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Rosenberg Sees 10% U.S. Jobless Rate as Consumer Credit Keeps Contracting

by on April 9, 2010

By Vincent Del Giudice and Thomas R. Keene April 9 (Bloomberg) — The U.S. jobless rate may rise above 10 percent at the end of the year and the contraction in consumer credit will persist, said David Rosenberg , chief economist of Gluskin Sheff & Associates Inc. in Toronto. “I think we’ll finish the year above 10 percent,” Rosenberg said in an interview with Tom Keene on Bloomberg Radio. “The credit contraction continues unabated in the household sector.” Economic growth is being fueled by the government’s $787 billion stimulus program, which has been offsetting slumping demand, Rosenberg said. “Final sales lag far behind,” he said. “There’s been no income growth in the personal sense in the past year.” Rosenberg’s forecast for unemployment is more pessimistic than the 9.4 percent median estimate for the fourth quarter in a Bloomberg News survey of economists. The jobless rate in March was 9.7 percent, down from a 26-year high of 10.1 percent in October. Payrolls expanded by 162,000 in March, the third gain in five months and the biggest in three years. Consumer credit declined $11.5 billion in February, the 12th drop in 13 months, according to Federal Reserve statistics released April 7. Revolving debt, such as credit cards, declined as did non-revolving debt, including loans for cars and mobile homes. (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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Rosenberg Sees 10% U.S. Jobless Rate as Consumer Credit Keeps Contracting

Nobel Laureate Spence Says U.S. Economic Recovery to Take `Several Years’

by on March 10, 2010

By Vincent Del Giudice and Thomas R. Keene March 10 (Bloomberg) — The U.S. faces an extended recovery from the recession even after the government infusion of cash into stimulus programs and the banking system, said Andrew Michael Spence , a Nobel laureate in economics. “Right now the expectations are that somehow the government can magically restore the economy to balance,” Spence said in an interview today on Bloomberg Radio. “A more realistic view is it’s going to take several years.” Federal Reserve Chairman Ben S. Bernanke said last month the economy is in a “nascent” recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus fades. Economists surveyed by Bloomberg News predict growth of 3 percent this year and next following a 2.4 percent contraction in 2009, which was the worst performance for a single year since 1946. “Diminished consumption” in the U.S. will be a drag on world growth, Spence said. “It’s very hard to progress on some global issues without a very strong America,” he said. The U.S. government should focus on support for the unemployed “over a more extended period” to bolster consumer confidence and spending, he said. Spence is joining the faculty of New York University Stern School of Business effective Sept. 1 after teaching at Stanford University in California. He shared the Nobel Memorial Prize for Economics in 2001 with George Akerlof of the University of California, Berkeley, and Joseph Stiglitz of Columbia University in New York, for their “analyses of markets with asymmetric information,” according to the Nobel Foundation. The U.S. economy has lost 8.4 million jobs since the recession started in December 2007, and the unemployment rate reached a 26-year high of 10.1 percent in October. The rate was down to 9.7 percent in February. (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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Nobel Laureate Spence Says U.S. Economic Recovery to Take `Several Years’

U.S. Economy Could Add 300,000 Jobs This Month, First Trust’s Wesbury Says

March 9, 2010

By Vincent Del Giudice and Thomas R. Keene March 9 (Bloomberg) — The U.S. economy could add 300,000 jobs this month as businesses rebound from blizzards last month that prevented hiring in parts of the country, said Brian Wesbury , chief economist at First Trust Portfolios in Wheaton, Illinois. “We could easily see that,” Wesbury said today in an interview on Bloomberg Radio. “I don’t expect to see consistent gains of that size, but clearly March could be that number.” In February, the unemployment rate held at 9.7 percent and payrolls fell a less-than-forecast 36,000, the Labor Department reported March 5. Snowstorms prevented an estimated 1 million people from getting to work during the week that the Labor Department survey of households. Payrolls, which have fallen by an average of about 309,000 a month since the recession started in December 2007, haven’t increased by more than 300,000 in a single month since March 2006. “We will continue to see increases in economic activity,” Wesbury said. “The economy is getting better because it has an underlying force of productivity, enterprise, technology.” (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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U.S. Unemployment Rate Peaked at 10.1% in October, Economist Achuthan Says

