recovery

Video: German Workers Demand Higher Wages as Economy Recovers

September 17, 2010

Sept. 17 (Bloomberg) — Bloomberg’s Philipp Encz reports on German unions’ demands for higher wages to reflect the recovery in economic growth.

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Video: Serbia’s Arms Industry Recovers to Become Major Exporter

September 16, 2010

Sept. 16 (Bloomberg) — Bloomberg’s Nicole Itano reports from Belgrade on the recovery in Serbia’s arms industry.

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Rev. Jesse Jackson: GOP Still Putting Wall Street First

September 14, 2010

Voters are angry, and for good reason. Jobs are gone; poverty is up; one in four homes, the leading source of savings for Americans, is underwater, worth less than the mortgage. Many who voted for Obama are discouraged; some argue there isn’t a whit of difference between the parties. An increasing percentage say they will vote against the incumbents simply to protest what is going on. But there is a great difference between the two parties. It’s personified by the contrast between the positions of President Obama and House Minority Leader John Boehner. On taking office, faced with an economy losing 750,000 jobs a month, President Obama called for a bold recovery program, a package of tax cuts, infrastructure spending, support for education and renewable energy, and extended unemployment benefits, food stamps and health care support for those who lost their jobs through no fault of their own. Although he supported bailing out the banks, Boehner said no to helping out Main Street, with zero Republicans voting for the plan in the House. In the Senate, Republicans worked to weaken the plan, making it smaller and stuffing in upper-end tax breaks like the alternative minimum tax that have little jobs impact. In the end, the Recovery Act spending, according to any independent economist, helped to stave off a far worse collapse, but wasn’t big enough to create the jobs we need. Now President Obama calls for adding $50 billion in investment in roads, runways and rail, for creating an infrastructure bank to mobilize private capital to rebuild America, for a range of tax breaks for small business owners. Boehner’s plan is to keep tax rates where they are — and to cut $100 billion from domestic spending next year — a folly that would add hundreds of thousands to the ranks of the unemployed. President Obama is for ending the deduction for Wall Street managers that enables them to pay a lower rate of taxes than their chauffeurs. Boehner is for protecting the tax break, as well as the Bush tax cuts for millionaires earning more than $250,000 a year that would add $700 billion to the deficits over the next decade. President Obama is for investing in renewable energy, increasing fuel standards and driving the U.S. to recapture a lead in the new green industrial revolution that is sweeping the world. Boehner mobilized oil and gas interests to help dilute and stop energy legislation. President Obama pushed to regulate the big banks, and establish a Consumer Financial Protection Bureau that would protect consumers from abuse by banks, insurers and credit card agencies. Boehner mobilized the bank lobby to oppose reforms, and calls for repeal of the consumer bureau. President Obama pushed to extend unemployment insurance; Boehner opposed. President Obama pushed health care reform, not only to extend coverage to all, but also to end abusive insurance company practices of denying those with pre-existing conditions, or setting a cap on what is insured each year. Boehner joined the insurance lobby in opposition. Obama says we need a new foundation for the economy, with investment in education and training, in research and development and in modernizing our infrastructure. Boehner is opposed. Obama would repeal the tax break that rewards companies that move jobs overseas. Boehner defends the tax break, and calls for more of the same trade treaties that helped lose one in three manufacturing jobs over the last decade and left the U.S. borrowing more than $2 billion a day from abroad. And this is only on economic questions. For those thinking of staying home or casting protest votes, take another look. Boehner recently opened a Boehner for Speaker Fund, raising millions from corporate political action committees and lobbyists for Republican congressional candidates. The first big check came from a Wall Street bank.

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Video: Schneider Says Obama Has `Right Message’ About Business: Video

September 8, 2010

Sept. 8 (Bloomberg) — Johanna Schneider, executive director of external relations for the Business Roundtable, a Washington lobbyist group, talks about President Barack Obama’s speech today about his initiatives to stimulate the U.S. economy and create jobs. Obama said he recognizes that the recovery has been “painfully slow,” and he called on Congress to enact measures to cut taxes for businesses and middle-income Americans while letting rates rise for the richest taxpayers. Schneider speaks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Donald Kohn: Fed Should Consider More Stimulus

September 5, 2010

The former vice chairman of the Federal Reserve, who retired last week after 40 years at the central bank, says that the economy is in “a slow slog out of a very deep hole,” and that the Fed should consider additional stimulus unless the recovery shows signs of “decent progress.” The departure of the official, Donald L. Kohn, who as the Fed’s No. 2 official played a pivotal role in its handling of the financial crisis, is something of an end of an era. A staff economist who worked his way up through the ranks, Mr. Kohn was one of the last direct links to Paul A. Volcker and Alan Greenspan, the chairmen who defined the modern Fed.

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Donald Kohn: Fed Should Consider More Stimulus

September 5, 2010

The former vice chairman of the Federal Reserve, who retired last week after 40 years at the central bank, says that the economy is in “a slow slog out of a very deep hole,” and that the Fed should consider additional stimulus unless the recovery shows signs of “decent progress.” The departure of the official, Donald L. Kohn, who as the Fed’s No. 2 official played a pivotal role in its handling of the financial crisis, is something of an end of an era. A staff economist who worked his way up through the ranks, Mr. Kohn was one of the last direct links to Paul A. Volcker and Alan Greenspan, the chairmen who defined the modern Fed.

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Obama’s Stimulus: ‘The Most Ambitious Energy Legislation In History’

September 3, 2010

For starters, the Recovery Act is the most ambitious energy legislation in history, converting the Energy Department into the world’s largest venture-capital fund. It’s pouring $90 billion into clean energy, including unprecedented investments in a smart grid; energy efficiency; electric cars; renewable power from the sun, wind and earth; cleaner coal; advanced biofuels; and factories to manufacture green stuff in the U.S. The act will also triple the number of smart electric meters in our homes, quadruple the number of hybrids in the federal auto fleet and finance far-out energy research through a new government incubator modeled after the Pentagon agency that fathered the Internet. (See TIME’s special report “After One Year, A Stimulus Report Card.”)

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Obama Economic Team Considering New Stimulus Heavy On Tax Breaks For Business

September 2, 2010

With the recovery faltering less than two months before the November congressional elections, President Obama’s economic team is considering another big dose of stimulus in the form of tax breaks for businesses – potentially worth hundreds of billions of dollars, according to two people familiar with the talks.

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 Europe Ahead: European Manufacturing to Ease in August amid Signs Global Recovery is Waning

September 1, 2010
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Video: U.S. Stocks Advance on GDP Data, Bernanke Growth Pledge: Video

August 27, 2010

Aug. 27 (Bloomberg) — Bloomberg’s Courtney Donohoe reports on the performance of the U.S. equity market today. U.S. stocks rose, paring the market’s third straight weekly loss, as Federal Reserve Chairman Ben S. Bernanke vowed to safeguard the recovery and growth in gross domestic product slowed less than estimated. Bloomberg’s Pimm Fox also speaks. (Source: Bloomberg)

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Bush Tax Cuts: Some Top Democrats May Be Rethinking Tax Hike On The Rich

August 27, 2010

The Bush tax cuts are set to expire in December. Republicans are pushing to extend them all, while President Obama has forcefully argued that the country cannot afford to keep tax breaks on income over $250,000 a year for families and $200,000 a year for individuals. But a growing cadre of Democrats – alarmed by evidence that the recovery is losing steam and fearful of wounding conservative Democrats in a tough election year – are advocating a plan that would permanently extend tax cuts benefiting the middle class while renewing breaks for the wealthy through 2011, senior Democratic aides said.

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Jared Bernstein: The Republicans’ Increasingly Awkward Dance Around the Truth

August 25, 2010

Ever since the Recovery Act passed last February, Congressional Republicans who opposed this economic rescue plan have had to do an awkward dance around the truth. After all, when you declare from the beginning that the Recovery Act won’t create a single job, you’re going to be forced to do a little two-step around the facts as week after week leading economists, the nation’s governors, and even your own constituents say otherwise. But yesterday, when Representative Boehner declared that “all this ‘stimulus’ spending has gotten us nowhere” on the same day the nonpartisan CBO said the program has created or saved as many as 3.3 million jobs nationwide and his own home state’s Department of Transportation said nearly 9,500 construction workers were on the job in July just on Ohio Recovery Act transportation projects alone… well, let’s just say that dance got a little more… awkward. Now, Representative Boehner was one of the first to declare the Recovery Act dead on arrival — the day it was signed into law, he declared it would “do little to create jobs.” But as soon as June 2009, as funding for Recovery Act transportation projects began to flow into Ohio, he said those dollars would be used for — get this — ” shovel-ready projects that will create much-needed jobs. ” And then when the nonpartisan CBO, Congress’s top watchdog and an institution widely respected on both sides of the aisle, began weighing in on the job impact of the Recovery Act, the dance got a little more complicated. Check out these quotes from Rep Boehner, followed by the facts: August 2009: Maintains that stimulus hasn’t created any jobs: “You know, after the1 trillion dollars stimulus bill that didn’t create any jobs.” [ Hugh Hewitt Show , 8/29/09] November 2009: The nonpartisan CBO announces the Recovery Act created or saved as many as 1.6 million jobs through September 2009. [ CBO Report , 11/30/09] January 2010: Says the stimulus “clearly hasn’t worked”: “Their trillion-dollar stimulus plan from a year ago clearly has not worked.” [ NPR , 1/27/10] February 2010: The nonpartisan CBO announces the Recovery Act has created or saved as many as 2.1 million jobs nationwide through December 2009. [ CBO Report , 2/23/10] May 2010: Still asking where the jobs are: “Where are the jobs?” [ Boehner Statement , 5/7/10] May 2010: The nonpartisan CBO says the Recovery Act created or saved as many as 2.8 million jobs through March 2010. [ CBO Report , 5/25/10] And then, of course, yesterday was the most difficult dance step of all: on the very same day that he declares in a major speech that the Recovery Act has “gotten us nowhere,” first,the nonpartisan CBO announces that the Recovery Act has created as many as 3.3 million jobs nationwide and lowered the unemployment rate by as much as 1.8 percent through March of this year , and then the Ohio Department of Transportation announces that nearly 9,500 construction workers were on the job on Ohio Recovery Act transportation projects in July, the highest monthly total since it began. I suspect those nearly 9,500 Ohio construction workers and 3.3 million Americans at work thanks to the Recovery act would disagree with Rep. Boehner’s statement that the Recovery Act has “gotten us nowhere.” And then to make his dance even more complicated, leading economist Mark Zandi said today that the Congressman from Ohio was “just wrong” that the Recovery Act has “gotten us nowhere:” Asked about Rep. Boehner’s claim that “all of this ‘stimulus’ spending has gotten us nowhere,” Mark Zandi, chief economist of Moody’s Analytics said “that is just wrong, the stimulus has been very helpful.” And let’s keep in mind who we are talking about here. This is the same Republican leader that actually said he wanted all of those people to lose their jobs earlier this month when he called for stopping the Recovery Act – a claim that got him in some hot water with independent fact-checkers who rated his rhetoric flat-out false . The true facts of the case are that this economy has undergone a major turnaround from the very deep recession that greeted President Obama when he took office, and the Recovery Act has been a major factor in that reversal. Yes, we’ve still got a long way to go, but we’re moving in the right direction. While it’s bad enough that Rep Boehner refuses to accept these facts, what’s worse is that he and his Republican colleagues have only one solution: a return to the same Bush economic policies that got us into this mess. As the head of their campaign committee, Rep. Pete Sessions, said, if they take control of Congress, they will go back to “the exact same agenda” they were pushing before President Obama took office. Mr. Boehner and his colleagues may well be the only Americans nostalgic for the economic policies of the Bush era. But we can’t go backwards. We need to recognize the positive impact of the Recovery Act and build on the momentum we’ve established. Jared Bernstein is Deputy Assistant to the President on Economic Policy This post originally appeared at the White House Recovery Act Blog .

