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The Federal Reserve announced today it will not change interest rates and offered no specific new policies to revive the economy.  But that doesn't mean the nation's central bank isn't worried about economic growth. In a statement, the Fed indicated the sluggish economy can keep inflation too low and that in turn could spur it into action.

"What they can do is add more quantity of money," said John Canally, an economist with LPL Financial. "So they're trying to put more money in the system to sort of restart and spark the economy."  

Stocks were largely flat today until the afternoon announcement from the Fed, when they then ticked upward. Eventually they ended the day near where they started. The Dow added seven points, closing at 10,761. The Nasdaq and the S&P 500 both had small losses.

Also, after dismal reports this summer about the housing market, there was some good news today. New home construction was up more than 10 percent in August. Many economists had forecast the rate to drop.  

"We're seeing some stability in the housing market rather than a continued fall-off," said Stuart Hoffman, the chief economist with PNC Financial Services. "And I think it does reflect the timing, the very volatile timing, just before and just after the tax credit expiration on April 30." Later this week, August home sales will be released.

Bloomberg Asks for Budget Cuts, Announces Hiring Freeze

Citing disappointing tax revenues and a weak economy, the Bloomberg administration is once again asking for hundreds of millions of dollars in budget cuts and a hiring freeze across city government.

WNYC's Bob Hennelly has the details.

I understand the mayor sent a letter to his different agency heads, explaining the fiscal situation. What does it ask them to do?

Well, the mayor's target is for $2 billion in savings from this year and next year combined: $800 million in the current year, and $1.2 billion in the next year. Once again, he tries to shield uniform emergency services and the Department of Education from the worst of the cuts, calling for 2.7 percent from them in the current year, and four percent next year. Where things get really difficult is for the other agencies, like the Parks Department, Administration of Children's Services and the Department of Transportation. They have to do 5.4 percent this year and eight percent next year.  

Last week, we learned New York City is adding jobs much faster than the state and the nation as a whole. So why isn't that helping the fiscal situation here?

There's a number of factors. One, you have tax revenues for personal income tax and business and real-estate -- still remain $4 billion dollars off where they were pre-recession. Also, Albany has more than an $8 billion budget gap for next year and you have to keep in mind that Albany supplies $11 billion  out of New York City's some $63 billion, so when they have a shortfall, they know where to come to try to make it up. And there's the loss of federal stimulus funds, that's not far down the road. And then the mayor, who is facing negotiations with the city's unions, is concerned about the explosion of pension costs.  

"City services are still as good as they've ever been here," the mayor said. "But, if we could solve our pension problems, that would give us $6 billion dollars more to have more employees and do more things."

And the thing is, when he came into office, he says it was at 1.5 billion, and then up in Albany -- kind of ironic it's up in Albany where the decisions are made by the legislature about public pensions -- it's now up to $7 billion. Now, that's a big chunk of change annually out of a $63 billion budget.     

And, looking forward, a new financial world order is troubling the mayor. How is that doing so?

Well, even independent analysts point to the fact that, you know, through the Basel accords we're seeing international efforts to set a limit on how mega-banks, many of them in our neighborhood, use leveraging and borrowing to try to make money. We also have the federal government's efforts to try to re-regulate. We haven't seen the fine print on that, and the question is, you know, how's that going to effect Wall Street, which is still our prime economic engine.

Let's go back to the mayor's proposed cuts, which are going to effect all New Yorkers. Can you give us some perspective, can you say how much the city government has already shrunk since the downturn began?

I guess the eight rounds of mid-year cuts have been around $4 billion in savings, and, amazingly, I think somewhere up to 2,500 jobs have been cut. In a 300,000 person workforce, that's pretty good. The problem is that attrition was something you used to be able to count on to kind of shrink the workforce without laying people off. But in tough times, people stay put and keep their jobs.      

And what's the word on the street from other elected officials, from unions -- what are they saying about this latest effort to reduce the workforce?

There's nothing there for them to react to yet. October 8 is when all the agency heads have to submit exactly where they're going to make these cuts.   

I see. So you're saying, in a nutshell here, that we won't see it as badly in the uniform services. Do you think that's true to say?

There will still be cuts there. Every time you go back and do this, it's harder and harder to avoid layoffs. The things you've done in terms of bringing down office costs, utility costs, all of that has been realized already. And, again, the city is in the business of providing services; services take people. Now one of the things that's instructive -- now in the fire department for instance, it's like $1.4 billion for salaries to pay for firefighters, but $1.5 billion for their pensions and healthcare costs. So we're at a crazy tipping point, where it's actually more expensive in terms of the health and benefit component than it is of the salary. And the question is, is that sustainable?