March 8, 2010

By Vincent Del Giudice and Thomas R. Keene March 8 (Bloomberg) — History indicates U.S. joblessness in coming months won’t exceed the quarter-century high reached in October, said Lakshman Achuthan , managing director at Economic Cycle Research Institute in New York. Unemployment unexpectedly held at 9.7 percent in February, figures from the Labor Department showed last week. The rate climbed to 10.1 percent in October, the highest level since 1983. “You have never had a four-tenths-of-a-point decline in the rate and then see it go up to a new peak” since the end of World War II, Achuthan said today in an interview on Bloomberg Radio. “The unemployment rate already peaked.” The reason the improvement does not “ring true” is that long-term unemployment remains high, Achuthan said. The skills of many unemployed Americans do not match the current demands of the workplace, he said. “The long-term unemployed, people who have been unemployed for more than six months, that’s 40 percent of the people out of work,” said Achuthan. Other workers have been more fortunate, as suggested by the decline in the unemployment rate and the slower pace of job cuts from a year earlier, he said. “The part you don’t see is that 60 percent of the unemployed, people who are shorter-duration unemployment, people who lost their job then in another month or two get another job, they’re seeing the jobless rate fall faster than the other two recoveries,” Achuthan said. Skill Sets The reason they are able to find work is “beyond just education,” he said. “Their skill sets fit what people want right now and the ones that are long-term unemployed are mismatched. They could be people who were associated with the bubbles, housing and credit, or they could be in manufacturing.” On March 5, the Labor Department also reported employment declined less than forecast as payrolls dropped by 36,000 workers. Employment fell in construction as blizzards crippled parts of the Atlantic seaboard. Temporary employment increased, as did manufacturing, according to the government statistics. Still, the underemployment rate , which includes part-time workers who’d prefer a full-time job, rose last month to 16.8 percent from 16.5 percent in January, the Labor Department reported. (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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Feldstein Says U.S. Economy Still in Recession, Calls 2010 Outlook `Weak’

December 17, 2009

By Vincent Del Giudice and Thomas R. Keene Dec. 17 (Bloomberg) — The U.S. economy remains mired in a recession, the prospects for next year are weak and home prices may resume declines, Harvard University economics professor Martin Feldstein said. “The recession isn’t over,” Feldstein said today in an interview on Bloomberg Radio in New York. “It will be a while before we have enough information to know if the recession ended.” Feldstein is former president of the Cambridge, Massachusetts-based National Bureau of Economic Research , and a member of the NBER’s Business Cycle Dating Committee, the panel charged with determining when U.S. recessions begin and end. He was also chairman of the White House Council of Economic Advisers during the Reagan administration. The recession is considered the deepest since the Great Depression of the 1930s. The economy has lost more than 7 million jobs since the NBER announced the recession in December 2007, It contracted for four consecutive quarters before expanding in the three months ended Sept. 30 by 2.8 percent at an annual rate. Housing Market Restrained consumer spending suggests “2010 is going to be a very weak year,” Feldstein said. “Thrift in the long run is a very good thing, but increasing thrift as you come out of a recession is going to be a drag.” In the interview, he also said the Obama administration’s effort to revive the U.S. housing market is a failure and home prices will continue to decline. “It was just not well enough designed,” Feldstein said. “They ended up failing.” That suggests the housing slump will “continue to push down house prices,” he said. “We saw a little pause in home-price declines in the summer but I think that was because of the first-time home buyers program,” Feldstein said. “We’re not going to get that boost.” On Dec. 11, The U.S. House voted to tighten rules for derivatives and create powers to break apart healthy financial firms that threaten the economy. The House rejected a “cram- down” amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court. Lenders permanently modified 31,382 of the 4 million mortgages targeted for loan relief under the Obama administration’s main foreclosure prevention plan through last month, the Treasury Department announced on Dec. 10. Separately today, the index of leading economic indicators rose for an eighth consecutive month in November, a sign growth will extend into the first half of 2010. The Conference Board’s gauge of the outlook for the next three to six months rose 0.9 percent after climbing 0.3 percent in October. (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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U.S. Economy to Add Jobs by End of This Year, Barclays Capital’s Maki Says