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Video: FT’s Lex Columnist Hadas on European Manufacturing Data: Video

August 23, 2010

Aug. 23 (Bloomberg) — Edward Hadas of the Financial Times’ Lex commentary team discusses growth in Europe’s services and manufacturing industries, which weakened more than economists forecast in August, signaling the pace of the recovery has peaked. Hadas talks with Jon Erlichman on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)(Source: Bloomberg)

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Video: FT’s Lex Columnist Hadas on European Manufacturing Data: Video

August 23, 2010

Aug. 23 (Bloomberg) — Edward Hadas of the Financial Times’ Lex commentary team discusses growth in Europe’s services and manufacturing industries, which weakened more than economists forecast in August, signaling the pace of the recovery has peaked. Hadas talks with Jon Erlichman on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)(Source: Bloomberg)

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HuffPost Readers Rename ‘The Recovery Summer’ — Which Suggestion Is Your Favorite? (PHOTOS)

August 20, 2010

Earlier this week, we asked HuffPost readers to come up with a more appropriate name for the last few months, which the Obama administration rather hopefully dubbed ” The Recovery Summer .” (To suggest your own name for “The Recovery Summer” click here .) With soaring jobless claims, seesawing leading indicators and growing concerns about a double-dip recession , we thought it was an ideal time to skip the political sloganeering. After sifting through responses from HuffPost readers, we’ve chose the best of the batch. We’ve also offered a quick bit of explanation about why we think each name is particularly apt. Which HuffPost reader suggestion is your favorite? Check them out and vote below:

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Can You Think Of A BETTER Name For The Obama Administration’s ‘Recovery Summer’?

August 16, 2010

In June, the Obama administration declared the start of the “Recovery Summer.” Two months later, this cheery bit of political sloganeering to rings more than a bit false. The administration’s Recovery Summer pitch was aimed at winning support for its stimulus package, and the achievements of the American Recovery and Reinvestment act, passed in February of 2009. Speaking to Politico , Chief White House adviser David Axelrod seemed positively sunny about the summer’s outlook: “This summer will be the most active Recovery Act season yet, with thousands of highly-visible road, bridge, water and other infrastructure projects breaking ground across the country, giving the American people a first-hand look at the Recovery Act in their own backyards and making it crystal clear what the cost would have been of doing nothing.” Without getting into the specifics of the stimulus, its size or whether another full-fledged Recovery Act is needed to jump start the economy, we at HuffPost Business thought the “Recovery Summer” could very well use a more appropriate name. Whether it’s persistent unemployment, rising odds of a double dip recession or Congressional dithering on jobless benefits, we’re sure HuffPost readers can think of a more apt — and less euphemistic — term to describe the last few months. Submit your ideas below — and be creative! We’ll feature the best suggestions in a future story.

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Double Dip Recession: What Will It Look Like?

August 16, 2010

A growing and vocal minority of economists believes that there will be a double dip recession primarily because of the intransigence of high unemployment and the rapidly faltering housing market. The notion of a “jobless recovery” has been around since the recessions of the 1950s and 1960s. It is a concept built on a relatively simple idea: employment lags during a recession but it is always part of a recovery cycle. Production rises as businesses see the end of a downturn and anticipate improving sales. They are reluctant to hire new workers until the recovery is confirmed, but once it has been, hiring picks up. This is what a double dip recession would look like:

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Video: U.S. Stocks Fall as Fed Plan Fails to Erase Early Loss: Video

August 10, 2010

Aug. 10 (Bloomberg) — Bloomberg’s Courtney Donohoe reports on the performance of the U.S. equity market today. U.S. stocks fell, with a late-day rally failing to erase losses, after the Federal Reserve’s plan to purchase Treasury securities wasn’t enough to overcome concern the recovery is faltering. Bloomberg’s Pimm Fox also speaks. (Source: Bloomberg)

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Federal Reserve Worried About Recovery, Takes Small Steps

August 10, 2010

WASHINGTON — As recently as two months ago, the Federal Reserve sounded optimistic about the economic recovery. Now the central bank is clearly more worried, and economists say there’s not much more it can do to help. The Fed said Tuesday that it would spend a relatively small amount of money – about $10 billion a month, economists estimate – buying government debt. The move is designed to drive interest rates on mortgages and corporate borrowing at least a little lower and help the economy grow faster. In a statement after a one-day meeting, the Fed said the pace of the recovery “has slowed in recent months.” After its last meeting in late June, the Fed was rosier, saying that the recovery was “proceeding” and the job market actually improving. The decision to buy government debt, using proceeds from Fed investments in mortgage bonds, was a shift from earlier this year, when the Fed was laying out plans to roll back some of the measures it took during the financial crisis. At that time, the Fed was also preparing a strategy to begin raising interest rates again, a step taken to keep a growing economy from overheating. Now, though, the Fed has decided to keep its benchmark interest rate near zero. “I don’t think they are going to raise interest rates until it is very clear that unemployment is moving definitively lower and that doesn’t look likely until late 2011,” said Mark Zandi, chief economist at Moody’s Analytics. Economists pointed out that buying $10 billion of government debt in a $14 trillion economy is a relatively small move, and they said they did not expect it to have a dramatic impact. “The Fed talked loudly but carried a small stick,” said Joel Naroff, president of Naroff Economic Advisors. He said that while the financial system has the money to lend, banks are unwilling or unable to find suitable loans to make. Until they do, he said, “the recovery will be softer than anyone hoped for and there may be little the Fed can do about it.” With interest rates so low, Congress, economists note, has more power than the Fed to stimulate the economy. But with midterm elections nearing, Congress is divided on whether the best move is short-term government spending, tax cuts or some combination. On Tuesday, the House, called back from its summer break for a one-day session, pushed through a $26 billion bill to protect 300,000 teachers, police and other workers from layoffs this year. President Barack Obama signed it almost immediately. The Fed action also came on a day when new figures showed worker productivity in the U.S. dropped this spring for the first time in more than a year – a sign that companies that want to grow may need to hire more people. Investors reacted positively to the Fed statement. Stocks were down sharply before the announcement but made up ground after it was announced at mid-afternoon. The Dow Jones industrial average finished down about 55 points. Treasury prices rose slightly because the Fed plan would reduce the amount of government debt on the market for others to buy. The Fed said it would buy two-year and 10-year Treasurys by using the proceeds from debt and mortgage-backed securities it bought from Fannie Mae and Freddie Mac. It said that it would buy additional government debt as its existing Treasury bonds mature. The effect is that the Fed will keep its $2.3 trillion balance sheet steady – rather than rolling it back, as it had hoped to do as the economy improved – while shifting its holdings out of mortgage securities and into more government debt. “The news is positive but not meaningful,” said John Merrill, chief investment officer of Tanglewood Wealth Management in Houston. “The money is a pittance.” The central bank said it expects to start buying the government debt Aug. 17 and planned to publish details Wednesday. From March 2009 to this March, the Fed bought up $1.25 trillion in mortgage securities and $175 billion in debt from Fannie Mae and Freddie Mac. The goal of these purchases was to drive down mortgage rates and bolster the crippled housing market. The Fed also bought $300 billion of government debt between March and October 2009. The Fed’s balance sheet has stayed at roughly $2.3 trillion since March. Economists are skeptical that cheaper credit or even more government aid will get Americans shopping more and businesses to hire. They also say some jobs in construction and other housing-related fields, and in manufacturing, will never return to pre-recession levels – a shift in the basic structure of the economy. High unemployment, lackluster income growth, sagging home values and tight credit are all restraining the pace at which Americans are spending, usually a major source of powering the economy. ___ AP Business Writers Martin Crutsinger in Washington, David Pitt in Des Moines, and Bernard Condon in New York contributed to this report.

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6 Charts That Suggest The Unemployment Crisis Is WORSE Than It Looks

August 6, 2010

If today’s uninspiring data on the mounting jobs crisis isn’t enough to convince you of how difficult it will be to turn employment situation around, we’ve gathered some graphical evidence of just how bad it is out there. Today, the Bureau of Labor Statistics announced that the U.S. economy shed 131,000 jobs in July . Private employers added 71,000 jobs, while the Census eliminated some 143,000 temporary positions. In sum, the report was widely seen to be weak and, as Calculated Risk noted , was actually weaker than many of the headlines suggested. Accounting for the Census hires, the economy added just 12,000 jobs last month, far below the 200,000 new jobs required each month to drive the unemployment rate down. Below, we’ve complied a handful of charts that take a deeper dive into the numbers. A few things standout. First, this recovery has been significantly flatter than previous economic rebounds. And, perhaps more disturbing, this unemployment crisis has been defined by historic rates of long-term unemployment and decreased economic output. Check out the most disturbing charts from the latest jobs data:

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Jared Bernstein: There They Go Again: Two Senators Continue False and Misleading Attacks on Recovery Act

August 3, 2010

This morning two senators — John McCain and Tom Coburn — released their third report critiquing 100 Recovery Act projects. And just like the last two, this one was an inaccurate and misleading attack on programs that are putting Americans to work across the nation. I’ll present some details in a moment, but it’s very unfortunate that, once again, instead of trying to help create the conditions for stronger growth, to help build on the momentum of the Recovery Act, McCain and Coburn spend their valuable time cooking up phony critiques and, with their Republican colleagues, blocking votes of even bipartisan measures to help small businesses. Let’s start with the bigger picture. Just last week two prominent, independent economists released a rigorous study on how actions by the government (and the Federal Reserve), including the Recovery Act, helped to end the Great Recession. One of the authors — Mark Zandi — was one of McCain’s top advisers during his presidential bid. He and Alan Blinder (a former vice-chairman of the Federal Reserve) found that the Recovery Act has created or saved about 2.7 million jobs so far, and shaved about a point and a half off of the unemployment rate. These jobs are the result of over 70,000 projects in action around the country, of grants to states supporting jobs of teachers, police, and firefighters, of tax cuts for working households, loans to small businesses, and investments in innovative new industries producing advanced batteries, clean energy, and much more. They’ve helped reverse a situation where last year, we were losing millions of private sector jobs; in the first half of this year, we’ve added 593,000 private sector jobs. Now, we’re always glad to take a second look at projects when concerns are raised. In fact, there’s never been a stimulus program of this magnitude with anywhere near the amount of oversight that’s been brought to bear on the Recovery Act. And when we find a problem, we fix it. We’ve shut down hundreds of projects that weren’t delivering the goods. But the inaccuracy of McCain/Coburn in this regard renders this report just as unreliable as the last two. We followed up the projects in those reports, and found half of their claims to be flat-out false or misleading. Many of the others criticized worthwhile, job-creating projects. Check out this link and you’ll see that news outlets like CNN have debunked their claims in the past, often by simply going to the folks who were working on the project and learning about it: In the current report, our review so far finds that five of the 100 projects are not even Recovery Act projects. And others are just blatantly wrong on the facts. Take for example an award that McCain and Coburn describe as “funding a WNBA Practice Facility,” when in fact the award is building a tribal government center that will create education and health facilities while also creating hundreds of jobs. Moreover, the tribe has agreed to disallow any commercial use of the facility. One of their top critiques in the new report is a clean energy program in California that’s put about 50 people to work so far, expects to create 1,500 construction jobs, and then 500 permanent green jobs after that. Gov. Schwarzenegger praised the program, as did the Chamber of Commerce. What would McCain and Coburn say to these workers? That they shouldn’t have this opportunity? That they should go back to the jobless roles? That building a clean energy future is the wrong way to go? What ideas does Senator Coburn have to offer to the 35,000 people working in Oklahoma who wouldn’t be there without the Recovery Act? What about the 64,000 Arizonans at work because of the Act? Instead of answers, we’re left with a partisan attack contradicted by one of the author’s own former advisers. But that’s not all. We’re also left with a choice. The President has shown he is willing to work with anyone who will join us to figure out new ways to create more jobs. The Vice-President spends each week making sure we’re squeezing job out of every Recovery Act dollar. Meanwhile, Republicans are blocking an up or down vote on a package of bipartisan proposals that would cut taxes for small businesses and allow them access to capital through community banks. It’s incredible, when you think about it: last week as they were working to turn out this hit-job of a report, these same two senators were voting against helping small businesses expand and create jobs. Yes, we must carefully evaluate our progress, but we must do so without partisan thumbs on the scale. In that regard, the report these two senators are touting today is not a road map forward. To the contrary, it is one back to the failed policies that got us into this mess. We’ve tried that route. We cannot afford to go back there again. This post originally appeared at the White House Blog .

