After being expected to register the first decline since 2009, retail sales increased in March. Image: CC .Martin./Flickr

Retail sales increased in March, defying the expectations of a consensus of analysts. Harsh winter weather, rising gas prices and a late Easter holiday were expected to produce the first monthly retail sales decline since 2009. But factors including a declining unemployment rate and higher prices resulted in a modest monthly gain.

Measuring monthly retail sales

U.S. retailers reported a 1.7 percent year-over-year increase in retail sales last month, according to a Thomson Reuters survey of 25 national retail chains. The numbers are based on retail sales reported at stores open at least since last March. The metric, known as “same-store sales,” is considered a reliable measure of retail performance because sales anomalies due to store openings and closings aren’t a factor. But analysts doubt whether the March increase is a solid trend in consumer demand. Later this year, rising prices for groceries and gas are expected to impact consumer spending. Plus, only 10 percent of retailers report monthly sales figures. A better picture of the consumer economy will come into focus when companies such as Wal-Mart, Best Buy and Home Depot report quarterly sales figures.

The importance of Easter shopping

Analysts expected March retail sales to be lackluster in large part because of the Easter holiday. This year Easter falls on April 24, three weeks later than last year and the latest Easter in decades. The calendar moves Easter shopping to April from March a year ago. The fluctuating nature of the Easter holiday has led retail analysts to create a calendar period called “Mapril” in order to get a more accurate reading on year-over-year retail sales. Some in the industry expect this year’s later Easter date would give retailers an extra boost in April sales. The International Council of Shopping Centers forecasts a robust 5 percent to 6 percent April increase. But a fragile economic recovery hit by rising food, gas and commodity prices, plus a depressed housing market and tenuous employment picture could mean that Mapril retail sails will surprise analysts in the opposite direction they did in March.

Don’t get too excited about retail stock

Many other factors suggest the March retail sales increase should be taken with a grain of salt. According to Jeff Macke at Yahoo! Finance, investors should still be wary of retail stock. He cites the fact that retailers are raising prices to offset rising prices in the supply chain, which inflates sales figures but doesn’t increase profit margins. Plus, the release of winter’s grip also released pent-up consumer demand, which resulted in bigger than normal clearance sales — great for the consumer, not so great for the retailer. Finally, retail sales beating extremely low expectations doesn’t mean much. After the Easter bump, malls could empty and margins could shrink as consumers feel the pinch of food and gas inflation.

Sources

Los Angeles Times

MSN Money

Yahoo! Finance

MarketWatch

The February jobs report indicates that unemployment is starting to consistently decline. Photo Credit: Nightscream/Luigi Novi/Wikimedia Commons/CC-BY 3.0

The February jobs report indicates that unemployment has declined slightly since January. The rate of unemployment declined .01 percent to 8.9 percent over February. It is the third month in a row that unemployment has decreased.

Employers adding jobs

The February jobs report was recently released by the Department of Labor, and it showed that the increase in hires during the month of February was a small one, but an increase nonetheless. The unemployment rate decreased by a paltry 0.1 percent, from 9 percent in January to 8.9 percent in February, according to CNN. Employers added 192,000 jobs to the economy, which was a dramatic improvement over January. In January, employers added 63,000 jobs to the overall economy, but January was slower than February as winter weather brought many areas to a near standstill, according to the Los Angeles Times. Besides an increase in hiring once the snow relented, December and January jobs reports were revised by the Labor Department to reflect that 50,000 new hires had gone previously unreported.

Third consecutive month of decreasing unemployment

The unemployment rate has declined for the third month in a row. The rate of unemployment has waxed and waned for the past several years, and there have been declines noted all along the way, but the unemployment rate declined nearly an entire percentage point from December to February, marking significant progress. The number of initial unemployment claims fell to 368,000 recently, marking a three-year low for new filers. More than 9 million people are claiming unemployment benefits, according to Forbes.  The economy is projected by the Federal Reserve to grow between 3.5 and 4 percent during 2011, though rising gas prices are sure to cause some hiccups over the next few months.

Government spending cuts could scuttle recovery

Congressional Republicans are on a mission to drastically cut the federal budget down to size, which some economists believe will negate any progress made toward curbing the high rate of unemployment, according to CBS. Mark Zandi, the chief economist for Moody’s Analytics, predicted that the House Republican plan to cut $61 billion from the federal budget could result in more than 700,000 people losing their jobs. A similar projection was also released by Goldman Sachs, though the objection was raised immediately that Zandi had been one of the most prominent supporters of the various stimulus packages and had claimed that unemployment would stay below 8 percent with stimulus spending.

Sources

CNN

Los Angeles Times

Forbes

CBS

Home Depot announced that it has started to fill 60,000 jobs as the national retailer gears up for the springtime rush. Image: CC TheTruthAbout/Flickr

Home Depot will add 60,000 jobs this spring, the company announced Tuesday. Spring is the busiest time of year for Home Depot, the world’s largest home improvement retailer. Home Depot hired about the same number of temporary workers in 2010, but the company’s announcement comes with other signs that the labor market is improving.

Home Depot is hiring now

Spring at Home Depot is like Christmastime at most other retailers. To get ready, the company is hiring 60,000 seasonal workers during February and March to fill Home Depot jobs. Home Depot also said Tuesday that it will be creating new permanent part-time and full-time positions for the second year in a row. According to an earnings report, a year ago the home improvement retailer employed 317,000 people, including 298,000 hourly or temporary workers. About 61 percent worked full-time. Home Depot stock rose 11 cents to $37.69 Tuesday when the hiring push was announced. Home Depot stock has risen 7.5 percent this year.

