Nightly Business Report interview, Paulson stated that, while there will be penalties, he believes the economy will quickly recover.

"There will be a penalty to our economic growth and I'm quite comfortable that we're going to continue to grow, create jobs," Paulson predicted. He warned that it will take “weeks, maybe a matter of months" to sort out stresses in the capital markets.

Paulson echoed those ideas in his interview with Bloomberg television, remaining optimistic but commenting on the negative impact of the severely lagging housing sector.

"(The housing sector) is going to extract a penalty on growth, and what we're going through in the credit markets is very apt to extract a penalty on growth, but the economy is going to continue to grow in the second half of the year," Paulson told Bloomberg television.

The Labor Department today reported 4,000 fewer jobs in August than there were in July, the first decline in four years. Government jobs fell 28,000, but manufacturing jobs plunged by 46,000. Paulson cited real wage growth and growing US exports and said a strong global economy also gives him confidence that the economic situation would right itself over time.

Overall, Paulson retained his positive outlook, telling Bloomberg “I believe our economy is healthy.” Yet, he rejected criticism that he is slightly too peppy in his outlook, claiming “I never thought of myself as a cheerleader.”