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GDP Slows: Recovery Loses Steam As Consumers Turn Cautious

July 30, 2010

WASHINGTON — The recovery lost momentum in the spring as growth slowed to a 2.4 percent pace, its most sluggish showing in nearly a year and too weak to drive down unemployment. Consumers spent less, companies slowed their restocking of shelves and the nation’s trade deficit dragged more on the economy in the April-to-June quarter. In a separate report, the Commerce Department said the recession was deeper than previously estimated. Together, the reports raise doubts about whether employers will hire enough and consumers will spend enough to invigorate the economy. As unemployment remains near double digits, Congress could feel pressure to pass more stimulus measures to speed the recovery. So far, Republicans and some Democrats have blocked additional spending because of their concerns about the size of the deficit. Investors reacted to the report with disappointment. Stock futures fell in the hour before the markets opened. However, losses moderated in morning trading after the University of Michigan/Reuters consumer sentiment index for July rose slightly more than expected. The Commerce Department report released Friday did offer some encouraging news. Businesses invested the most in 13 years on equipment and software during the second quarter. For the first time in two years, builders boosted spending on commercial projects. And home builders spent the most in 27 years, although many expect that to fade now that government homebuying tax credits have expired. The report also showed that the economy grew at a 3.7 percent pace in the first three months of this year. That was much better than the 2.7 percent pace estimated just a month ago. Still, the recovery has been losing power for two straight quarters. That raises concerns about whether it will fizzle out. Or worse, tip back into a “double-dip” recession. The economy began to grow in the third quarter of last year after having suffered the worst recession since the Great Depression. And in the following quarter the economy’s growth surged at a 5 percent pace, the high water mark of the rebound. Much of the expansion was driven by the government’s massive $862 billion stimulus package of tax cuts and increased spending. Also, companies helped energize growth with a burst of spending to replenish inventories that were cut down during the recession. Now, as those forces are fading, concerns are growing as to whether the private sector can boost spending and investment enough to keep the recovery afloat. Consumer spending, usually the lifeblood of economic activity, slowed in the second quarter. Such spending rose at an anemic 1.6 percent pace. That was down from a 1.9 percent pace in the first quarter and was the weakest showing since the end of last year. Instead, Americans saved more. They saved 6.2 percent of their disposable income in the second quarter, the highest share in a year. The 2.4 percent growth rate logged in the April-to-June quarter was the weakest since a 1.6 percent pace in the third quarter of last year, when a record streak of four straight losing quarters came to an end. “The economy is growing but not enough to make most Americans happy. At this weak pace, it will take more time than many hoped for people to really feel the benefits of this upturn,” said Joel Naroff, president of Naroff Economic Advisors. In the revisions issued Friday, the government estimated that the economy shrank 2.6 percent last year – the steepest drop since 1946. That’s worse than the 2.4 percent decline originally estimated. The economy’s plunge underscores why the unemployment rate surged to 10.1 percent in October, a 26-year high. With the economy growing at a subpar speed, the current 9.5 percent unemployment rate is not expected to fall. It takes about 3 percent growth in gross domestic product just to create enough jobs to keep pace with the population increase. Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the Obama administration nor the Federal Reserve expect that to happen. Gross domestic product measures the value of all goods and services – from machinery to manicures – produced within the United States. It is the best gauge of the nation’s economic health. The weak economy leaves Democrats and Republicans on Capitol Hill vulnerable as they head into the November midterm elections. Democrats, who now control both chambers, have the most to lose. The gloomier outlook is also a liability for President Barack Obama. However, there were some encouraging signs in terms of business spending. Spending by businesses on equipment and software increased at a blistering 21.9 percent pace in the second quarter. Builders boosted spending on commercial projects, such as office buildings and plants, at a 5.2 percent pace. And, home builders, who have cut spending for the last two quarters, ratcheted up their outlays at a hot 27.9 percent pace, the most in nearly 27 years. Still, with the expiration of the government’s homebuyer tax credit, housing activity has started to turn sluggish again. Looking ahead, though, businesses still aren’t showing signs of ramping up spending that would translate into the explosive kind of growth needed to drive down unemployment. Uncertain about the strength of the recovery, companies are sitting on record piles of cash, loath to use the money to hire new workers and expand operations. Caterpillar Inc., Dupont Co. and Microsoft Corp. are among companies reporting strong second-quarter earnings in the past two weeks yet they aren’t ready to bulk up their work forces. “There is a high degree of uncertainty. There is a recovery under way. It is going to be choppy,” said United States Steel Corp. Chairman and CEO John Surma earlier this week. Overall economic growth was bolstered in the second quarter by strong spending by the federal government. It boosted spending at a 9.2 percent pace, the most in a year. And, state and local governments, coping with budget shortfalls, increased their spending for the first time in a year.

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Video: UBS’s Kara Says U.K. GDP Increase `As Good As It Gets’

July 23, 2010

July 23 (Bloomberg) — Amit Kara, an economist at UBS AG, talks about about the rise in the U.K.’s gross domestic product during the second quarter. The U.K. economy grew almost twice as much as economists forecast in the second quarter in the fastest expansion for four years as rebounding services, manufacturing and construction ignited the recovery. Kara speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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Biden: White House Wanted Bigger Stimulus; Republicans Howl Immediately (VIDEO)

July 18, 2010

Vice-President Joseph Biden said on Sunday that the administration understood the need to pass a larger stimulus package upon entering office but chose to scale down their ambitions in order to win GOP votes. Appearing on ABC’s “This Week,” Biden endorsed the viewpoint held by Keynesian economists like New York Times columnist Paul Krugman (who he referenced by name), acknowledging that the stimulus passed was likely too small. But, he added, there would have been no package at all had it not been made smaller and, subsequently, more palatable to moderate Republicans. “There was a reality,” Biden told host Jake Tapper. “In order to get what we got passed, we had to find Republican votes. And we found three. And we finally got it passed.” “I think it would have been bigger [if not for that],” he added. “I think it would have been bigger. In fact, what we offered was slightly bigger than that. But the truth of the matter is that the recovery package, everybody’s talking about it [like] it’s over. The truth is now, we’re spending more now this summer than we — I’m calling this … the summer of recovery.” The notion that the stimulus was, in all likelihood, too small for the crisis it was supposed to mend is hardly controversial among sober-minded political and economic observers. The White House, after all, continues to press Congress for additional (marginal) stimulus packages — underscoring what the president clearly feels is an additional need to jolt the economy. But Biden’s comments are already being jumped on by Republican strategists, who have spent the past year ridiculing the stimulus as a massive, wasted, $800 billion check. Kevin Madden, a longtime consultant and confidant of Mitt Romney, predicted television ads attacking the White House for Biden’s remark. As for the argument that the stimulus (even undersized) hasn’t had its desired effect, Biden cast blame on a miscommunication campaign that has kept the public in the dark. “People don’t know a lot of what’s going on in the Recovery Act,” Biden said. “Understandably, because there has been so much stuff that has been flowing our way.” WATCH

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David D. Caron: The Claims of Two Gulfs

July 14, 2010

Kenneth Feinberg, the “claims czar” for the BP catastrophe in the Gulf, reportedly looks to how to adapt his experience with the claims process he devised following the 9/11 attacks.  Another mass claims process provides a more apt analogy, however:  the very successful mass claims process following the 1991 Persian Gulf War oil well blowouts, fires and oil spills unleashed by then-president Saddam Hussein.  In the wake of that disaster, then the largest oil spill in history, a claims commission processed claims from individuals and corporations and also public authorities regarding the environment and health.  19 years later, the experience offers at least four lessons as we confront our current disaster: A claims process may distort, or even hinder, recovery.   It is a mistake to divorce the possibility of later compensation from decisions made to initiate clean-up, assessments and restoration today.  In the Persian Gulf, local governments’ efforts to address environmental damage slowed as they awaited funds.  Eventually, authorities situated along the Gulf of Mexico coast will be compensated, at least in part, but providing interim payments now will ensure that their work continues.  Vague guidelines as to which efforts will be remunerated, and when, may lead to hesitation at the starting gate.  The ongoing harm to the environment must be addressed.   It’s no secret that environmental damage is accumulating.  Recently, President Obama declared the Gulf spill the worst environmental disaster America had ever faced.  A proactive claims process will aid the response in the Gulf and limit damage.   Local, state and federal government officials have a responsibility to ascertain, within reason, the extent of harm.   Compensation follows environmental damage.  But suppose a public authority spends funds to ascertain the extent of the damage.  And having spent a significant amount of public funds does not find damage in a particular area.  What then?  An important lesson from the Gulf War claims process is that the presence of a large oil spill creates risks of future harm which a government has the responsibility to take reasonable steps to assess as quickly and efficiently as possible. And the costs of those efforts should be compensated. A claims body can streamline the recovery effort.  Courts typically focus on individual claims.  Mass claims processes do, too, but also cast an eye on the larger situation.  The Feinberg claims commission will receive a tremendous amount of information on the damage wreaked by oil on coasts, wildlife and businesses.  It will also influence decision-makers at all levels tasked with compensating victims.  The commission thus occupies a key berth from which it can encourage assessments that answer questions shared by many claimants.  In light of the giant data collection effort that will occur, the commission can coordinate data about the region which will further our long-term understanding of what occurred, how the environment of the Gulf was damaged, and how it can, we hope, be restored.    As Kenneth Feinberg knows from his experience with the 9/11 Compensation Fund, a key element of a mass claims process is that the lawyers must think not only like lawyers with one client.  They must focus simultaneously on the individual claimant and on the region as a whole, for the recovery of the region is an important part of the true recovery of each individual. David D. Caron is President of the American Society of International Law and served as a Member of the Precedent Panel of the U.N. Compensation Commission for the 1991 Gulf War. 

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Dylan Ratigan Rips GOP Congressman Kevin Brady Over Wall Street Greed

July 13, 2010

Rep. Kevin Brady (R-Texas) looked uncomfortable when MSNBC host Dylan Ratigan introduced him Tuesday afternoon to talk about unemployment benefits and Wall Street greed. Brady’s discomfort proved well-founded. Ratigan tore into the Texas Republican, who voted against the extension of unemployment benefits but for the Wall Street bailout known as the Troubled Asset Relief Program. Brady repeatedly attempted to deflect Ratigan’s harsh line of questioning on the nature of Wall Street by arguing that potential — not actual — tax increases are stifling capital investment and thus job creation, but the MSNBC host didn’t let up. “I know you have an issue with the government, but I’ve got an issue with a private industry that’s using the government to rape my country of its money, and I’d like to try to put a stop to that,” Ratigan said. “We are facing higher taxes in energy and income and capital and dividends,” Brady argued, not for the last time. “All those tax proposals are what’s keeping our recovery from gaining steam–” “That’s a lie. That’s a lie,” Ratigan shot back. “What’s keeping our recovery from gaining steam is the fact that the financial industry is stealing America’s money, depriving this country of any investment whatsoever, and that is the entire basis of our system, and the government has converted it from an investment vehicle into a vehicle for it to steal money for its rich friends.” The MSNBC host ended the segment on a frustrated note, complaining that Brady simply retreated to his talking points. “I’m done with you,” Ratigan said, after he challenged Brady to answer his questions and his guest resumed talking about possible future taxes. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Dylan Ratigan Rips GOP Congressman Kevin Brady Over Wall Street Greed

July 13, 2010

Rep. Kevin Brady (R-Texas) looked uncomfortable when MSNBC host Dylan Ratigan introduced him Tuesday afternoon to talk about unemployment benefits and Wall Street greed. Brady’s discomfort proved well-founded. Ratigan tore into the Texas Republican, who voted against the extension of unemployment benefits but for the Wall Street bailout known as the Troubled Asset Relief Program. Brady repeatedly attempted to deflect Ratigan’s harsh line of questioning on the nature of Wall Street by arguing that potential — not actual — tax increases are stifling capital investment and thus job creation, but the MSNBC host didn’t let up. “I know you have an issue with the government, but I’ve got an issue with a private industry that’s using the government to rape my country of its money, and I’d like to try to put a stop to that,” Ratigan said. “We are facing higher taxes in energy and income and capital and dividends,” Brady argued, not for the last time. “All those tax proposals are what’s keeping our recovery from gaining steam–” “That’s a lie. That’s a lie,” Ratigan shot back. “What’s keeping our recovery from gaining steam is the fact that the financial industry is stealing America’s money, depriving this country of any investment whatsoever, and that is the entire basis of our system, and the government has converted it from an investment vehicle into a vehicle for it to steal money for its rich friends.” The MSNBC host ended the segment on a frustrated note, complaining that Brady simply retreated to his talking points. “I’m done with you,” Ratigan said, after he challenged Brady to answer his questions and his guest resumed talking about possible future taxes. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Dylan Ratigan Rips GOP Congressman Kevin Brady Over Wall Street Greed