Home Depot’s Spring Black Fridays

Home Depot said that 60,000 seasonal workers is comparable to the number hired last spring. The company takes advantage of the springtime rush for home improvement and gardening supplies with “Spring Black Friday” events across four weekends. When and where the Home Depot Spring Black Fridays take place will depend on when spring weather arrives in particular regions of the country. In March, Home Depot will start rolling out the discounts on garden tools, barbecues and other home improvement and outdoor merchandise.

Is the job market improving?

The Home Depot jobs announcement could be a tangible sign that the job market is improving. Last week the Labor Department reported that weekly jobless claims hit their lowest level in two and a-half years. The unemployment rate fell to 9 percent in January from 9.4 percent in December. The Thomson Reuters index of consumer sentiment rose to 75.1 in February, the highest level in eight months. Consumer spending, about 70 percent of the economy, grew at a 4.4 percent annualized rate in the fourth quarter, the highest rate of growth since the first three months of 2006, according to the Commerce Department.

Sources

CNN

Bloomberg

Reuters

Think the picture for the U.S. job market is crystal clear? Think again. (Photo Credit: CC BY-ND/Renee Silverman/Flickr)

Forbes reports that January unemployment figures paint what some people consider to be a rosy picture. A decline to 9 percent unemployment has been hailed as “the fastest pace in half a century,” and people say they’re finding work. However, this data conflicts with a recent business survey reflecting weak job growth in January, hinting once again that the national media’s view of the unemployment rate is as blurry as ever.

Labor Department encouraged by unemployment data

Government surveys attribute the unemployment slide to 9 percent as a natural by-product of strong January data. One government survey that included the self-employed found that more than 500,000 people found work, but a survey by the U.S. Department of Labor noted that only 36,000 net jobs were created, which happens to be only a quarter of what the U.S. needed to keep up with population growth.

Nigel Gault, the chief U.S. economist at job forecasting firm IHS Global Insight, told Forbes that the drop in unemployment was not a drop in the labor force, but of actual job creation – even if many of those jobs come via self-employment. The total gain of 165,000 jobs via self-employment in January is the highest total since last May. Yet the self-employed do not factor into unemployment surveys that focus on corporate payroll numbers, which causes some confusion when job market numbers are reported.

Those who give up are invisible

Another problem that plagues unemployment rate reports is that the U.S. government no longer counts people who have stopped looking for work as being unemployed, but independent surveys do keep track. According to Forbes, in January 2.8 million threw in the towel; 200,000 more than in December. Some were simply discouraged, while others returned to school. Regardless of the reason, the participation rate – or the percentage of those working-age people out looking for employment – hit a 26-year low of 64.2 percent.

Fewer jobs created in 2010 than previously thought

Government analysts’ early estimate was that 1.1 million jobs were created in 2010, but further analysis found that 950,000 was a more accurate total. As analysts continue to struggle with conflicting data, consumers in need of more money than their jobs provide will continue to look to payday loans, perhaps until the country’s economic direction becomes more clear.

Source

Forbes

Are you actually unemployed?

While the unemployment rate remains stubbornly high, U.S. companies are prospering by creating more jobs overseas. Image: swanksalot/Flickr

U.S. companies are reaping record profits, yet the unemployment rate remains stuck at nearly 10 percent. These firms are prospering because overseas demand is growing, while U.S. demand remains stagnant. To meet that demand, U.S. companies are creating jobs overseas.

Job creation overseas exceeds U.S.

U.S. companies are creating more jobs overseas than here at home. According to the Economic Policy Institute, U.S. companies created less than 1 million jobs in the U.S. in 2010. Overseas, U.S. companies created 1.4 million jobs. If those U.S. overseas jobs would have been created in the United States, the current unemployment rate would be 8.9 percent, rather than 9.8 percent, which was reported by the Labor Department at the end of November.

International sales outstrip U.S.

Overseas jobs are growing because sales for U.S. multinational corporations are growing nearly twice as fast internationally as they are domestically. The Associated Press reports that Wall Street stalwarts UPS and Caterpillar Inc. are both hiring more people overseas than at home. More than 50 percent of 15,000 jobs created by Caterpillar in 2010 materialized in other countries. Caterpillar is building three new plants in China as its sales in Asia grew 38 percent in the first three quarters of 2010. The company’s U.S. sales grew just 16 percent.

U.S. consumer demand depends on job creation

Jobs are being created overseas as U.S. companies sit on trillions of dollars in excess cash. Corporate executives say that money will be invested in new jobs and equipment when U.S. demand warrants it. But U.S. consumer demand is tied to the unemployment rate. The fact that foreign countries are churning out better-educated workers than the U.S. can manage adds to the vicious cycle. In the transition to globalization, U.S. companies, looking after their own interests, are leaving the U.S. workers they can’t depend on anymore behind.

Sources

Associated Press

Firedoglake.com

A Labor Department report showed October job openings reached a two-year high and economists expect the trend to continue. Image: CC tom.arthur/Flickr

Job openings in the U.S. rose to a two-year high in October, according to the Labor Department. The job openings report was good news in the wake of last week’s depressing jobs report in which the unemployment rate rose to 9.8 percent. However, economists say the job openings report is preview of longer-term trends that could result in more hiring over the next few months.

