Kiplinger Connection
The Economy • Global Economy • Human Resources

The Economy: Lowering prime to 6.75, the Fed aspires to spur growth.
Global Economy: As the U.S. slows, so does Asia.
Human Resources: Accessibility laws likely to get stronger.

The Economy
The Fed will supply more stimulus, and more quickly than Congress.
Look for a half-point cut in interest rates on Jan. 30, when policymakers conclude their next meeting.
The reduction will prompt banks to lower the prime rate to 6.75%, down from 7.25%. The benchmark prime stood at 8.25% as recently as September, which the Fed cut Tuesday to 7.75%.
The rate cut means the Fed has put inflation on the back burner, at least for now. It’s more worried about spurring economic growth.
But inflation remains a concern, and the Fed will address it later in the year, once the economy is able to shake off its lethargy.

As consumers hold wallets tighter, retailers need to work harder.
What do experts advise? Stock only what consumers are buying. Keep a close eye on what’s moving, and focus efforts on those products. Lower prices can help, but not if they slice deeply into profit margins. And too many sales make buyers feel they can always wait till next time. Use sales staff efficiently. Study consumer traffic patterns, and don’t schedule more salespeople in the store than conditions warrant.
Create a more comfortable environment so stressed shoppers don’t feel pressured. Let them know that you understand their concern about price. Emphasize service and selection, and don’t push too hard.

Global Economy
Japan will just barely avoid tipping into a recession this year.
Its gross domestic product will grow only about 1.3% in 2008, nearly the same as in the U.S. Flat wages and rising prices for fuel and food will sap consumer spending.
High commodity prices are squeezing businesses, which often can’t pass the cost along to buyers. Smaller companies are being pinched the most.
Policy mismanagement is another problem. Strict new building safety codes were imposed in 2007 without much advance notice to firms, sparking delays in home and office building.

The U.S. will feel the sting as Japan’s demand for American exports declines in coming months. U.S. farm products will take the biggest hit.

No sign of a slump in South Korea ... GDP growth of 4.8% this year, about the same as last year. The president-elect, Lee Myung-bak, has set a goal of 7%, but that won’t happen. Weaker exports to the U.S. and Japan will offset the growth in demand domestically and from China.
Korea’s parliament will probably OK a U.S.-Korea free trade pact. But U.S. approval will be a much harder sell. Senate leaders won’t let the agreement come to a vote until Seoul lifts its restrictions on U.S. beef imports, which date back to the mad cow scare of 2003.

President-elect Lee will be a welcome change for Bush, who sparred with his predecessors Roh Moo-hyun and Kim Dae-jung.
Lee is likely to take a harder line with North Korea when he takes over, insisting that economic cooperation with Pyongyang hinges on its commitment to disable all nuclear weapons facilities.
He may soon have an opportunity to show he means business. North Korea has now fallen behind in meeting its commitments.

Human Resources
Employers should brace for an expansion in disability law.
Lawmakers are pushing a bill to broaden the reach of the ADA, the Americans with Disabilities Act. It now applies only to conditions that substantially limit a major life activity, but draft legislation drops that qualifier. The new bill would apply the law to all ailments, mental and physical, even when controlled by medication or treatment.
Businesses can’t count on a Bush veto. The original ADA was part of his father’s legacy, and he may be reluctant to block an expansion, though he’ll probably work hard to make the changes less onerous.

New rules on access for the disabled will have a huge impact.
They’ll affect almost all businesses that are open to the public. The regulations, coming from the Justice Dept. next month, are likely to require lower light switches, bigger bathroom stalls, more van parking, and more-accessible sales counters. Firms worry that facilities modified to meet existing rules may now be required to make a new set of fixes.

Employers are also gearing up for a fight over a new OSHA rule. The Occupational Safety and Health Admin. is expected to propose changes in exposure limits to diacetyl, a butter-flavor chemical additive tied to a rare but sometimes fatal lung disease known as "popcorn lung." It has been identified in workers who help produce microwave popcorn.
Businesses worry that the new rule will set a bad precedent. Though narrow, the regulation comes before scientists have agreed on exposure levels. Firms say that’s putting the cart before the horse.
But OSHA is getting heat from Congress, with many lawmakers threatening legislation if the agency fails to take action this year.

Lump-sum pension payouts will shrink because of a change in law. Starting this year, employers will base payments on a yield curve for investment-grade corporate debt instead of the 30-year Treasury rate, which is often lower. The change will be phased in over five years.