Retail Sales Expected to Decline

Story first appeared in Bloomberg Businessweek.
Retail sales in the U.S. probably declined in May for the first time in a year as slower employment and subdued wage gains damped demand for automobiles, economists said before reports this week.

The projected 0.2 percent decrease last month would follow a 0.1 percent gain in April that was the smallest this year, according to the median forecast of 62 economists surveyed by Bloomberg News ahead of Commerce Department figures due June 13. A measure of the cost of living fell last month for the first time in two years, reflecting cheaper gasoline prices, other data may show.

Limited payroll growth and unemployment exceeding 8 percent may make it tough for consumer spending to improve after a first-quarter pace that was the fastest in a year. At the same time, lower prices at the gasoline pump are providing relief for Americans and also helping contain inflation, giving the Federal Reserve more room to stimulate the economy should Europe’s debt crisis worsen.

According to economists, retail sales will be quite soft. It is quite evident that the job market is slowing. The Fed is much more worried about the high level of unemployment than about inflation, which is likely to remain moderate.

Household purchases will grow at 2.3 percent annual rates in each of the final three quarters of 2012, according to the median forecast in a separate Bloomberg survey of economists taken from June 1 to June 5. Consumer spending, which accounts for about 70 percent of the economy, expanded at a 2.7 percent pace last quarter.

Labor Market

Monthly employment gains have decelerated from a high this year of 275,000 in January, Labor Department figures show. Payrolls rose 69,000 in May following a 77,000 increase in April. The jobless rate climbed to 8.2 percent from 8.1 percent. Average hourly earnings rose 1.7 percent last month from May 2011, the smallest increase since December 2010.

Cooling employment and a drop in stock prices since the end of April are also weighing on Americans’ confidence. A report on June 15 may show the Thomson Reuters/University of Michigan preliminary index of sentiment fell this month from the highest level since October 2007, economists projected.

Atlanta-based Home Depot Inc., the largest U.S. home- improvement retailer, is among companies whose business plans assume slower economic growth and stubborn joblessness.

The economy still faces higher-than-normal unemployment and underemployment rates, with the consequence that value will remain of major importance to our customers.

Auto Sales

Cars and light trucks sold at a 13.7 million annual rate in May after April’s 14.4 million pace, Ward’s Automotive Group data showed. Gains of 11 percent at General Motors Co. (GM) and 30 percent at Chrysler Group LLC trailed analysts’ projections. Ford Motor Co., the only major automaker whose 13 percent increase in sales topped estimates, boosted incentives by about $100 per vehicle.

Retail sales excluding autos probably were little changed last month, according to the Bloomberg survey median.

The Commerce Department’s retail sales data, which aren’t adjusted for prices, will reflect cheaper gasoline. A gallon of regular fuel at the pump cost an average $3.71 in May, down from this year’s peak of $3.94 on April 4, according to AAA, the biggest U.S. auto group. It was $3.56 on June 7.

Less expensive gasoline may have helped free up cash for other purchases such as clothing and home goods. May same-store sales climbed more than analysts projected for Target Corp., the second-largest U.S. discount chain, and Limited Brands Inc., the operator of the Victoria’s Secret lingerie stores, company reports showed.

Retail Sales
Investors are counting on Americans to keep shopping. The Standard & Poor’s Supercomposite Retailing Index, which includes Macy’s Inc. and Gap Inc., has gained more than 16 percent this year through June 8, compared with a 5.4 percent advance for the broader S&P 500.

The decline in fuel costs is also subduing inflation. The consumer price index, the broadest of three gauges issued by Labor Department each month, fell 0.2 percent in May after no change in April, according to the Bloomberg survey median. The report is due June 14.

Receding inflation gives the Fed more flexibility to take steps to spur the economy if needed.

The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.

Manufacturing continues to support the economic expansion, albeit at a slower pace, Fed reports may show this week. Industrial production grew 0.1 percent in May after a 1.1 percent increase that was the biggest in more than a year, according to the Bloomberg survey median. The report is due June 15.

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New Bill Meant to Help Farmers

Story first appeared in Delta Farm Press.
On Wednesday, Senate Agriculture Committee leadership urged the Senate to swiftly pass the Agriculture Reform, Food and Jobs Act of 2012 (the farm bill), which reforms agriculture policy and saves more than $23 billion in taxpayer money by streamlining and consolidating programs and ending unnecessary farm subsidies.

While saving taxpayer dollars, the bill strengthens initiatives that help America’s agriculture economy continue creating jobs. The measure was adopted by the committee on a strong bipartisan vote of 16-5 in April and is now being considered by the full Senate.

This bill represents commonsense and responsible reforms that will save taxpayers tens of billions of dollars while strengthening key initiatives that will allow our economy to continue growing and creating jobs. This bill has garnered widespread praise from hundreds of farm, food and conservation organizations for its common sense reforms, deficit reduction, and investments in our economic future. The 2008 farm bill is set to expire at the end of September -- we must pass this commonsense bill immediately to give farmers the certainty they need to continue growing the economy. Sixteen million American jobs rely on agriculture. The time for reform is now.