The October job openings report

Job openings in October rose to 3.4 million, an increase from 3 million reported in September. The Labor Department’s Job Openings and Labor Turnover Survey showed that the 12 percent month-to-month increase reversed declines in the two previous months. October job openings reached the highest total since August 2008, when the financial markets were on the brink of collapse. An increase of 369,000 private sector job openings in October was the biggest since 2006. The JOLTS report showed that advertised job openings rose by about 1 million. That’s a 44 percent increase from the low point reached in July 2009, a month after the recession technically ended.

Job openings still swamped by jobless

Even though job openings increased by about 32 percent from October 2009, there were still 14.8 million people unemployed. Competition for jobs remains intense. The JOLTS report showed there were 4.4 people going after each October job opening. Even so, that number is improving from 4.9 people per job opening reported in September and is the best ratio since January 2009. Despite the gains, the hole blasted in employment by the recession is deep. On the CBS News program “60 Minutes” Sunday, Federal Reserve Chairman Ben Bernanke said it could take up to five years before the unemployment rate returns to a “normal” rate of between 5 and 6 percent.

Good news for the job market

There may be a remote chance that the job openings report signals accelerated hiring that could shorten Bernanke’s estimate. There are economists who look at the JOLTS report as an indicator of hiring up to three months down the road. Even though job creation in November fell short of the most conservative estimates, an economist at Credit Suisse in New York told reporters that last month’s dismal jobs report looks like “a bump in the road.” The JOLTS report could be interpreted as a sign that the job market is on the verge of emerging from limbo.

Sources

ABC News

Business Week

MarketWatch

U.S. GDP, driven by consumer spending, was higher in the third quarter than first reported, but not high enough to lower the unemployment rate. Image: CC Charlie Brewer/Flickr

U.S. GDP growth in the third quarter has been revised to a higher rate than reported earlier. However, as the economy struggles to get in gear, that’s not saying much. U.S. gross domestic product expanded at a 2.5 percent annual rate from July through September, about half the rate needed to affect the unemployment rate.

Consumer spending drives U.S. GDP

Gross domestic product, the value of goods and services produced in the U.S., is used as a broad measure of economic growth. The 2.5 percent growth of U.S. GDP in the third quarter was driven by consumer spending and increased exports. According to a Commerce Department report, consumer spending was predicted to rise 2.6 percent but increased at a 2.8 percent annualized pace, the strongest result since 2006. Exports were revised upward to 6.3 percent from the 5 percent originally reported. The U.S.economy expanded 3.2 percent in the past four quarters, the strongest year-over-year growth since the first quarter of 2005.

Obstacles to economic growth

The Commerce Department report also revised wages and salaries in the second quarter upward from a $51.1 billion increase to a $97.4 billion increase from the first quarter. The new figures suggest that consumers could have the resources to continue supporting economic growth in the near future. But the increase in consumer spending isn’t expected to be enough to offset the drag of a moribund housing market. Prices remain depressed by anemic sales and a huge inventory of unsold homes and foreclosures. The National Association of Realtors said existing-home sales slipped 2.2 percent in October. The median price for a home sold in October dropped 0.9 percent from a year ago.

High unemployment will persist

Most economists agree that a U.S. GDP annualized growth rate of 2.5 percent does nothing to move the unemployment rate downward. The consensus is that until GDP hits at least 5 percent growth, unemployment will be stuck at 9.6 percent. Growth is forecast at about a 2.3 percent rate for the rest of the year.

Sources

Associated Press

Bloomberg

MarketWatch

The October jobs report shows the 10th straight month of private sector job growth, but the unemployment rate remains stubbornly unaffected. Image: CC TheTruthAbout/Flickr

The October jobs report released Friday by the Labor Department said that the U.S. economy created 151,000 jobs last month. The job creation numbers were more than expected, but barely enough to keep up with U.S. population growth. As a result, the unemployment rate remained stuck at 9.6 percent despite the job gains.

October jobs report numbers

The October jobs report was a somewhat pleasant surprise for economic forecasters that expected a net increase of about 60,000 jobs. The Labor Department report was a major improvement over September’s numbers, which showed a net loss of 41,000 jobs. After hemorrhaging jobs for two straight years, the private sector has shown job growth for 10 months in a row. The October numbers were the best since May. U.S. companies hired an additional 159,000 people in October, exceeding the 92,000 jobs predicted by economists. The government cut 8,000 jobs in October, which resulted in the 151,000 total.

Industries that are hiring

According to the October jobs report, industries that are hiring include health care, retail, temp workers, mining and small businesses. Health care providers hired 24,000 workers. Food service hired another 24,000 and retailers added 28,000. The temporary work force grew by 35,000. A weaker dollar boosted mining to the tune of 8,000 jobs. Because it takes small businesses longer to report their hiring activity to the Labor Department, job creation numbers from August and September were revised upward by 110,000.

A long, hard road ahead

Despite the October job creation, the U.S. has a long way to go. Economic growth is still too weak to affect the 9.6 percent unemployment rate. At least 15 million people are looking for work. Taking into account part-time workers who can’t find full-time jobs and people who have given up looking, the unemployment rate is 17 percent. According to the Brookings Institution, even if job creation grows to the highest levels of the past decade–208,000 jobs a month–it will take 12 years to close the gap between the growing labor force and available jobs.