July 13, 2010

Rep. Kevin Brady (R-Texas) looked uncomfortable when MSNBC host Dylan Ratigan introduced him Tuesday afternoon to talk about unemployment benefits and Wall Street greed. Brady’s discomfort proved well-founded. Ratigan tore into the Texas Republican, who voted against the extension of unemployment benefits but for the Wall Street bailout known as the Troubled Asset Relief Program. Brady repeatedly attempted to deflect Ratigan’s harsh line of questioning on the nature of Wall Street by arguing that potential — not actual — tax increases are stifling capital investment and thus job creation, but the MSNBC host didn’t let up. “I know you have an issue with the government, but I’ve got an issue with a private industry that’s using the government to rape my country of its money, and I’d like to try to put a stop to that,” Ratigan said. “We are facing higher taxes in energy and income and capital and dividends,” Brady argued, not for the last time. “All those tax proposals are what’s keeping our recovery from gaining steam–” “That’s a lie. That’s a lie,” Ratigan shot back. “What’s keeping our recovery from gaining steam is the fact that the financial industry is stealing America’s money, depriving this country of any investment whatsoever, and that is the entire basis of our system, and the government has converted it from an investment vehicle into a vehicle for it to steal money for its rich friends.” The MSNBC host ended the segment on a frustrated note, complaining that Brady simply retreated to his talking points. “I’m done with you,” Ratigan said, after he challenged Brady to answer his questions and his guest resumed talking about possible future taxes. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Dylan Ratigan Rips GOP Congressman Kevin Brady Over Wall Street Greed

July 13, 2010

Rep. Kevin Brady (R-Texas) looked uncomfortable when MSNBC host Dylan Ratigan introduced him Tuesday afternoon to talk about unemployment benefits and Wall Street greed. Brady’s discomfort proved well-founded. Ratigan tore into the Texas Republican, who voted against the extension of unemployment benefits but for the Wall Street bailout known as the Troubled Asset Relief Program. Brady repeatedly attempted to deflect Ratigan’s harsh line of questioning on the nature of Wall Street by arguing that potential — not actual — tax increases are stifling capital investment and thus job creation, but the MSNBC host didn’t let up. “I know you have an issue with the government, but I’ve got an issue with a private industry that’s using the government to rape my country of its money, and I’d like to try to put a stop to that,” Ratigan said. “We are facing higher taxes in energy and income and capital and dividends,” Brady argued, not for the last time. “All those tax proposals are what’s keeping our recovery from gaining steam–” “That’s a lie. That’s a lie,” Ratigan shot back. “What’s keeping our recovery from gaining steam is the fact that the financial industry is stealing America’s money, depriving this country of any investment whatsoever, and that is the entire basis of our system, and the government has converted it from an investment vehicle into a vehicle for it to steal money for its rich friends.” The MSNBC host ended the segment on a frustrated note, complaining that Brady simply retreated to his talking points. “I’m done with you,” Ratigan said, after he challenged Brady to answer his questions and his guest resumed talking about possible future taxes. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Video: Blanchflower Says Economy May Have Decade of Slow Growth: Video

July 9, 2010

July 9 (Bloomberg) — David Blanchflower, professor of economics at Dartmouth College, talks about the global economic outlook. Blanchflower, speaking with Bloomberg’s Julie Hyman, also discusses the need for governments to maintain fiscal stimulus measures and the role of private industry in the recovery. (Source: Bloomberg)

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‘The Real Answer’ For Private Banking Recovery: Scorpio Partnerships

July 9, 2010

British wealth manager Scorpio Partnerships claims they’ve uncovered the “real answer” to the recovery of the private banking industry: capture the $10 trillion of investable assets that high-net worth individuals are holding back from money managers. “The wealth management engine is still misfiring for many,” says Sebastian Dovey, a managing partner at Scorpio. “New clients are still holding back from opening accounts with the industry.” The private banking industry only manages 42 percent of the roughly $40 trillion of investable assets that belong to rich customers, Scorpio’s annual benchmark reports. From the report (hat tip to New York Times Dealbook ): “The total assets under the control of the industry is now set at $16.5 trillion…However, in our analysis of market conditions the real total HNW [high-net worth] market opportunity is set at $26 trillion…Critically, this implies there is approximately $10 trillion of HNW assets that could be advised by banks but is not currently in the sector.” The report adds: “Capturing these assets is the real answer for industry recovery.”

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Video: Bandid Says Thailand to Consider Interest Rate Increase: Video

July 4, 2010

July 5 (Bloomberg) — Bank of Thailand Deputy Governor Bandid Nijathaworn talked with Bloomberg’s Haslinda Amin from Bangkok on July 2 about the outlook for the country’s economy and central bank monetary policy. Thailand will consider raising its benchmark interest rate, Bandid said, after the nation’s worst political violence in almost two decades ended without derailing the recovery. Thailand has refrained from joining Taiwan, Malaysia, India and Australia in raising borrowing costs this year, choosing to keep its benchmark rate at 1.25 percent in June as local political unrest and Europe’s sovereign-debt crisis threatened the economy. (Source: Bloomberg)

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A ‘Double-dip’ Recession Defined

July 1, 2010

WASHINGTON — Concerns are rising that the economy is at risk of slipping into a “double-dip” recession. High unemployment, Europe’s debt crisis, a slowdown in China, a teetering housing market and sinking stock prices are all weighing on a fragile U.S. recovery. So what exactly is a double-dip recession? Robert Hall has an idea of what one looks like but no precise definition. He’s chairman of the National Bureau of Economic Research, a group of academic economists that officially declares the starts and ends of recessions. In Hall’s view, a double dip is akin to a continuous recession that’s punctuated by a period of growth, then followed by a further decline in the economy. The NBER doesn’t define a double dip any more specifically than that, says Hall, an economics professor at Stanford University. In econo-speak, Hall explains: “The idea – hypothetical because it has yet to happen – is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle.” Hall says the closest the United States has come to a double dip was in 1980 and 1981. But the NBER concluded that those were two distinct, though closely spaced, recessions – “not a double dip,” he says. Not so, says Sung Won Sohn, professor at California State University, Channel Islands. Sohn says the back-to-back recessions of the early ’80s fit his definition of a double dip: A recession followed by a short period of growth followed by a recession. Brian Bethune, economist at IHS Global Insight, has a view similar to Hall’s: A period in which the economy shrinks, starts growing again and then shrinks again – for at least six months. “There is no mathematical formula; it’s a judgment call,” Bethune says. The NBER has declared the economy fell into a recession in December 2007. It hasn’t yet pinpointed an end to the recession. It said in April that it would be “premature” to do so. Many other economists say the recession ended in June or July of last year. The economy returned to growth again in the third quarter of 2009, after four straight quarters of declines. More recently, the economy has added jobs in each of the first five months of this year. Still, the threats to the recovery from overseas and at home are growing. So are the risks that the recovery will fade out. Economists say the odds of that remain low but have crept up since a couple of months ago. Analysts are downgrading their growth forecasts for the second half of this year. In determining the starts and stops of recessions, the NBER reviews data that make up the nation’s gross domestic product. The GDP measures the value of goods and services produced in the United States. The NBER also reviews incomes, employment and industrial activity. The panel, based in Cambridge, Mass., tends to take its time in declaring when a recession has started or ended. It announced in December 2008 that the recession had actually started one year earlier – in December 2007. And it declared in July 2003 that the 2001 recession was over. It had actually ended 20 months earlier – in November 2001. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second started in December 2007; its end date is pending the NBER’s determination. The timing of the NBER’s decision likely means little to ordinary Americans now muddling through a sluggish economic recovery and weak job market. Many will continue to struggle. Unemployment usually keeps rising well after a recession ends. After the 2001 recession, for instance, unemployment didn’t peak until June 2003 – 19 months later.

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A ‘Double-dip’ Recession Defined

July 1, 2010

WASHINGTON — Concerns are rising that the economy is at risk of slipping into a “double-dip” recession. High unemployment, Europe’s debt crisis, a slowdown in China, a teetering housing market and sinking stock prices are all weighing on a fragile U.S. recovery. So what exactly is a double-dip recession? Robert Hall has an idea of what one looks like but no precise definition. He’s chairman of the National Bureau of Economic Research, a group of academic economists that officially declares the starts and ends of recessions. In Hall’s view, a double dip is akin to a continuous recession that’s punctuated by a period of growth, then followed by a further decline in the economy. The NBER doesn’t define a double dip any more specifically than that, says Hall, an economics professor at Stanford University. In econo-speak, Hall explains: “The idea – hypothetical because it has yet to happen – is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle.” Hall says the closest the United States has come to a double dip was in 1980 and 1981. But the NBER concluded that those were two distinct, though closely spaced, recessions – “not a double dip,” he says. Not so, says Sung Won Sohn, professor at California State University, Channel Islands. Sohn says the back-to-back recessions of the early ’80s fit his definition of a double dip: A recession followed by a short period of growth followed by a recession. Brian Bethune, economist at IHS Global Insight, has a view similar to Hall’s: A period in which the economy shrinks, starts growing again and then shrinks again – for at least six months. “There is no mathematical formula; it’s a judgment call,” Bethune says. The NBER has declared the economy fell into a recession in December 2007. It hasn’t yet pinpointed an end to the recession. It said in April that it would be “premature” to do so. Many other economists say the recession ended in June or July of last year. The economy returned to growth again in the third quarter of 2009, after four straight quarters of declines. More recently, the economy has added jobs in each of the first five months of this year. Still, the threats to the recovery from overseas and at home are growing. So are the risks that the recovery will fade out. Economists say the odds of that remain low but have crept up since a couple of months ago. Analysts are downgrading their growth forecasts for the second half of this year. In determining the starts and stops of recessions, the NBER reviews data that make up the nation’s gross domestic product. The GDP measures the value of goods and services produced in the United States. The NBER also reviews incomes, employment and industrial activity. The panel, based in Cambridge, Mass., tends to take its time in declaring when a recession has started or ended. It announced in December 2008 that the recession had actually started one year earlier – in December 2007. And it declared in July 2003 that the 2001 recession was over. It had actually ended 20 months earlier – in November 2001. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second started in December 2007; its end date is pending the NBER’s determination. The timing of the NBER’s decision likely means little to ordinary Americans now muddling through a sluggish economic recovery and weak job market. Many will continue to struggle. Unemployment usually keeps rising well after a recession ends. After the 2001 recession, for instance, unemployment didn’t peak until June 2003 – 19 months later.

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A ‘Double-dip’ Recession Defined

July 1, 2010

WASHINGTON — Concerns are rising that the economy is at risk of slipping into a “double-dip” recession. High unemployment, Europe’s debt crisis, a slowdown in China, a teetering housing market and sinking stock prices are all weighing on a fragile U.S. recovery. So what exactly is a double-dip recession? Robert Hall has an idea of what one looks like but no precise definition. He’s chairman of the National Bureau of Economic Research, a group of academic economists that officially declares the starts and ends of recessions. In Hall’s view, a double dip is akin to a continuous recession that’s punctuated by a period of growth, then followed by a further decline in the economy. The NBER doesn’t define a double dip any more specifically than that, says Hall, an economics professor at Stanford University. In econo-speak, Hall explains: “The idea – hypothetical because it has yet to happen – is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle.” Hall says the closest the United States has come to a double dip was in 1980 and 1981. But the NBER concluded that those were two distinct, though closely spaced, recessions – “not a double dip,” he says. Not so, says Sung Won Sohn, professor at California State University, Channel Islands. Sohn says the back-to-back recessions of the early ’80s fit his definition of a double dip: A recession followed by a short period of growth followed by a recession. Brian Bethune, economist at IHS Global Insight, has a view similar to Hall’s: A period in which the economy shrinks, starts growing again and then shrinks again – for at least six months. “There is no mathematical formula; it’s a judgment call,” Bethune says. The NBER has declared the economy fell into a recession in December 2007. It hasn’t yet pinpointed an end to the recession. It said in April that it would be “premature” to do so. Many other economists say the recession ended in June or July of last year. The economy returned to growth again in the third quarter of 2009, after four straight quarters of declines. More recently, the economy has added jobs in each of the first five months of this year. Still, the threats to the recovery from overseas and at home are growing. So are the risks that the recovery will fade out. Economists say the odds of that remain low but have crept up since a couple of months ago. Analysts are downgrading their growth forecasts for the second half of this year. In determining the starts and stops of recessions, the NBER reviews data that make up the nation’s gross domestic product. The GDP measures the value of goods and services produced in the United States. The NBER also reviews incomes, employment and industrial activity. The panel, based in Cambridge, Mass., tends to take its time in declaring when a recession has started or ended. It announced in December 2008 that the recession had actually started one year earlier – in December 2007. And it declared in July 2003 that the 2001 recession was over. It had actually ended 20 months earlier – in November 2001. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second started in December 2007; its end date is pending the NBER’s determination. The timing of the NBER’s decision likely means little to ordinary Americans now muddling through a sluggish economic recovery and weak job market. Many will continue to struggle. Unemployment usually keeps rising well after a recession ends. After the 2001 recession, for instance, unemployment didn’t peak until June 2003 – 19 months later.

