WASHINGTON -- High U.S. debt levels are choking the economy and making it more difficult for the Federal Reserve to hep by lowering interest rates, Fed Chairman Alan Greenspan said Friday.

"A heavy overhang of debt, an accumulation of bad loans, and doubts about th future have produced an unusual degree of caution among many key lenders, as well as on the part of businesses and consumers," Mr. Greenspan said in a speech to the Securities Industry Association in Boca Raton, Fla.

His comments came shortly after the Fed apparently moved again to trim short-term interest rates by cutting the federal funds rate to 4.5% from 4.75%. Analysts say the Fed's shift to an easier monetary policy was prompted by the Labor Department's jobs report, which said labor markets deteriorated in November.

Bond market analysts said there was no doubt of the Fed's shift in stance after the trading desk of the Federal Reserve Bank of New York added $3 billion in reserves to the banking system through customer repurchase agreements.

In his comments to the SIA, Mr. Greenspan gave an unusually lengthy and detailed analysis on the credit crunch and on the buildup of debt by consumers and businesses.

"Clearly, many businesses, as well as households, took on considerably more debt in the 1980s than they could comfortably service under less buoyant economic circumstances," Mr. Greenspan said.

As banks pulled back from lending to commercial real estate and other sectors, there was also a marked reduction in credit demand, he said.

The U.S. economy is now dealing with the consequences of "balance sheet deflation," said Mr. Greenspan. He noted, for example, that mergers and acquisitions financed by debt have fallen by the wayside. Moreover, he said the drop in real estate prices is hampering home owners from getting equity loans to finance consumption or the purchase of other assets.

But Mr. Greenspan was optimistic about inflation. "Inflation pressures have abated, and the inflation rate is headed down," he said.

Some analysts said more rate cuts, including a reduction in the discount rate from 4.5% to 4%, are likely before the month is over as Fed policymakers seek to keep a flat economy from falling back into recession. The Federal Open Market Committee is scheduled to meet Dec. 17 to review monetary polcy.

"The odds favor it," said Ray Stone, managing director of Stone & McCarthy Research Associates Inc. in Princeton, N.J. "I would think they're going to go pretty soon, probably before the FOMC meeting. They don't need any more numbers."

The Labor report said the civilian unemployment rate last month remained unchanged, at 6.8%, but the survey of nonfarm payrolls showed a drop of 241,000 jobs -- a much larger decrease than the bond market was expecting. The job losses were concentrated in construction, manufacturing, and retail trade, which are three sectors that have grown increasingly troubled in recent months.

Janet Norwood, commissioner of the Bureau of Labor Statistics, said the decrease in nonfarm jobs was accentuated by updated methods to adjust for seasonal factors that affect hiring. Using the old methodology, nonfarm payroll jobs would have been down about 170,00. she said. Moreover, she added, the drop in construction employment reflected unusually harsh weather.

Still, analysts said, the employment report was not a good one and put continued heat on the Federal Reserve and the Bush administration to get the economy moving again. Even before the report was issued, many economists were saying U.S. growth had come to a near halt.

The Commerce Department reported last week that the economy grew sluggishly in the second and third quarters, but the figures were even weaker than they appeared on paper. Much of the rise in third-quarter gross domestic product came on a big swing in inventories, and final sales actually contracted.

"That's a vicious combination," said John Silvia, chief economist for Kemper Financial Services Inc. in Chicago. "Retail firms are discounting prices to get rid of inventories, and they're not hiring people or laying off people at a season when they should be hiring."

Retail employment fell by 110,000, the Labor report said, as preholiday hiring in department stores and specialty shops remained well below the pattern of recent years. Hiring at restaurants and drinking places was also off, and jobs in wholesale trade continued to fall.

In addition, construction jobs fell by 95,000, and manufacture jobs edged down for the third month in a row.

Mr. Silvia said he expects to see "flat or possibly negative" growth in the current quarter, putting "tremendous pressure" on the Fed and the administration to do more to move the economy off dead center.

But it remained unclear whether any government policymakers could do anything much to turn things around very quickly. Bush administration officials testifying to Congress last week did not make clear what, if any, kinds of new budget initiatives they may offer. Moreover, some analysts are saying high debt levels are making consumers and businesses reluctant to borrow and spend despite lower interest rates.

"It's bothersome because it's not clear what the policy prescriptions can be," Mr. Stone said. "The Fed can keep lowering rates, but it's a little bit like pushing on a string. Fiscal policy may put some money in people's pockets but raise interest rates."

Although last week's figures showed a small rise in U.S. output of goods and services during the middle of the year, said Mr. Stone, "it's not clear we ever had a recovery. Something unsatisfactory seems to be in the bag, and my guess is that'll continue right through the election."

Mr. Silvia was not much different in his assessment. "This is not the situation that the administration and the Fed wanted to get into, and they're in it. We had a modest recovery in the second and third quarter, and now we're back in the soup."

"Growth is pretty flat at this time," said William Sullivan, director of money market research at Dean Witter Reynolds Inc. "The Fed is clearly responding, and this increases the chance for fiscal stimulus at some point."

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