Sources

CNN

Christian Science Monitor

New York Times

U.S. home ownership rates have fallen to the lowest level in a decade, and millions of Americans are expected to lose their homes in 2011. Image: CC TheTruthAbout/Flickr

U.S. home ownership levels have declined to the lowest level in more than a decade. The trend has accelerated in recent years because of high unemployment, a foreclosure crisis and falling home values. Millions of Americans have lost their homes in the last five years and millions more are expected to in the near future.

Home ownership declining steadily

Home ownership in the U.S. has declined steadily over the last five years according to a report from the U.S. Census Bureau. U.S. home ownership has dropped by 3 million households since 2005. In the third quarter this year the rate of home ownership was 66.9 percent — the lowest rate since 1999. The home ownership rate peaked in the first quarter of 2005 at 69.1 percent. The economic uncertainty of the past several years hit younger homeowners the most. In the third quarter 39.2 percent of people younger than 35 owned homes, a decline of 9 percent since 2005.

Housing market repercussions

As homeownership falls, the housing market follows. U.S. existing home sales in September dropped 19 percent from the year before. The current annual rate of 307,000 existing home sales is a historic low. The lack of sales continues to drive down home prices. The Census Bureau reports that 18.8 million homes are vacant. Housing starts in 2010 are at about a 600,000 a year annual rate, far below what is considered normal. A real estate analyst told CNN that fewer people are forming new households or renting. Families are doubling up and younger people are living with more roommates.

Home ownership and the foreclosure crisis

Nearly a million homes are expected to be foreclosed on in 2010. If the unemployment rate doesn’t go down, analysts have said foreclosure numbers will be even higher in 2011. A Morgan Stanley report said that about 3.1 million mortgage holders are seriously delinquent, and many are expected to lose their homes. An additional 4 million homeowners are falling behind, and half of those are expected to go into foreclosure. The total number of homes in danger of foreclosure is about 11 million.

Sources

CNN

Daily Finance

Consumer Affairs

Ben Bernanke's Fed has pumped nearly $2 trillion into the economy since 2008, to little effect. Image: CC Gage Skidmore/Flickr

Federal Reserve chairman Ben Bernanke has hinted that the Fed will begin another round of quantitative easing, known as QE2, to stimulate the economy. The mere possibility that the Fed will buy more Treasuries to pump money into the economy has devalued the dollar, lowered treasury yields, boosted stocks and raised the price of oil, gold, silver, corn and other commodities. Yet unemployment remains persistently high, which is the primary threat to economic recovery, according to Bernanke.

Bernanke says QE2 will prevent deflation

Having lowered interest rates to nearly zero, quantitative easing is the only arrow left in the Fed’s quiver to battle high unemployment. In a speech in Boston Friday, Bernanke said high unemployment is a scourge that could start feeding on itself by causing a debilitating cycle of deflation. CNNMoney.com reports that rather than focus on the Fed’s traditional mission to limit inflation, Bernanke said it was time to seriously consider that inflation is too low. In theory, quantitative easing — pumping more money into the economy — triggers inflation by weakening the dollar. The Fed has increased the money supply by purchasing nearly $2 trillion in assets since 2008, to little effect.

How QE2 has affected the economy

Investors expect the Fed to announce QE2 at its Nov. 2-3 meeting. The Associated Press reports that since Bernanke started hinting at such a move, anticipation of QE2 has profoundly affected the economy. The price of oil is up 10 percent. Americans are paying $400 million more per week for gas. Gold has risen 11 percent. Corn futures are up more than 30 percent. The average interest rate on a 30-year fixed mortgage has fallen to 4.19 percent, the lowest since the 1950s. The unemployment rate remained stuck near double digits.

Why QE2 isn’t likely to succeed

In Boston Bernanke justified QE2. In theory, the combination of a weaker dollar and low interest rates would increase spending, boost corporate revenue, create jobs and drive down unemployment. Kevin Giddis of Morgan Keegan, told CNNMoney.com that more quantitative easing won’t work because it hasn’t yet. “I don’t think buying securities is going to pull the economy out of a ditch,” he said. “The market is not buying it. We’ve made money available freely for a while now. The Fed has to start thinking way outside the box. This is not a war where conventional weapons can be used.”

The job market is still in ruins. Image from Wikimedia Commons.

A lot of people lost their jobs during the worst parts of the recession. The idea was that if the government doled out a huge cash advance, the unemployment rate would decrease. Instead, the number of unemployed has only increased. In the month of August, there were 27 states that recorded an increase in unemployment. There were only 13 states that marked an improvement, and 10 that did not change. The recession is supposedly over, yet the economy as a whole does not seem to be improving fast enough.

Spike in unemployment rate

The unemployment rate has shot through the roof over the last month. According to CNN, there were 27 states that recorded an increase in the unemployment rate. Nevada still has the highest unemployment rate in the nation at 14.4 percent.  Michigan and California have unemployment rates of 13.1 and 12.4 percent, respectively. These have been the hardest-hit states throughout the recession. It appears emergency loans that went to these states to stimulate job growth, such as the auto bailout for Detroit, have not helped as much as was hoped.

Census accounted for losses

The end of the 2010 Census had a heavy hand in the increase in unemployment, according to USA Today. The Census employed about 114,000 people nationwide. That said, private employers are slowly starting to add jobs. About 67,000 private sector jobs were added, which has to be a relief for people looking for a pay day again. The end of the Census was anticipated to have a negative impact on the unemployment rate and jobless claims, as there isn’t enough instant cash floating around to hire all of them back into the private sector.