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Dan Dorfman: Why 2011 Will Be A Bummer

June 28, 2010

Forget about that champagne toast on New Year’s eve. A bottle of Budweiser might be far more appropriate. Why beer instead of Don Perignon? Because it won’t be a happy 2011 as the economic mess promises to get messier. Likewise, we’ll all feel more financial aches and pains from Uncle Sam’s heftier tax grab, which will assuredly depress economic growth. This dreary year-ahead outlook comes from Madeline Schnapp, a sharp, perceptive economist who boasts a number of excellent calls on the economic front, especially as it relates to the critical job and housing markets. As such, she’s no stranger in my writings. Her view, it should be noted, is a contrary view. The general expectation is that the recovery will continue to hum in 2011, following a pickup in 2010, as the economy shifts from slippers to sneakers. Schnapp, the economics chief at West Coast liquidity tracker TrimTabs Research, which is partially owned by Goldman Sachs, is convinced the timing is wrong to think about a jitterbug economy next year. A slow fox trot, she believes, is much more in line, based on her work which shows we’re in for a disappointing 2011 economy and a limping stock market to boot. Schnapp figures you don’t really need the IQ of an Albert Einstein to recognize that the 2011 economy will be riddled with a number of significant land mines, which strongly suggests the general expectation of 3% to 3.5% GDP growth next year is overblown. Our economic worrier, by the way, is not looking for a double-dip recession next year, but rather anemic growth (on the order of 2%-2.5%), which reminds her of her favorite quote pertaining to exaggerated economic expectations. It comes from none other than Warren Buffett, who said: “You can’t produce a baby in one month by getting nine women pregnant. It just doesn’t work that way.” It means, Schnapp says, no matter how hard you try or what rabbit you try to pull out of your hat, the recovery process is just going to take a long time. Credit crises that lead to banking crises, she observes, take a lot longer to recover than say a business cycle characterized by bloated inventory. Speaking of economic land mines, Schnapp takes particular note of a bigger tax bite. Noting that the Bush tax cuts expire at the end of this year, she points out that if they all expire en masse, that would translate into tax increases approximating half a trillion dollars. Since that would be political suicide, she says, tax hikes will probably come in at $200-$250 billion, mostly on the shoulders of those individuals earning $200,000 a year. That, she believes, will shave 1%-2% off GDP growth next year. Among the most prominent tax boosts slated to go into effect on January 1, 2011, the top capital gains tax will rise to 20% from 15%, the top dividend tax rate will go up to 39.6% from 15%, the top personal income tax rate will climb to 39.6% from 35%, and the lowest person income tax rate will increase to 15% from 10%. As a result, Schnapp points out, many investors will probably be selling assets in the fourth quarter to avoid paying higher taxes next year. Aside from a larger tax bite, Schnapp takes note of several other developments that will stifle economic growth next year. In brief: –Loss of stimulus measures, such as income tax refunds, cash for clunkers and the homeowner’s tax credit. –Ongoing high unemployment, likely in the 9.5%-10% range, with additional job losses of 900,000 to one million. Adding to labor woes will be more than a million new entrants into the labor force. –A darker housing picture, what with another 7-8 million new mortgage delinquencies projected over the next couple of years on top of the current population of 7.2 million delinquencies. It means, says Schnapp, a bigger inventory overhang and a further decline in housing prices. –De-leveraging cycle here and in European countries–which is a deflationary event and will take many more years to unwind. This will result in less private and government sector growth, huge deficits, higher unemployment, reduced consumer spending and it all adds up to a dismal economic outlook. What about all those expectations of a fast recovery? Schnapp figures they’re strictly a pipe dream. “You’ll have to wait a long time before we see robust GDP growth again of 3% to 3.5%, and that won’t happen,” she believes, “until 2013 or 2014 when the housing market finally gets back on solid footing.” As far as investors go, Schnapp’s advice is “don’t get sucked into a bullish stock market scenario because it’s not real.” What do you think? E-mail me at Dandordan@aol.com.

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Uncertainties Grow Surrounding US Recovery; US Data in Focus

June 28, 2010

Uncertainties Grow Surrounding US Recovery; US Data in Focus

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U.S. G20 Message: Stimulus Money Is Vital To Economic Recovery, Don’t Pull Back Yet

June 26, 2010

TORONTO — World leaders must work together to make sure the global recovery stays on track, Treasury Secretary Timothy Geithner said Saturday. Geithner made his remarks as President Barack Obama has warned his counterparts from the Group of 20 nations to not reel in measures to stimulate their economies too quickly. The United States fears doing so could endanger the global recovery. Nations like Germany, Britain and others are shifting their focus on cutting deficits – especially in the wake of Greece’s debt crisis, which rattled world markets. Asked if the global economy could slip back into another “double dip” recession, Geithner said the answer to that question hinges on decisions made by world leaders. “It is within the capacity of the people who are going to be in those rooms together in the next few days to avoid that outcome,” he said. But Geithner’s insistence that nations continue stimulus spending to avoid another global recession w as not bolstered by America’s own actions at home . On Thursday, Senate Republicans defeated a jobs bill that included unemployment extensions, provisions for the elderly and poor, state funding for medicaid, and various tax cuts. Republicans threatened to filibuster the legislation and because Democrats were short of the 60 votes needed to overcome the legislative block, they did not vote on the bill. But Geithner did not mention the failed stimulus bill at home as he told politicians from the world’s largest economies that global economic recovery depended upon government spending. Geithner told the Toronto audience that one of the mistakes made in the 1930s was that countries pulled back their recovery efforts too soon, prolonging the Great Depression, he said. He said the United States doesn’t want to see that happen again. “What we want to do is continue to emphasize that we are going to avoid that mistake,” he said. “It’s only been a year since the world economy stopped collapsing … it will take some time to heal.” Although the world economy has recovered from the worst financial and economic crisis since the 1930s, many challenges remain, Geithner said. “The scars of this crisis are still with us,” Geithner told reporters. “If the world economy is to expand at its potential, if growth is going to be sustainable in the future, then we need to act together to strengthen the recovery and finish the job of repairing the damage of the crisis.”

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Bank Stocks RISE On Financial Reform News – But Rest Of Market Slides

June 25, 2010

NEW YORK — (TIM PARADIS, AP) The stock market fell Friday after a disappointing gross domestic product reading added to investors’ discomfort about the strength of the economic recovery. Financial shares rose on relief that a banking overhaul bill is in hand. The said GDP, the broadest measure of the economy’s health, at a 2.7 percent annual pace in the first quarter, rather than the 3 percent it previously estimated. The report follows a string of weaker-than-expected economic numbers in the past week and raised investors concerns about the recovery. Check out a chart of the S&P 500 (orange) and the KBW Bank Index (blue): Uneasiness about the GDP report tempered investors’ upbeat reaction to the financial regulation bill that lawmakers agreed on early Friday. The bill would regulate banks’ ability to trade in derivatives, but the rules are less strict than investors had feared. Derivatives are complex securities that companies and investors often use to hedge against losses. But some derivatives are purely speculative investments, and some of this type of derivatives have been blamed for contributing heavily to the collapse of the housing market and the 2008 financial crisis. One investor concern was alleviated: A plan that would have had banks paying for the costs of unwinding mortgage giants Fannie Mae and Freddie Mac, was not included in the bill that will now go to the House and Senate for final approval. “The bill could have been a lot worse,” said Alan Valdes, vice president at Hilliard Lyons in New York. “It’s a bill we can live with.” That pushed bank stocks higher: U.S. Bancorp rose 2.1 percent, while Bank of America added 1.3 percent. Some of the big Wall Street banks that will see the most changes from the bill also edged higher in part on relief of knowing what is in the legislation and in part because not all parts of the overhaul were as onerous as feared. Goldman Sachs Group Inc. rose 1 percent, while JPMorgan Chase & Co. gained 1.4 percent. In late morning trading, the Dow Jones industrial average fell 42.55, or 0.4 percent, to 10,110.25. The broader Standard & Poor’s 500 index fell 2.49, or 0.2 percent, to 1,071.20, and the Nasdaq composite index fell 4.78, or 0.2 percent, to 2,212.64. Trading was expected to be heavy and volatile because Friday is the day that stocks within the Russell indexes are being added and deleted. That forces investors to buy and sell certain stocks if they have portfolios that follow the indexes. The Russell 2000 index of smaller companies rose 3.06, or 0.5 percent, to 636.23. Treasury prices rose, driving down interest rates. The 10-year Treasury note’s yield fell to 3.10 percent from 3.14 percent late Thursday. The euro, which investors have been treating as a measure of confidence in Europe’s ability to resolve its economic problems, was down at $1.2288. Crude oil rose 86 cents to $77.37 on the New York Mercantile Exchange. Investors are cautious after the latest economic reports have cast doubt on the strength of the recovery. On Thursday, a disappointing durable goods orders report from the government and downbeat forecasts from analysts raised questions about manufacturing and consumer spending. Investors are waiting to see what news comes out of the G20 meeting being held this weekend in Toronto. The world economy, including Europe’s debt problems, will dominate the talks. President Barack Obama will be among the leaders attending the meeting. U.S. Bancorp rose 47 cents, or 2.1 percent, to $23.08, while Bank of America climbed 19 cents, or 1.3 percent, to $15.21. Goldman Sachs rose $1.38, or 1 percent, to $136.36 and JPMorgan advanced 52 cetns, or 1.4 percent, to $38.55. Four stocks rose for every three that fell on the New York Stock Exchange, where volume came to 260 million shares, compared with 267 million traded at the same point Thursday. The FTSE-100 index in London fell 0.9 percent, while Paris’ CAC-40 index fell 1 percent and Frankfurt’s DAX index lost 0.6 percent. Earlier, the Nikkei 225 index in Tokyo closed down nearly 2 percent.

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State Budget Crisis: 46 States Facing ‘Greek-Style Deficits’

June 25, 2010

Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution. State spending is 12 percent of U.S. GDP. “States are going to have to cut back spending and raise taxes the same way Greece and Spain are,” says Dean Baker, co- director of the Center for Economic and Policy Research in Washington. “That runs counter to stimulating the economy and will put a big damper on the recovery in the latter half of this year.”