September 21, 2009

By Vincent Del Giudice and Thomas R. Keene Sept. 21 (Bloomberg) — The U.S. economy will add jobs by the end of this year, said Dean Maki , chief U.S. economist at Barclays Capital Inc. in New York. The unemployment rate will “peak slightly below 10 percent,” Maki said today in an interview on Bloomberg Radio. “We don’t think there’s a lot left to go.” In August, the rate reached a quarter-century high of 9.7 percent. After losing jobs every month since December 2007, “payroll growth turns positive” within three months, Maki said. September, however, will show another net loss in non-farm payrolls, he said. After expanding at a 3.5 percent annual rate this quarter, the economy will grow at a 4 percent pace in the fourth quarter and at a 5 percent rate at the start of 2010, Maki wrote in a research report issued Sept. 17. Maki previously forecast a 3 percent growth rate at the start of 2010. The rebound in the economy is being driven by housing and consumer spending, Maki said today. “Housing has turned in a durable way in our view” and “consumer spending is actually coming in stronger than we expected,” he said. In housing, “ affordability has improved so dramatically” and “housing prices have fallen faster than incomes.” (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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Fed Was Lax in Supervision of Banks Before Financial Crisis, Kaufman Says

September 2, 2009

By Vincent Del Giudice Sept. 2 (Bloomberg) — The Federal Reserve has been lax in its role as a bank regulator, economist Henry Kaufman , president of Henry Kaufman & Co. in New York, said today in an interview on Bloomberg Radio and Bloomberg Television. “Supervision and regulation has had a very low priority within the scheme of things in the Federal Reserve,” Kaufman, author of “The Road to Financial Reformation,” said. Fed Chairman Ben S. Bernanke “did not recognize the financial crisis this country was facing,” and leaned toward the policies of his predecessor, Alan Greenspan , Kaufman said. Bernanke then “acted with substantial force” once he understood the depth of the crisis, he said. Government action helped avert a deeper economic slump, Kaufman said. “We would be beyond the recession today,” he said. “We would probably be in a depression.” Excesses in mortgage lending have made it “difficult for many households to recover financially,” Kaufman said. Kaufman also expressed doubts about a proposal to tax the financial industry to limit its growth. “It is wrong to pass on that cost to the borrower or the participant in the financial system,” he said. (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net .

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U.S. Economy Faces `Bumpy’ Recovery, Bank of America Economist Levy Says

August 18, 2009

By Vincent Del Giudice Aug. 18 (Bloomberg) — The U.S. economy faces an uneven recovery from the deepest recession since the Great Depression rather than a rapid rebound, said Mickey Levy , chief economist at Bank of America Corp. in New York. “My hunch is it’s going to be a bumpy recovery” because of temporary government efforts to boost growth, Levy said today in an interview on Bloomberg Radio. The “cash for clunkers” auto trade-in program, for example, is “borrowing from future auto sales” and “probably borrowing from current non-auto sales” as well, he said. In the past, the deeper drop in gross domestic product during a recession, “the sharper the bounce back,” Levy said. “If history holds, it’ll be a decent bounce back.” Labor markets may be steadying as well, and the unemployment rate may remain below 10 percent, he said. Residential real estate “is past its trough” and the inventory of new homes is “back to a normal level,” Levy said. As a result, home prices may be “closer to a trough,” he said. Levy said that by his estimates the housing collapse started in late 2005. Housing starts unexpectedly fell in July, pulled down by multifamily dwellings, while single-family starts that make up 75 percent of the industry rose to the highest level since October, a Commerce Department report showed today. The 1 percent decline in starts to an annual rate of 581,000 was the first drop in three months and followed a 587,000 rate in June. Construction of single-family houses rose 1.7 percent to a 490,000 rate. (In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.) To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net .

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