Slow but steady wins the race

Recent data was released indicating that the recession was supposedly over. However, it is difficult to reconcile that idea with the levels of unemployment and decreased spending and credit activity.

Sources

USA Today

CNN

The Great Recession ended in June 2009, a government panel said, but economic growth is too weak to reduce the unemployment rate. Image: CC Ed Yourdon/Flickr

Recession is a technical term that technically doesn’t apply to what the U.S. is currently going through. Economic misery as a real-life condition persists, but a government panel announced Monday that the recession officially ended in June 2009. The economic downturn started in December 2007 and lasted for 18 months — the longest slide since World War II. The economy’s prolonged freefall had earned it the title of “Great Recession” long before it was officially declared over. The panel said that even though the economy resumed growth, it is far from returning to normal capacity. Meanwhile, the Federal Reserve is seeking to avoid a “growth recession” in which economic expansion is too slow to stem rising unemployment.

Recession runner up to Depression

The longest recession since the Great Depression ended when the economy resumed growth last summer, according to the National Bureau of Economic Research. The Los Angeles Times reports that a relapse, or double-dip, would be a new recession. The 18-month Great Recession is the official runner up to the 43-month Great Depression that lasted from 1929 to 1933. The most recent economic collapse eclipsed 16-month recessions in 1973-75 and 1981-82. More than 8 million people lost their jobs, and the labor market could take years to recover. The NBER said the most damaging factor in this recession was rapid productivity growth, which deleted jobs as output was marginally sustained.

Recession ended on paper, but not on the street

The NBER warned last spring that what appears to be an expansion could be a blip in a long-term contraction. The Washington Post reports that the NEBR defines a recession as “a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales.” According to the panel, GDP and industrial production bottomed out in June 2009. Employment, however, did not begin expanding until December 2009. The NEBR said that by declaring a specific date for the end of the recession it was not saying that economic conditions have been favorable since then.

Anatomy of a growth recession

While the economy is expanding, it has been too weak to lower the unemployment rate; this is called a growth recession. Bloomberg reports that economic growth slowed in 2010 to a 1.6 percent annual rate in the second quarter from 3.7 percent in the first quarter. A 5 percent rate of growth in the fourth quarter of 2009 raised hopes that economic recovery was gathering steam. An unemployment rate stuck at 9.5 percent and above is stifling the consumer spending the economy needs to grow. Fed chairman Ben Bernake said the agency has the tools to aid the economy. With interest rates near zero, some think the next step for the Fed is to buy more Treasuries, or government debt. Others believe severe unemployment is the result of Americans lacking the skills to fill available jobs — a problem monetary policies can’t fix.

Consumer confidence posted a modest gain in August -- data that bumped stocks and eased concerns that anemic consumer spending will derail economic recovery. Charlie Brewer/Flickr photo.

The Conference Board’s monthly report on its consumer confidence index showed that the metric used to gauge economic outlook actually bumped up a couple of points in August. The modest gain gave the stock market a jolt into positive territory Tuesday morning.

Consumer confidence index beats forecast

Consumer confidence rose in August to beat predictions. Bloomberg reports that the increase in the consumer confidence index to 53.5 from a five-month low of 51 in July could be a sign the biggest part of the economy may avoid a further slide that could effectively end a stalled economic recovery. But even with the increase, an economist told Bloomberg that the August consumer confidence figure is at a “stunningly low level.” Even so, higher confidence brings a ray of hope that consumer spending — 70 percent of the U.S. economy — will recover. To do that, companies need to start hiring more. Yet according to the Labor Department, companies created an average of 51,000 jobs from May through July — down from 200,000 the previous two months.

Consumer confidence report details

In addition to the consumer confidence index, the Conference Board report contains other details. MarketWatch reports that more consumers are pessimistic about the present situation of the economy, yet optimistic that conditions will improve. The Conference Board’s present-situation index — a measure of attitudes about business climate and job opportunities — dropped to 24.9 in August from 26.4 in July. The expectations index — a measure of expectations for a better business climate and more job creation — rose to 72.5 in August from 67.5 in July. Consumers planning to buy a home within six months moved to 2 percent from 1.9 percent. People planning to buy a car rose to 5 percent from 4.7 percent. An economist told MarketWatch that despite the August gains, consumer confidence is at “incredibly depressed levels,” compared with previous economic recoveries.

Bump in index doesn’t guarantee consumer spending

A consumer confidence index above 90 indicates a healthy economy, according to the Associated Press. Yet the August bump put the brakes on a sliding stock market Tuesday morning. About two stocks rose for every one that fell on the New York Stock Exchange. Like all recent market rallies, this one is expected to be short-lived. Most economic reports show economic growth is slowing, and the slight uptick in consumer confidence doesn’t guarantee an increase in consumer spending. A high unemployment rate continues to motivate consumer saving and debt reduction — behavior considered virtuous from a personal finance standpoint. But until the job market recovers and people open their wallets, the late-summer slump could continue for the rest of the year and drag the U.S. economy into a double-dip recession.

The Fed's record-low interest rate policy is boosting profits at bailed out banks at the expense of savers, investors, pensions and endowments. Thinkstock photo.

U.S. consumers are cutting debt and trying to save more money. The Federal Reserve, in an effort to keep the economy from a double-dip recession, is keeping the benchmark interest rate artificially low. Record-low interest rates are fattening bank bottom lines. The low interest rate has created a wide disparity between what financial institutions can collect from borrowers and what they have to pay depositors for their money. Some analysts are saying that while Fed monetary policies shore up the banks it bailed out with billions, they are an “invisible tax” on savers, investors, pensions and endowments.