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Olivier Blanchard: Ten Commandments for Fiscal Adjustment in Advanced Economies

June 24, 2010

Olivier Blanchard and Carlo Cottarelli are economists at the International Monetary Fund Advanced economies are facing the difficult challenge of implementing fiscal adjustment strategies without undermining a still fragile economic recovery. Fiscal adjustment is key to high private investment and long-term growth. It may also be key, at least in some countries, to avoiding disorderly financial market conditions, which would have a more immediate impact on growth, through effects on confidence and lending. But too much adjustment could also hamper growth, and this is not a trivial risk. How should fiscal strategies be designed to make them consistent with both short-term and long-term growth requirements? We offer ten commandments to make this possible. Put simply, what advanced countries need is clarity of intent, an appropriate calibration of fiscal targets, and adequate structural reforms. With a little help from monetary policy, and from their (emerging market) friends. Commandment I: You shall have a credible medium-term fiscal plan with a visible anchor (in terms of either an average pace of adjustment, or of a fiscal target to be achieved within four-five years). There is no simple one-size-fits-all rule. Our current macroeconomic projections imply that an average improvement in the cyclically-adjusted primary balance of some 1 percentage point per year during the next four-five years would be consistent with gradually closing the output gap, given current expectations on private sector demand, and would stabilize the average debt ratio by the middle of this decade. Countries with higher deficits/debt should do more, others should do less. Such a pace of adjustment must be backed-up by fairly specific spending and revenue projections, and supported by structural reforms (see below). Commandment II: You shall not front-load your fiscal adjustment, unless financing needs require it. For a few countries, frontloading may be needed to maintain access to markets and finance the deficit at reasonable rates–but, in general, a steady pace of adjustment is more important than front-loading, which could undermine the recovery and be reversed. Nonetheless, a non-trivial first installment is needed: promises of future action will not be enough. Current fiscal consolidation plans in advanced G-20 countries imply on average a reduction in the cyclically adjusted deficit of some 1¼ percentage point of GDP in 2011, with significant dispersion around this according to country circumstances. This seems broadly adequate, and consistent with commandment I, at least based on current projections on the recovery of aggregate demand. This said, while front-loading fiscal tightening is, in general, inappropriate, front-loading the approval of policy measures (which would become effective at a later date) will enhance the credibility of the adjustment. Commandment III: You shall target a long-term decline in the public debt-to-GDP ratio, not just its stabilization at post-crisis levels. High public debt tends to raise interest rates, lower potential growth, and impede fiscal flexibility. Since the early 1970s, public debt in most advanced countries has been the ultimate absorber of negative shocks, going up in bad times, not coming down in good times. In the G-7 average, gross debt was 82 percent of GDP in 2007, a level never reached before without a major war. The current fiscal doldrums are due not only to the crisis, but also to how fiscal policy was mismanaged during the good times. This time, it must be different: the final goal must be to lower public debt ratios, gradually but steadily. Commandment IV: You shall focus on fiscal consolidation tools that are conducive to strong potential growth. This will require a bias towards (current) spending cuts, as spending ratios are high in advanced countries and require highly distortionary tax levels. Some cuts should be no brainers: for example, shifting from universal to targeted social transfers would involve significant savings, while protecting the poor. Containing public sector wages–which have risen faster than GDP in several advanced countries in the last decade–will be necessary. This said, nothing should be ruled out. Countries with low revenue ratios and large adjustment needs–like the United States and Japan–will also have to act on the revenue side. Promising “no new taxes,” in all countries and circumstances, is unrealistic. Commandment V: You shall pass early pension and health care reforms as current trends are unsustainable. Increases in pension and health care spending represented over 80 percent of the increase in primary public spending to GDP ratio observed in the G-7 countries in the last decades. The net present value of future increases in health care and pension spending is more than ten times larger than the increase in public debt due to the crisis. Any fiscal consolidation strategy must involve reforms in both these areas. This includes Europe, where official projections largely underestimate health care spending trends. Given the magnitude of the spending increases involved, early action in these areas will be much more conducive to increased credibility than fiscal front-loading. And will not risk undermining the recovery. Indeed, some measures in this area–while politically difficult–could have positive effects on both demand and supply (for example, committing to an increase in the retirement age over time). Commandment VI: You shall be fair. To be sustainable over time, the fiscal adjustment should be equitable. Equity has various dimensions, including maintaining an adequate social safety net and the provision of public services that allow a level playing field, regardless of conditions at birth. Fighting tax evasion is also a critical component to equity. For VAT, a tax that is relatively resilient to fraud, tax evasion averages about 15 percent of revenues in G-20 advanced countries. Evasion for other taxes is likely to be higher. Commandment VII: You shall implement wide reforms to boost potential growth. Strong growth has a staggering effect on public debt: a one percentage point increase in potential growth–assuming a tax ratio of 40 percent–lowers the debt ratio by 10 percentage points within 5 years and by 30 percentage points within 10 years, if the resulting higher revenues are saved. An acceleration of labor, product and financial market reforms will thus be critical. In the current context of weak aggregate demand, reforms that increase investment are more desirable than reforms that increase saving. While both have positive long-run effects, investment friendly reforms increase demand and output in the short run, while saving friendly reforms do the opposite. A word of caution, though: the timing and magnitude of the effects of structural reforms on growth are uncertain: fiscal adjustment plans relying on faster growth would not be credible. Commandment VIII: You shall strengthen your fiscal institutions. Sustaining fiscal adjustment over time requires appropriate fiscal institutions. The current ones allowed a record public debt accumulation before the crisis. They are insufficient. This requires better fiscal rules, including in Europe; better budgetary processes, including in the United States, where, at least for Congress, the budget is essentially a one-year-at-a-time exercise; and better fiscal monitoring, including through independent fiscal agencies of the type recently created in the United Kingdom. Commandment IX: You shall properly coordinate monetary and fiscal policy. If fiscal policy is tightened, interest rates should not be raised as rapidly as in other phases of economic recovery. Calls for an early monetary policy tightening in advanced economies are misplaced. Commandment X: You shall coordinate your policies with other countries. In a number of advanced countries, the reduction in budget deficits must come with a reduction in current account deficits. Put another way, if the recovery is to be maintained, the initial adverse effects of fiscal consolidation on internal demand have to be offset by stronger external demand. But this implies that the opposite happens in the rest of the world. In a number of emerging market economies, current account surpluses must be reduced, and these countries must shift from external to internal demand. The recent decisions taken by China are, in this respect, an important and welcome step. Policy coordination will also be important in some structural areas: for example, over the medium term, it will be critical to protect fiscal revenues from rising tax competition. Obey these commandments, and chances are high that you will achieve fiscal consolidation and sustained growth. This post originally appeared at iMFDirect

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U.S. Economy Factories Lead Rebound as Housing Falls

June 16, 2010

By Timothy R. Homan and Courtney Schlisserman June 16 (Bloomberg) — Production in the U.S. rose by the most since August and builders broke ground on fewer homes than projected, showing manufacturing is sustaining the recovery as the housing market retreats following the expiration of a government tax credit. Output at factories, mines and utilities increased 1.2 percent last month after a 0.7 percent gain in April, a Federal Reserve report in Washington showed today. Housing starts fell 10 percent, the biggest decline since March 2009, according to figures from the Commerce Department. Companies are rebuilding inventories and investing in new equipment as rising overseas demand drives profits at manufacturers including Deere & Co . Another report today showed producer prices fell last month, giving the Fed scope to keep interest rates near zero to sustain the recovery as less government spending and the European debt crisis hurt growth. “We continue to have an economic expansion that’s moderate overall and uneven,” said Richard DeKaser , chief economist at Woodley Park Research in Washington, who accurately forecast the gain in industrial production. “Clearly, the factory sector is helping to offset the weakness” in the housing market. Stocks dropped on a disappointing earnings forecast by FedEx Corp. and on concern over the outlook for housing. The Standard & Poor’s 500 Index fell 0.2 percent to 1,113.54 at 11:36 a.m. in New York. Treasury securities rose, sending the yield in the benchmark 10-year note down to 3.28 percent from 3.30 percent late yesterday. Exceeds Expectations Economists forecast industrial production would increase 0.9 percent in May, according to the median of 82 projections in a Bloomberg News survey. Estimates ranged from gains of 0.5 percent to 1.6 percent. Housing starts fell to a 593,000 annual rate from a revised 659,000 pace in April that was lower than previously estimated. Building permits , a sign of future construction, unexpectedly declined to a one-year low, the report from the Commerce Department showed. Single-family home starts suffered the biggest drop since 1991. The plunge followed the expiration of a government incentive worth as much as $8,000, which required contracts be signed by April 30 and closed by the end of this month. Builders are rushing to complete projects before the June closing deadline and are less focused on starting new projects. “Builders are obviously feeling very cautious, justifiably cautious,” said Robert Dye , a senior economist at PNC Financial Services Group Inc. in Pittsburgh. Home construction in the third quarter is “going to be weak and will be a drag on” the economy, Dye said. ‘Weak’ Homebuilding Prices paid to factories, farmers and other producers fell 0.3 percent in May, the third decline in four months, figures from the Labor Department also showed today. Excluding food and fuel, so-called core prices climbed 0.2 percent for a second month. The European debt crisis has prompted economists to trim inflation forecasts on increased prospects for weaker global growth and a strengthening dollar. With about 25 percent of U.S. plant space idle and unemployment hovering around 10 percent, companies have little ability to raise prices. “Slack in the labor force and excess capacity continue to keep inflationary pressure in check,” Lindsey Piegza , an economist at FTN Financial in New York, said in a note to clients. “Deflationary pressures continue to temper expectations of a near-term change in interest-rate policy.” Idle Resources The Fed’s production report showed capacity utilization, which measures the amount of a plant that is in use, rose to 74.7 percent last month from 73.7 percent in April. The rate is still lower than the 80 percent average over the last two decades. Excess capacity reduces the risk of bottlenecks that can force prices up, indicating inflation will remain low. The gain in output was paced by increases among auto, computer, electronics and machinery makers. Deere, the world’s largest farm-equipment maker, said on its website last week that sales of utility tractors rose in the “double digits” in May, compared with a 6 percent increase for the industry overall. Growing global demand for agricultural commodities, housing and infrastructure is driving sales, Samuel Allen , chief executive officer of the Moline, Illinois-based company, said last month in a statement. Deere last month raised earnings and sales forecasts for a second time this year after second-quarter profit topped analysts’ estimates. Rising Exports Manufacturing, which makes up about 11 percent of the economy, is benefiting from gains in business spending and global economic growth. U.S. exports have risen 10 of the last 12 months, helped by surging growth in emerging Asian and Latin American countries, according to figures from the Commerce Department. “People have an undue sense of pessimism relative to what is actually happening out there,” FedEx Chief Executive Officer Frederick Smith said, referring to growth in the shipment of high-value goods. Shipping demand is rising as a growing middle class in India, Brazil and China increasingly uses the Internet to order goods, he said on a conference call. “We expect stronger demand for our services and continued growth in revenue and earnings as global economic conditions continue to improve in fiscal 2011,” Smith said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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Few Fundamentals from the U.S. Confirmed Recovery is Undergoing, While Markets Fluctuate Heavily on Concerns over Global Growth

June 12, 2010

Few Fundamentals from the U.S. Confirmed Recovery is Undergoing, While Markets Fluctuate Heavily on Concerns over Global Growth

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Bernanke Says Fed Is Prepared to Counter Effects of European Debt Crisis

June 9, 2010

By Scott Lanman and Joshua Zumbrun June 9 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery, while being sustained by private demand, isn’t as strong as he prefers and faces risks from Europe’s debt crisis that may require further Fed action. U.S. growth is “not as fast as we would like,” Bernanke told the House Budget Committee in testimony today just hours before the Fed’s regional business survey said the economy expanded in all 12 Federal Reserve districts for the first time in more than two years, with a “modest” pace in many regions. Bernanke gave no indication he’ll soon back off from the central bank’s pledge to keep interest rates at a record low for an “extended period,” given high unemployment and low inflation. Economists surveyed by Bloomberg News this month pushed back their forecast of higher rates to 2011 from late 2010, based on the median estimates. The Fed chief repeated his call for lawmakers to come up with a long-term plan to reduce the federal budget deficit, which is projected to widen to a record $1.55 trillion this fiscal year. “Unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth,” he said. In other responses, Bernanke said the Fed and other regulators will soon release guidance to banks on employee-pay plans. He also said New York-based insurer American International Group Inc. will repay its federal bailout funds, sending the insurer’s shares higher. ‘Pushing’ Banks “We found that many banks have not modified their practices” on pay, Bernanke said. “We will be pushing the banks to move as quickly as possible to restructure their compensation packages.” Bernanke repeated today that the economy is growing at a “moderate pace,” a stance that’s little changed from recent remarks. He reiterated that the recovery from the worst recession since the 1930s is being restrained by the housing and commercial real-estate markets. In the Fed’s regional business survey, known as the Beige Book, all 12 district banks reported an improvement for the first time since October 2007. In the October and December 2008 reports, all of the districts reported a contraction. The Fed’s decision to restart emergency currency-swap lines to contain the debt crisis “sends an important signal to global financial markets that we will take the actions necessary to ensure stability and continued economic recovery,” Bernanke said. Swap Lines While recent use of the swap lines that restarted in May is “quite limited,” the program is “nevertheless providing an important backstop for the functioning of dollar funding markets,” said Bernanke, 56, a former Princeton University economist who began his second four-year term in February. Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York, said in an interview on Bloomberg Television that the impact of the European crisis “looks modest, but of course there is that tail risk that we have to worry about and about which Bernanke said they are watching.” Bernanke said the economy is being supported by “stimulative” monetary policy. The impact of the European crisis on U.S. growth is “likely to be modest” if financial markets “continue to stabilize,” he said. European finance ministers this week put the finishing touches on a rescue fund backed by 440 billion euros ($526 billion) in national guarantees. The Fed had $6.64 billion of swaps outstanding as of June 2, compared with a record $583.1 billion in December 2008. Stocks, Treasuries The Standard & Poor’s 500 Index fell 0.2 percent to 1,059.74 at 3:27 p.m. in New York after rising as much as 1.5 percent. AIG shares gained as much as 4.2 percent. The S&P index has dropped 13 percent since April 23, battered by the widening debt crisis in Europe. The euro fell below $1.19 on June 7 for the first time since March 2006. Today, the euro strengthened to $1.1993 against the dollar from $1.1973 yesterday. While the drop in stocks and Europe’s “weaker economic prospects” will have “some imprint” on the U.S. economy, the effects may be offset by declines in Treasury yields and home- loan rates and lower prices on oil, Bernanke said. “The Federal Reserve will remain highly attentive to developments abroad and to their potential effects on the U.S. economy,” he said. ‘Subdued’ Inflation Bernanke’s outlook for the U.S. echoed comments he made two days ago. Fed policy makers’ projections for about 3.5 percent growth this year and a “somewhat faster pace” in 2011 would mean “only a slow reduction in the unemployment rate over time.” In addition, “inflation is likely to be subdued,” Bernanke said. The Fed chief said June 7 that the unemployment rate, 9.7 percent in May, is likely to stay “ high for a while.” Given the depth of the recession, the recovery is “moderate paced,” Bernanke said in a question-and-answer session in Washington. He used similar language today do describe growth of the economy and consumer spending. Responding to a question, Bernanke said the recovery appears to have made an “important transition” from relying on government support and inventory rebuilding to private demand. Still, the chance of a relapse into recession “can never be ruled out.” Private payrolls rose by 41,000 in May, trailing the 180,000 gain forecast by economists. Including government, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. “Expectations of both businesses and households about hiring prospects have improved since the beginning of the year,” Bernanke said. “In all likelihood, however, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.” Bernanke and his colleagues will give updated economic projections when they next meet in Washington June 22-23. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net ; Joshua Zumbrun in Washington at jzumbrun@bloomberg.net .