Representatives feel they have performed their duty to taxpayers by cutting deficit spending while at the same time strengthening and preserving the programs so important to agriculture and rural America. Mandatory spending has been cut by $23.6 billion. They have reformed, eliminated and streamlined USDA programs to the tune of more than 100 programs and authorizations eliminated. We’ve done it on a voluntary basis and in a bipartisan fashion. Simply put, this bill is commonsense reform and needs to be approved now to provide certainty for our farmers and ranchers to make planning decisions and to help our economic recovery.

Losses are tough on any producer, but especially catastrophic for a beginning farmer who is still trying to build up equity. This is a good bill for young and beginning farmers and ranchers. If the bill were in existence today, local farmers would have the opportunity to cover more crops through crop insurance. In years like this one production is going to be almost zero. Crop insurance helps keep families in business. And allows for expansion and proper Farm Machine Sheds for crop and tool storage.

There are many other young dairy farmers who want to keep their family’s farms going, but it’s a tough business. This legislation is not just about the next five years, but the next generation of farmers in America. That’s what is at stake this month. Farmers need certainty to make smart business decisions. Waiting until the last minute or passing patchwork, short-term extensions creates uncertainty and takes a big toll.

Farmers are pleased to see the new farm bill reduces the federal deficit and makes the necessary reforms for the next generation.

The Senate’s bipartisan bill represents significant reform of American agriculture policy. By ending four different commodity subsidy programs (direct payments, counter-cyclical payments, the SURE program and the ACRE program), the bill achieves billions in savings while strengthening responsible, market-based risk management tools that prevent farmers -- and farm jobs -- from being wiped out because of weather disaster or market volatility.

Through streamlining programs, the bill consolidates 23 conservation programs into 13 easier-to-use initiatives -- a commonsense approach that is being supported by nearly 650 environmental groups in all 50 states, which will mean less erosion, cleaner water and healthier wildlife habitats. Additionally, the bill increases efficiency and accountability while strengthening agricultural jobs initiatives by expanding export opportunities, investing in research, growing bio-based manufacturing, spurring innovation in bio-energy production, helping family farmers sell locally, strengthening our commitment to fruit and vegetable and organic farmers, and extending rural development initiatives.

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Motorcycle Helmets Make A Difference

Story first appeared in USA Today.

As highway deaths overall have fallen with improved safety in cars, motorcyclists have seen just the opposite: a higher death rate.

Motorcyclist fatalities have more than doubled since mid 1990s to about 4,550 last year. And a lengthy report by FairWarning.org, an independent nonprofit public-interest investigative news website, says the rising death toll comes as biker groups have urged Washington to repeal states' motorcycle helmet laws.

Now the groups are going a step further, advocating for a rule that would prevent the National Highway Transportation Safety Administration, or NHTSA, from providing any more grants to states to conduct highway stops of motorcyclists to check for safety violations such as wearing helmets that don't meet federal standards.

Also, FairWarning.org says the groups, backed by major motorcycle manufacturers, are:

Seeking to preserve what essentially is a gag rule that since 1998 has prevented NHTSA from advocating safety measures at the state and local levels, including promoting life-saving motorcycle helmet laws.

Trying to derail a measure lawmakers envisioned to reinstate financial penalties for states lacking helmet laws.

By doing so, the groups can help keep pressure on state legislatures to repeal helmet laws, which save lives but impede on what bikers' consider to be their wind-in-the-hair freedom. Says FairWarning.org: "With Michigan's repeal in April of its nearly 50-year-old helmet requirement, only 19 states have helmet laws covering all riders, according to the Insurance Institute for Highway Safety. In the late 1970s, by contrast, 47 states had such requirements."

NHTSA estimates that motorcycle helmets saved 1,483 lives in 2009, and that another 732 deaths could have been avoided if all riders had worn them, the site says.

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Economic Slowdown Breeding Ground for Recession

Story first appeared in Bloomberg Businessweek.

The U.S. economy looks set to deliver a repeat performance in 2012: for the third straight year, it may suffer a swoon yet not slip into a recession.

Researchers don’t think the slowdown will be any more consequential than the past two years. There are positives out there in the economy, we should avoid another recession.

Household balance sheets are in better shape, with indebtedness down about $100 billion in the first quarter, according to the New York Fed. Banks are more profitable: earnings have risen for 11 straight quarters, based on data compiled by the Federal Deposit Insurance Corp. Even the housing market is reviving, with starts through the first four months of this year 24 percent higher than the comparable 2011 period.