Little reward for saving money

U.S. banks are paying savers the lowest average rates on record. A Bloomberg story on a report from Market Rate Insight said that the national average rate paid on interest for checking, savings, money market and certificates of deposit in July was 0.99 percent. The interest rate index produced by Market Rates measures rates and bonuses paid by 1,300 commercial banks and credit unions of all sizes around the U.S. The report also tracked savings rate fluctuations between Jan. 2004 and July 2010. When the national unemployment rate goes up, savings rates go down. The report concludes that when the unemployment rate goes down, interest rates on savings will go up.

Banks set up roadblocks to debt reduction

Fed monetary policy that is holding the interest rate at near zero, some believe, is rewarding banks and penalizing the average citizen. People who want to reduce debt and save more seem to have the deck stacked against them. Larry Doyle at Daily Markets writes that miniscule interest rates are squeezing people who live on fixed incomes. Savings accounts generate a negligible returns. Meanwhile, it costs credit card issuing banks next to nothing to borrow money while they continue to raise interest rates on consumer credit.

Low interest rates an invisible tax

The Fed’s interest rate policy may be causing more economic problems than it’s solving, according to Gretchen Morgenson at the New York Times. Todd E. Petzel of Offit Capital Advisors told Morgenson that the Fed’s interest rate policy is an “invisible tax” that costs savers and investors about $350 billion a year. He got that figure by starting with about $14 trillion in debt issued by the Treasury at an interest rate near zero. Rates have averaged 3 percent over time. That makes current rates too low by 2.5 points. On $14 trillion, 2.5 percent adds up to $350 billion a year in lost income to savers, investors. pensions and endowments. The money lost is more than 2 percent of gross domestic product and almost 3 percent of disposable personal income.

The latest jobs report shows a continued high U.S. unemployment rate stuck in limbo between job gains and job losses. Nick Hewett/Flickr photo.

The latest jobs report detailing the U.S. unemployment rate for July reflects the ongoing battle between the bad news and the good news. The unemployment rate held steady at 9.5 percent. But the U.S. economy had more job loss than economists expected. The U.S. economy added 71,000 jobs in July, but lost 131,000. Manufacturing added 36,000 jobs, but those gains are the lowest of the year as orders and production decline. Average hourly earnings increased, average hours worked rose and productivity increased. But increasing productivity is another factor holding back hiring.

U.S. unemployment rate stuck in limbo

Companies in the U.S. added workers in July for a seventh straight month. However, The Wall Street Journal reports that taking into account revisions to prior months this year, the U.S. economy added an average of less than 100,000 jobs a month in the first seven months, a level that’s not strong enough to offset the job loss that would bring unemployment down. Jobs report data for June was also revised downward. Jobs fell 221,000 that month, more than the 125,000 job loss previously reported. Only 31,000 jobs were added to the private sector in June. The 131,000 job loss in July far exceeded the 60,000 economists polled by Dow Jones Newswires were expecting.

U.S. economy: work is  good if you got it

July’s jobs report did contain a few bright spots. Daily Finance reports that the average workweek increased by 0.1 hour to 34.2 hours. Average hourly earnings increased 4 cents to $22.59 per hour. U.S. productivity continues to increase at a robust rate — 3 percent in the last 12 months and 4 percent in the first quarter of 2010. Higher U.S. productivity is boosting corporate earnings. Companies are sitting on huge piles of cash. High productivity and more efficient business models are good for stock prices, but that means many companies don’t feel they have to hire more workers.

Fed ponders what to do about unemployment

The jobs report could determine what the Federal Reserve does next to influence the unemployment rate. Bloomberg reports that options outlined by Fed chairman Ben Bernanke last month include further reducing the 0.25 percent rate the Fed pays on banks’ reserve deposits.  Expanding the amount of assets on the Fed’s near-record $2.3 trillion balance sheet — a broad gauge of Fed lending to the financial system to hold down borrowing costs, is also an option.

Americans at odds with themselves about unemployment

Meanwhile, much like the good news/bad news in the jobs report, the conflicting opinions of the public cancel each other out. More than seven in 10 Americans say the U.S. economy is still mired in recession, according to a Bloomberg National Poll. Seven of 10 Americans also said reducing unemployment is the government’s top priority. But more than half are skeptical of the stimulus program and wary of more spending.

The unemployment rate fell in June despite rising job losses because people are giving up looking for work -- conflicting indicators in an economic recovery struggling with a lack of jobs. Flickr photo.

The unemployment rate is the great ball and chain putting a drag on U.S. economic recovery. Its such a problem that even though the unemployment rate fell from 9.7 percent in May to 9.5 percent in June, more jobs were cut than were created. Jobless Americans dropping out of the labor force in droves skewed the stats in the jobs report. The stock market, accepting the numbers at face value, rose slightly Friday morning. But soon after a decline in factory orders was reported at 10 a.m., the Dow Jones Industrial Average lost 32.5 points. The turgid U.S. economy is full of conflicting information. Even as job creation, factory orders and consumer confidence fell, some manufacturing companies that want to hire can find workers with the kind of skills they need.

Unemployment rate, consumer confidence and everything else

The unemployment rate reverberates throughout the U.S. economy. An uncertain employment picture wreaks havoc on consumer confidence, which declined sharply in June. The decline in consumer confidence led to a decline in auto sales, and pushed pending home sales off a cliff as tax credits for home buyers expired. Consumer spending makes up 70 percent of the U.S. economy, and disposable income is a distant memory for millions of jobless workers.