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Bernanke Says Fed Prepared to Counter Effects of Europe Crisis

June 9, 2010

By Scott Lanman and Joshua Zumbrun June 9 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery, while being sustained by private demand, isn’t as strong as he prefers and faces risks from Europe’s debt crisis that may require further Fed action. U.S. growth is “not as fast as we would like,” Bernanke told the House Budget Committee in testimony today just hours before the Fed’s regional business survey said the economy expanded in all 12 Federal Reserve districts for the first time in more than two years, with a “modest” pace in many regions. Bernanke gave no indication he’ll soon back off from the central bank’s pledge to keep interest rates at a record low for an “extended period,” given high unemployment and low inflation. Economists surveyed by Bloomberg News this month pushed back their forecast of higher rates to 2011 from late 2010, based on the median estimates. The Fed chief repeated his call for lawmakers to come up with a long-term plan to reduce the federal budget deficit, which is projected to widen to a record $1.55 trillion this fiscal year. “Unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth,” he said. In other responses, Bernanke said the Fed and other regulators will soon release guidance to banks on employee-pay plans. He also said New York-based insurer American International Group Inc. will repay its federal bailout funds, sending the insurer’s shares higher. ‘Pushing’ Banks “We found that many banks have not modified their practices” on pay, Bernanke said. “We will be pushing the banks to move as quickly as possible to restructure their compensation packages.” Bernanke repeated today that the economy is growing at a “moderate pace,” a stance that’s little changed from recent remarks. He reiterated that the recovery from the worst recession since the 1930s is being restrained by the housing and commercial real-estate markets. In the Fed’s regional business survey, known as the Beige Book, all 12 district banks reported an improvement for the first time since October 2007. In the October and December 2008 reports, all of the districts reported a contraction. The Fed’s decision to restart emergency currency-swap lines to contain the debt crisis “sends an important signal to global financial markets that we will take the actions necessary to ensure stability and continued economic recovery,” Bernanke said. Swap Lines While recent use of the swap lines that restarted in May is “quite limited,” the program is “nevertheless providing an important backstop for the functioning of dollar funding markets,” said Bernanke, 56, a former Princeton University economist who began his second four-year term in February. Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York, said in an interview on Bloomberg Television that the impact of the European crisis “looks modest, but of course there is that tail risk that we have to worry about and about which Bernanke said they are watching.” Bernanke said the economy is being supported by “stimulative” monetary policy. The impact of the European crisis on U.S. growth is “likely to be modest” if financial markets “continue to stabilize,” he said. European finance ministers this week put the finishing touches on a rescue fund backed by 440 billion euros ($526 billion) in national guarantees. The Fed had $6.64 billion of swaps outstanding as of June 2, compared with a record $583.1 billion in December 2008. Stocks, Treasuries The Standard & Poor’s 500 Index fell 0.2 percent to 1,059.74 at 3:27 p.m. in New York after rising as much as 1.5 percent. AIG shares gained as much as 4.2 percent. The S&P index has dropped 13 percent since April 23, battered by the widening debt crisis in Europe. The euro fell below $1.19 on June 7 for the first time since March 2006. Today, the euro strengthened to $1.1993 against the dollar from $1.1973 yesterday. While the drop in stocks and Europe’s “weaker economic prospects” will have “some imprint” on the U.S. economy, the effects may be offset by declines in Treasury yields and home- loan rates and lower prices on oil, Bernanke said. “The Federal Reserve will remain highly attentive to developments abroad and to their potential effects on the U.S. economy,” he said. ‘Subdued’ Inflation Bernanke’s outlook for the U.S. echoed comments he made two days ago. Fed policy makers’ projections for about 3.5 percent growth this year and a “somewhat faster pace” in 2011 would mean “only a slow reduction in the unemployment rate over time.” In addition, “inflation is likely to be subdued,” Bernanke said. The Fed chief said June 7 that the unemployment rate, 9.7 percent in May, is likely to stay “ high for a while.” Given the depth of the recession, the recovery is “moderate paced,” Bernanke said in a question-and-answer session in Washington. He used similar language today do describe growth of the economy and consumer spending. Responding to a question, Bernanke said the recovery appears to have made an “important transition” from relying on government support and inventory rebuilding to private demand. Still, the chance of a relapse into recession “can never be ruled out.” Private payrolls rose by 41,000 in May, trailing the 180,000 gain forecast by economists. Including government, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. “Expectations of both businesses and households about hiring prospects have improved since the beginning of the year,” Bernanke said. “In all likelihood, however, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.” Bernanke and his colleagues will give updated economic projections when they next meet in Washington June 22-23. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net ; Joshua Zumbrun in Washington at jzumbrun@bloomberg.net .

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Fed Prepared to Counter Effects of Europe as Regions Show `Modest’ Growth

June 9, 2010

By Scott Lanman and Joshua Zumbrun June 9 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery, while being sustained by private demand, isn’t as strong as he prefers and faces risks from Europe’s debt crisis that may require further Fed action. U.S. growth is “not as fast as we would like,” Bernanke told the House Budget Committee in testimony today just hours before the Fed’s regional business survey said the economy expanded in all 12 Federal Reserve districts for the first time in more than two years, with a “modest” pace in many regions. Bernanke gave no indication he’ll soon back off from the central bank’s pledge to keep interest rates at a record low for an “extended period,” given high unemployment and low inflation. Economists surveyed by Bloomberg News this month pushed back their forecast of higher rates to 2011 from late 2010, based on the median estimates. The Fed chief repeated his call for lawmakers to come up with a long-term plan to reduce the federal budget deficit, which is projected to widen to a record $1.55 trillion this fiscal year. “Unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth,” he said. In other responses, Bernanke said the Fed and other regulators will soon release guidance to banks on employee-pay plans. He also said New York-based insurer American International Group Inc. will repay its federal bailout funds, sending the insurer’s shares higher. ‘Pushing’ Banks “We found that many banks have not modified their practices” on pay, Bernanke said. “We will be pushing the banks to move as quickly as possible to restructure their compensation packages.” Bernanke repeated today that the economy is growing at a “moderate pace,” a stance that’s little changed from recent remarks. He reiterated that the recovery from the worst recession since the 1930s is being restrained by the housing and commercial real-estate markets. In the Fed’s regional business survey, known as the Beige Book, all 12 district banks reported an improvement for the first time since October 2007. In the October and December 2008 reports, all of the districts reported a contraction. The Fed’s decision to restart emergency currency-swap lines to contain the debt crisis “sends an important signal to global financial markets that we will take the actions necessary to ensure stability and continued economic recovery,” Bernanke said. Swap Lines While recent use of the swap lines that restarted in May is “quite limited,” the program is “nevertheless providing an important backstop for the functioning of dollar funding markets,” said Bernanke, 56, a former Princeton University economist who began his second four-year term in February. Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York, said in an interview on Bloomberg Television that the impact of the European crisis “looks modest, but of course there is that tail risk that we have to worry about and about which Bernanke said they are watching.” Bernanke said the economy is being supported by “stimulative” monetary policy. The impact of the European crisis on U.S. growth is “likely to be modest” if financial markets “continue to stabilize,” he said. European finance ministers this week put the finishing touches on a rescue fund backed by 440 billion euros ($526 billion) in national guarantees. The Fed had $6.64 billion of swaps outstanding as of June 2, compared with a record $583.1 billion in December 2008. Stocks, Treasuries The Standard & Poor’s 500 Index fell 0.2 percent to 1,059.74 at 3:27 p.m. in New York after rising as much as 1.5 percent. AIG shares gained as much as 4.2 percent. The S&P index has dropped 13 percent since April 23, battered by the widening debt crisis in Europe. The euro fell below $1.19 on June 7 for the first time since March 2006. Today, the euro strengthened to $1.1993 against the dollar from $1.1973 yesterday. While the drop in stocks and Europe’s “weaker economic prospects” will have “some imprint” on the U.S. economy, the effects may be offset by declines in Treasury yields and home- loan rates and lower prices on oil, Bernanke said. “The Federal Reserve will remain highly attentive to developments abroad and to their potential effects on the U.S. economy,” he said. ‘Subdued’ Inflation Bernanke’s outlook for the U.S. echoed comments he made two days ago. Fed policy makers’ projections for about 3.5 percent growth this year and a “somewhat faster pace” in 2011 would mean “only a slow reduction in the unemployment rate over time.” In addition, “inflation is likely to be subdued,” Bernanke said. The Fed chief said June 7 that the unemployment rate, 9.7 percent in May, is likely to stay “ high for a while.” Given the depth of the recession, the recovery is “moderate paced,” Bernanke said in a question-and-answer session in Washington. He used similar language today do describe growth of the economy and consumer spending. Responding to a question, Bernanke said the recovery appears to have made an “important transition” from relying on government support and inventory rebuilding to private demand. Still, the chance of a relapse into recession “can never be ruled out.” Private payrolls rose by 41,000 in May, trailing the 180,000 gain forecast by economists. Including government, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. “Expectations of both businesses and households about hiring prospects have improved since the beginning of the year,” Bernanke said. “In all likelihood, however, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.” Bernanke and his colleagues will give updated economic projections when they next meet in Washington June 22-23. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net ; Joshua Zumbrun in Washington at jzumbrun@bloomberg.net .

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BP Oil Capture Rate Increases as Pace of Leak From Well Remains a Mystery

June 8, 2010

By Jim Polson and Jessica Resnick-Ault June 8 (Bloomberg) — BP Plc said more oil is being recovered from its leaking Gulf of Mexico well with a cap device, as the commander of the U.S.’s spill-response team said it’s unknown how much crude continues to leak. A drillship above the leak recovered 7,541 barrels of oil in the 12 hours to midday yesterday, BP said on its website last night. Sustained over 24 hours, that would be 36 percent more than the 11,100 barrels the London-based company gathered June 6. BP said it will give its next update on the recovery rate at 9 a.m. U.S. central daylight time. A governmental scientific team will reassess its estimates of the spill amount, which ranged from 12,000 barrels to 25,000 barrels a day, after BP stabilizes the recovery rate, U.S. Coast Guard Admiral Thad Allen , the national incident commander, said yesterday at a press conference at the White House. “We’re groping in the dark trying to figure out what our recovery capacity should be,” said Ian MacDonald, an oceanographer at Florida State University in Tallahassee. “They keep painting themselves into a corner and having to abandon the positions that they held before because they were not truthful about this, and didn’t try to get real numbers.” BP recovered 10,500 barrels on June 5 and 6,077 in the previous 24-hour period ending at midnight June 4. The oil is piped to a vessel at the surface with capacity to handle 15,000 barrels a day. BP said it burned off 15 million cubic feet of gas in the 12 hours to noon yesterday. Spill Estimates MacDonald estimates the well is leaking 26,500 barrels to 30,000 barrels a day, six times more than the figure used by BP and the government from April 28 to May 27. The spill, which is the largest in U.S. history based on the government estimates, has polluted 140 miles (225 kilometers) of shoreline, reduced offshore drilling in the nation by half, menaced tourist beaches in four states, and cost BP more than $1.2 billion. The resulted from the explosion of the Deepwater Horizon rig on April 20 and won’t be stopped until the well is plugged by so-called relief wells no earlier than August. BP is preparing to process another 5,000 barrels a day at the site by hooking up a drilling rig this month, Allen said. BP intends to reverse the flow through lines used for the failed top kill attempt so that oil and gas can flow to the Q4000, the floating rig it also used to try and plug the well, Allen said. BP has said that system will be in place by mid- June. Scientific Panel The government scientific panel can’t reassess its estimates until BP stabilizes the flow to the drillship through a cap installed June 3, Allen said. The panel also can’t check its estimate that cutting away a section of kinked pipe, necessary to fit the cap, raised the spill rate by as much as 20 percent, he said. “We’d love to know” how much oil is skirting the cap, Kent Wells, a BP senior vice president, said yesterday in a briefing with reporters. The test of the system is whether it reduces the amount of oil on the surface, he said. Winds that had held the bulk of the oil east of Louisiana shifted, breaking up the slick into sections that are soiling Louisiana and threatening beaches in Florida, hundreds of miles away, Allen said yesterday. The Coast Guard is canvassing national inventories of oil-skimming equipment to see what can be spared for the Gulf, he said. ‘Changing Enemy’ “We’re adapting to an enemy that changes,” Allen said. Allen has said that the spill response hasn’t been hampered by the lack of an accurate estimate of the leak, and that the estimate is mainly needed to assess damages against BP . BP had said it was prepared for a spill of 250,000 barrels a day in a Gulf deep-water response plan filed in 2008. The company has brought to bear all of the resources called for by that plan, Allen said yesterday. The government scientific panel, led by Marcia McNutt, director of the U.S. Geological Survey , said May 27 its best estimate of the spill rate was 12,000 to 19,000 barrels a day, based on separate analyses of the plume of oil from the well as shown on video and the extent of the slick on the surface of the Gulf. Scientists examining the plume estimated the leak might be 25,000 barrels a day, the panel said. Failure to plug the well with mud and cement on May 29 means BP can only capture oil to send to surface ships until relief wells stanch the flow, Allen said. By the end of June, BP intends to re-plumb the drillship containment system with a quick-release hose for tankers so that ships may detach and reconnect swiftly if a hurricane raises seas to unsafe heights, Wells said yesterday. To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net ; Jessica Resnick-Ault in New York at jresnickault@bloomberg.net .

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Bernanke Predicts Continued Recovery, Not Double-Dip Recession, ‘But It Won’t Feel Terrific’

June 7, 2010

WASHINGTON — Federal Reserve Chairman Ben Bernanke said Monday he is hopeful the economy will gain traction and not fall back into a “double dip” recession. “My best guess is we will have a continued recovery, but it won’t feel terrific,” Bernanke said. That’s because economic growth won’t be robust enough to quickly drive down the unemployment rate, now at 9.7 percent, he said in remarks to the Woodrow Wilson International Center for Scholars, a nonpartisan research group. The economy grew at a 3 percent pace in the first quarter of this year. That’s good growth during normal times. But coming out of such a deep recession, the economy must grow much more strongly to make a dent in the jobless rate. Fears have grown that the recovery could be derailed if Europe’s debt crisis turns into a broader financial contagion, crimping lending in the United States and around the globe. The situation has spooked investors, sending Wall Street into fits of panic. Bernanke said the Fed is monitoring the European crisis carefully, and he believes European leaders are taking the right steps to deal with the problems. Asked when the Fed will start raising interest rates, Bernanke quipped “in the future.” The Fed has pledged to hold rates at record lows to nurture the recovery. A growing number of economists now believe the Fed won’t start to boost rates until next year given the European crisis and high unemployment. Bernanke didn’t offer new clues about when the Fed would reverse course and start to tighten credit. However, he did say the Fed won’t be able to wait until the jobs market is fully healed before it pushed rates up. The Fed chief’s remarks came during a question and answer session Monday night sponsored by the Woodrow Wilson “International Center for Scholars. Reporter Sam Donaldson, who is affiliated with the group, asked most of the questions. A few came from the audience. Observing the economy, Bernanke said the news so far is “pretty good.” Both consumers and companies are spending sufficiently to keep the recovery moving forward. The private sector, he said, is “picking up the baton” as government stimulus, which mainly powered the recovery in its earliest stage, starts to fade. On relations between the United States and China, Bernanke said there is a real desire between the two superpowers to work together to ease trade and economic tensions. Both countries sort of understand there is a “co-dependency relationship,” Bernanke said. The United States snaps up Chinese goods and the Chinese is a major buyer of the U.S. government’s debt.

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U.S. Economy May Employment Gain Trails Forecast

June 4, 2010

By Shobhana Chandra June 4 (Bloomberg) — American companies hired fewer workers in May than forecast and workers dropped out of the labor force, indicating government support is still needed to spur economic growth. Private payrolls rose by 41,000, Labor Department figures showed today, trailing the 180,000 gain forecast by economists. Including government workers, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. The jobless rate fell to 9.7 percent from 9.9 percent. Stocks slumped and Treasuries surged as the report raised concern the world’s biggest economy was susceptible to shocks such as the European debt crisis. The figures may deal a blow to the Obama administration as the Congressional elections approach, and bolster forecasts the Federal Reserve will maintain its pledge to keep interest rates low for “an extended period.” “The labor market is extremely weak and has been in a mild recovery,” said Steven Wieting , managing director of economic and market analysis at Citigroup Global Markets Inc. in New York. “Policy makers need to be careful. No one should be taking stability for granted.” The Standard & Poor’s 500 Index dropped 3.4 percent to close in New York at 1,064.88, the lowest level since Feb. 8. The 10-year Treasury note rose, pushing the yield down to 3.20 percent from 3.37 percent late yesterday. Estimates of 82 economists surveyed by Bloomberg News for total payrolls ranged from 220,000 to 750,000. Last month’s gain followed a 290,000 increase in April employment. Discouraged Workers Economists surveyed also forecast the jobless rate would fall 9.8 percent. Unemployment reached a 26-year high of 10.1 percent in October. The decrease in joblessness last month reflected a 322,000 drop in the labor force as Americans grew discouraged over hiring prospects. Temporary census jobs accounted for 411,000 of the May increase in payrolls, leaving the ex-census figure at 20,000. The hiring of temporary workers to conduct the decennial population count probably peaked last month, economists said. The unwinding of census employment may keep distorting the payroll figures for months as the government dismisses workers when the count is completed. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. “Job growth is going to be anemic,” said Bill Gross , who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California. “It requires 150,000 to 200,000 jobs in order to reduce that unemployment rate, which is a key focus for the administration,” he said in an interview with Bloomberg Radio’s Tom Keene on “Bloomberg on the Economy.” Obama on Jobs President Barack Obama said the employment report showed the economy was moving in the right direction. “While we recognize that our recovery is still in its early stages, and that there are going to be ups and downs in the months ahead — things never go completely in a smooth line — this report is a sign that our economy is getting stronger by the day,” the president said while visiting a truck factory in Hyattsville, Maryland. Manufacturing remained a bright spot as factories increased payrolls by 29,000 in May, a fifth straight gain. The average number of hours worked, overtime, and earnings also climbed. Fed Chairman Ben S. Bernanke yesterday said joblessness is among the “important concerns” for the recovery. “One particularly difficult issue is the continued high rate of unemployment,” Bernanke said at a forum at the Chicago Fed’s Detroit office. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.” Cutting Staff Hewlett-Packard Co. , the world’s largest personal-computer maker based in Palo Alto, California, this week said it’ll slash about 3,000 jobs over several years. The slower pace of hiring came as colleges and universities began sending a wave of more than 1.6 million men and women with new bachelor’s degrees into the labor force. Analysts said the scramble for jobs may depress pay and handicap future career opportunities for the recent graduates. Not all the data today was bleak. Earnings per hour for those with jobs climbed 0.3 percent on average to $22.57 last month. Pay rose 1.9 percent from May 2009, up from a 1.8 percent increase in the year to April. “Today’s report may be the normal volatility seen in payroll jobs as the economy transitions from firing workers to hiring workers,” Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UJF Ltd. in New York, said in a note to clients. “The labor markets are still in recovery mode.” The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — decreased to 16.6 percent from 17.1 percent. The number of temporary workers increased 31,000, an eighth consecutive gain. Employment at temporary-help agencies often picks up before companies take on permanent staff. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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U.S. Economy Payrolls Trail Forecasts in Sign Growth May Cool

June 4, 2010

By Shobhana Chandra June 4 (Bloomberg) — American companies hired fewer workers in May than forecast and workers dropped out of the labor force, indicating government support is still needed to spur economic growth. Private payrolls rose by 41,000, Labor Department figures showed today, trailing the 180,000 gain forecast by economists. Including government workers, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. The jobless rate fell to 9.7 percent from 9.9 percent. Stocks fell and Treasuries surged as the report raised concern the world’s biggest economy was susceptible to shocks such as the European debt crisis. The figures may deal a blow to the Obama administration as the Congressional elections approach, and bolster forecasts the Federal Reserve will maintain its pledge to keep interest rates low for “an extended period.” “The labor market is extremely weak and has been in a mild recovery,” said Steven Wieting , managing director of economic and market analysis at Citigroup Global Markets Inc. in New York. “Policy makers need to be careful. No one should be taking stability for granted.” The Standard & Poor’s 500 Index dropped 2.2 percent to 1,078.9 at 12:27 p.m. in New York. The 10-year Treasury note rose, pushing the yield down to 3.21 percent from 3.37 percent late yesterday. Estimates of 82 economists surveyed by Bloomberg News for total payrolls ranged from 220,000 to 750,000. Last month’s gain followed a 290,000 increase in April employment. Discouraged Workers Economists surveyed also forecast the jobless rate would fall 9.8 percent. Unemployment reached a 26-year high of 10.1 percent in October. The decrease in joblessness last month reflected a 322,000 drop in the labor force as Americans grew discouraged over hiring prospects. Temporary census jobs accounted for 411,000 of the May increase in payrolls, leaving the ex-census figure at 20,000. The hiring of temporary workers to conduct the decennial population count probably peaked last month, economists said. The unwinding of census employment may keep distorting the payroll figures for months as the government dismisses workers when the count is completed. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. “Job growth is going to be anemic,” said Bill Gross , who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California. “It requires 150,000 to 200,000 jobs in order to reduce that unemployment rate, which is a key focus for the administration,” he said in an interview with Bloomberg Radio’s Tom Keene on “Bloomberg on the Economy.” Obama on Jobs President Barack Obama said the employment report showed the economy was moving in the right direction. “While we recognize that our recovery is still in its early stages, and that there are going to be ups and downs in the months ahead — things never go completely in a smooth line — this report is a sign that our economy is getting stronger by the day,” the president said while visiting a truck factory in Hyattsville, Maryland. Manufacturing remained a bright spot as factories increased payrolls by 29,000 in May, a fifth straight gain. The average number of hours worked, overtime, and earnings also climbed. Fed Chairman Ben S. Bernanke yesterday said joblessness is among the “important concerns” for the recovery. “One particularly difficult issue is the continued high rate of unemployment,” Bernanke said at a forum at the Chicago Fed’s Detroit office. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.” Cutting Staff Hewlett-Packard Co. , the world’s largest personal-computer maker based in Palo Alto, California, this week said it’ll slash about 3,000 jobs over several years. The slower pace of hiring came as colleges and universities began sending a wave of more than 1.6 million men and women with new bachelor’s degrees into the labor force. Analysts said the scramble for jobs may depress pay and handicap future career opportunities for the recent graduates. Not all the data today was bleak. Earnings per hour for those with jobs climbed 0.3 percent on average to $22.57 last month. Pay rose 1.9 percent from May 2009, up from a 1.8 percent increase in the year to April. “Today’s report may be the normal volatility seen in payroll jobs as the economy transitions from firing workers to hiring workers,” Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UJF Ltd. in New York, said in a note to clients. “The labor markets are still in recovery mode.” The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — decreased to 16.6 percent from 17.1 percent. The number of temporary workers increased 31,000, an eighth consecutive gain. Employment at temporary-help agencies often picks up before companies take on permanent staff. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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