Why the unemployment rate dropped:

The unemployment rate reached its lowest point since July 2009. But the Wall Street Journal reports that the decline wasn’t due to improvement in the labor market. A loss of 125,000 jobs should have increased June’s unemployment rate. But 652,000 people gave up looking for a job — the sharpest one-month decline in 15 years in the Labor Department’s survey. The Journal speculates that some could be choosing to pursue other options like school. Some are reaching the end of their unemployment benefits, which require an active job search. Whatever the reason, over the past two months almost 1 million people stopped looking for work.

New jobs a mismatch for many unemployed workers

The unemployment rate remains stubbornly high because plenty of people are still applying for the jobs. The New York Times reports that the problem is a mismatch between the kind of skilled workers needed and the ranks of the unemployed. During the recession, domestic manufacturers accelerated the long-term move toward more automation, laying off their lowest-skilled workers and replacing them with cheaper labor abroad. Now these companies need to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math skills  than old-school assembly line workers.

A silver lining in the jobs report?

One must dig deep to find some positives about the latest jobs report. The Washington Post reports that Friday’s jobs report could mean that the economic recovery that began last year has lost momentum, but the numbers are not so bad as to suggest the nation is heading into a double-dip recession. The numbers, although weak, show just how far the U.S. economy has fallen. The job growth number, for example, is a decline from stronger levels in March and April, but the June job creation number of a mere 83,000 is better than any month out of the past 31, other than the last two.

(Image from MarinePhotoBank, Flickr.com)

It is safe to say that the extent of damage from the Gulf of Mexico oil spill will be far-reaching, but to think you might need online payday loans because of the spill is a little strange, right? Wrong. Obviously, the environment and ecosystem of the Gulf will be hard hit, but we forget how many people rely on that ecosystem. Fishermen will have no fish to net. Shrimpers will have no shrimp to catch. Drivers across the nation will feel the pinch at the pump.

In short, the oil spill will not only wreak havoc on the Gulf ecosystem, it will also take a toll on the economy.

BP versus Exxon Valdez

The BP Oil Spill has far surpassed the Exxon Valdez spill. When the Exxon Valdez ran aground in Alaska, it was considered one of the most tragic environmental disasters ever. So, we can now assume that the BP Oil Spill will go down as another environmental tragedy. Oil is gushing into the gulf, and the sticky petroleum is killing wildlife including shrimp, birds and fish — fish that fishermen usually catch for a living.

Unemployment in the Gulf

The United States is already struggling with unemployment. In April, the unemployment rate was 9.5 percent. The Florida Oil Spill will not help matters. Without fish and shrimp to fill their nets, there are going to be a lot of fishermen out of work and out of food.

Summer Gas Prices

People that live on and around the Gulf Coast will be hit hardest by the oil spill, but people in the rest of the country can expect gas prices to go up. Gas prices typically increase in the summer months, but when you start messing with the supply, you can anticipate an even bigger price increase.

Obama Promises a Solution

President Obama promises Americans that we will get through this catastrophe. No doubt we will get through it, but we have no idea how much it is going to cost us. If the oil spill has left you in a financial sticky spot, unemployed, or just unable to put gas in your car, online payday loans are a quick, easy way to wipe away those financial troubles and get instant cash.

We're a long way from soup kitchens and bread lines, but we aren't out of the woods yet. Image from Wikimedia Commons.

Fingers have been crossed, prayers offered and hands have been wrung waiting for an increase in the number of jobs. Unfortunately, the May jobs report has not revealed a huge increase in the number of jobs available.  This is not to say that there was no improvement, but the improvement was less than anticipated, which caused ripples in the stock market. Fewer than 50,000 non-farming private sector jobs were added, and the biggest job growth over the last couple of months appears to be for the U.S. Census.

Jobs report shows slower growth

The May jobs report by the Department of Labor does have some reason for hope.  That said, it also would seem that the currently high unemployment rate will have to be addressed via attrition.  According to Forbes, the May jobs report showed a gain of 431,000 total jobs. Most were seasonal employment. Of those, 411,000 were jobs with the U.S. Census, which means an increase in unemployment is due in June when Census jobs end.

Private sector slumps

The private sector did not fare well.  Only 41,000 jobs were added overall in non-farming private sector jobs, which is down from 218,000 from the April jobs report.  It’s the lowest month since January for private sector hiring, so it would appear that the rebuilding of the workforce is going to be a slow climb.  On the plus side, however, the unemployment rate dropped to 9.7 percent from 9.9 percent last month.

Stock markets slide

This spring has been a turbulent time for the stock markets. On the heels of the news that job growth had been slower than anticipated, combined with the European debt crisis, the Dow Jones and NASDAQ indexes both slid 1.9 percent, and the S&P 500 lost 2 percent in trading, according to CNN Money.  It would appear that the rebound is taking longer than predicted, both in the stock markets and in the job market.

Small businesses showing no signs of current incentives to expand and grow

The National Federation of Independent Business (NFIB) compiles monthly and quarterly statistics on small businesses in the United States. Some of the areas covered in their “Small Business Economic Survey” include projected business expansion, earnings changes, sales changes and expectations, price estimates and changes, just to name a few.

The NFIB states that its federation includes some 350,000 members. Conducted among member businesses, the federation’s May 2010 “NFIB Small Business Economic Trends” survey discovered the following very interesting facts.

Small businesses report higher earnings

Small business earnings for the first quarter of 2010 have increased 9 percent, and up 12 percent from the end of the first quarter of 2009. The reason small businesses are experiencing higher earnings for April 2010 may be due to a rebound in the economy, but it still is too early to say whether this is the case.

Small business sales are rebounding

Small business sales peaked in late 2005, before the U.S. housing bubble burst. At this peak, sales for small businesses were at 15 percent. By early 2007, sales dropped to 5 percent. In January of 2008 that number dropped to -8 percent, and later dropped to -31 percent in mid 2009.

Since hitting that bottom, small business sales in the United States have risen. At last, sales were reported at -15 percent as of the first quarter of 2010, which is 30 percent below the 2005 peak of 15 percent. This 2005 number was taken before the beginning of the fallout of the housing bubble during that same year, and before the corporate banking derivatives in the autumn of 2008. Sales expectations have been in negative territory for 23 of the last 28 months, from January of 2008 to April of 2010.

In June of 2008, small business prices peaked at 32 percent. During the first quarter of 2009, small business prices reached a bottom of -25 percent. These prices declined for more than six months until early 2009. These statistics show that many small businesses, due to low sales, have had to lower prices to move inventory, which means that price deflation is occurring for many small businesses in the U.S. economy for over part of the past two years.

Small businesses borrowing less

The number of small business owners borrowing at least every three months hit its peak in April of 2006 at 40 percent. One year later, that number had dropped three percentage points to 37 percent. By the end of the first quarter of 2009, the percentage borrowing every three months had dropped seven points to 33 percent, and by April 2010, it had dropped a total of nine percentage points from its peak of 40 percent in 2006. This shows that small businesses, which are over 95 percent of the companies in the United States, are cutting back on expansion plans and, therefore, are not hiring as many new employees.

The ‘Citizen Consumers’ are the key

Capital expenditures by small businesses hit its peak in March of 2005 at 36 percent of the businesses surveyed, with capital expenditures hitting a low of 17 percent twice in December of 2008 and June of 2009. In April of 2010, it climbed just above the low at 19 percent. This shows that banks are lending less, partially due to the current banking crisis.

Also included is the fact that citizen consumers are significantly cutting back on discretionary spending and buying expensive new durable goods, if absolutely necessary. This is partially due to fears of the weak economy and losing their jobs. Many are using installment loans online to fund some purchases. And it is the U.S. consumer economy (which is over 75% of our nations GDP) that drives small business growth and expansion. It is the central factor that is contributing to the weakness in the current U.S. economy, which is clearly shown in the survey conducted by the National Federation of Independent Business.

Sources:

• Wikipedia NFIB entry: http://en.wikipedia.org/wiki/National_Federation_of_Independent_Businesses
• National Federation of Independent Business (NFIB): http://www.nfib.com/Portals/0/PDF/sbet/sbet201005.pdf
• US Small Business Administration: Office of Advocacy: http://www.sba.gov/advo/press/06-17.html

The U.S. unemployment rate rose along with job creation numbers as people who had given up during the recession are looking for work again. Flickr photo.

The U.S. unemployment rate rose in April along with job creation, in a bit of statistical hocus pocus that’s not as baffling as it looks. But the phenomenon shows how hard it’s going to be for the unemployment rate to climb out of the deep hole dug by the great recession. The U.S. unemployment rate rose to 9.9 percent in April from 9.7 percent in March, according to the jobs report released by the Labor Department Friday. But the same jobs report said nonfarm payroll employment rose by 290,000 in April. How can the jobless rate rise at the same time jobs creation showed its biggest monthly total in four years?

Jobs report a sign of healing

The jobs report showed the U.S. unemployment rate rose along with jobs creation because of the improving economic outlook and a healing jobs market. The Associated Press reports that the jobless rate rose because 805,000 unemployed Americans who were so discouraged they had given up are starting to look for work and personal loans again. If the economy continues to pick up momentum, many economists predict that jobless claims could continue to rise along with jobs creation. Last month a total of 15.3 million people were still out of work. The number of people out of work six months or longer reached 6.7 million in April, a new high. These people made up 45.9 percent of all unemployed people, also a record high.

More unemployed seeking work

The rise in the unemployment rate in the jobs report Friday also contradicts a Labor Department report Thursday showing that first-time jobless claims fell by 7,000 last week, to 440,000. This is the third week in a row a decrease in jobless claims has been reported. The four-week average of jobless claims declined 4,750 to 458,500, the first decrease in five weeks — further evidence that things are looking up for people seeking work.

Wall Street distracted by panic

The improving jobs report may be good news for manufacturers, construction companies, retailers, professional and business services, education and health services. But a sector of the economy that doesn’t actually produce anything of value was unmoved. Wall Street fixated on Europe’s debt crisis, which appears to be resembling America’s own financial meltdown. Bad news in Europe sent traders into a panic Thursday. The Dow Jones industrial average plummeted almost 1,000 points and was wracked by spasms into Friday.

For job creation to start reducing the unemployment rate, economic growth needs to double its present rate. The Commerce Department said the economy expanded by 3.2 percent in the first quarter of 2010 — the third straight quarter of growth. The Associated Press reports that for the unemployment rate to fall, economists say the economy needs to grow at an annual rate of 6 percent to 8 percent a quarter. That rate of growth would require us all to go shopping. But nationwide average hourly earnings only increased by one penny in April from March to $22.47.