Stocks plunged on Friday on news that American employers last month added the fewest workers to their payrolls in a year while the jobless rate rose. Treasuries gained, sending yields to record lows, as investors sought refuge from rising financial strains in Europe and slowing growth in the U.S. and China. German and U.K. yields fell to all-time lows after the Spanish Economy Minister said the future of the euro is at stake.

Following the jobs report, the chief U.S. economist at JPMorgan Chase & Co. in New York, lowered his forecast for third-quarter economic growth to 2 percent from 3 percent. He sees the economy expanding 2.5 percent this quarter.

The chief executive officer of Decision Economics in New York, bumped up his odds of a recession next year to 15 percent from 10 percent.

Romney Versus Obama
Mitt Romney, the presumptive Republican nominee in November’s presidential election, seized on the jobs figures to attack Barack Obama. “It is now clear to everyone that President Obama’s policies have failed to achieve their goals,” he said in a statement.

The administration, seeking to blunt the political impact, highlighted private payroll gains over the past 27 months while promoting measures Obama has proposed to boost hiring.

The decline in jobs growth to 69,000 last month from a high this year of 275,000 in January was reminiscent of the labor- market cooling that occurred in both 2010 and 2011. Then as now, employers turned skittish as Europe’s sovereign-debt woes worsened.

Repeating the pattern of the last two years, the Fed Chairman and his fellow central bankers are likely to respond to the job-market weakness by announcing further steps to stimulate growth. The moves could come when the Fed meets on June 19-20 to decide monetary strategy.

More Pressure

Policy makers elsewhere face even more pressure to come up with ways to boost their economies. The European Central Bank may cut its benchmark interest rate from 1 percent as soon as this week, the chief economist at Berenberg Bank in London said in a June 1 report. China will respond with a 2 trillion yuan ($314 billion) fiscal stimulus this year and next, according to a senior managing director of New York-based ISI Group.

The U.S. is in “better shape” to weather the global economic tremors than it was in the past, and in comparison with other countries today, provided the euro region’s currency compact doesn’t collapse completely. He sees U.S. growth picking up to 2.5 to 3 percent in the second half of this year as consumer spending expands, encouraging employers to take on more workers.

Household Demand

Household purchases rose 0.3 percent in April, the Commerce Department reported on June 1. That followed a 2.7 percent annualized increase in the first quarter, the most since the final three months of 2010.

Demand is holding up at store chains. Retailers’ same-store sales topped analysts’ estimates in May. Sales at Minneapolis- based Target Corp. (TGT), the second-largest U.S. discount retailer, climbed 4.4 percent. Framingham, Massachusetts-based TJX Cos., the owner of T.J. Maxx and Marshalls, posted an 8 percent increase, reports showed last week.

While automobile sales slipped in May from April, they were still up 17 percent from a year earlier, according to Ward’s Automotive Group.

Consumers are benefitting from easier credit terms as financial institutions seek to put the money they’ve earned to work. U.S. banks “eased standards on credit card, auto and other consumer loans,” according to the Fed’s quarterly survey of senior loan officers, released on April 30.

Gasoline Prices

Investor nervousness over the world economy has pluses and minuses for U.S. households. On the negative side, it has pushed down stock prices, reducing household net worth. On the positive side, it has helped bring down gasoline prices and mortgage rates.

The average price of regular unleaded gasoline fell to $3.61 a gallon on May 31 from a 2012 high of $3.94 on April 5, according to AAA, the nation’s largest motoring group, as oil demand ebbed with the slowing world economy.

Economists feel that we’re benefitting from a global drop-off in commodity prices.

Rates for 30-year U.S. mortgages fell to a record as concern about Europe’s financial crisis drove investors to the safety of the government bonds that guide borrowing costs. The average rate for a 30-year mortgage dropped to 3.75 percent in the week ended May 31 from 3.78 percent, according to Freddie Mac, the McLean, Virginia-based mortgage financier.

Homebuilder Confidence

The drop in loan rates is aiding housing, the trigger for the worst recession since the Great Depression. Confidence among U.S. homebuilders jumped to a five-year high in May, the National Association of Home Builders/Wells Fargo index showed.

Toll Brothers Inc. is among builders benefiting from the revival in demand. Second-quarter profit at the Horsham, Pennsylvania-based company exceeded analysts’ estimates as orders surged 47 percent from a year earlier.

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New Mexico Wildfires Still Rage

Story first appeared on MSNBC.

A smoky haze hangs over the rugged canyons and tree-covered expanses of southwestern New Mexico as the largest wildfire in the state's recorded history marches across more of the Gila Wilderness.

The virtually unchecked wildfire is fueling experts' predictions that this is a preview of things to come as states across the West contend with a dangerous recipe of wind, low humidity and tinder-dry fuels.

The Whitewater-Baldy blaze has charred more than 190,000 acres, or nearly 300 square miles, in Gila National Forest and has become the largest wildfire burning in the country.

The Governor viewed the fire from a New Mexico National Guard helicopter Thursday and saw the thick smoke shrouding some of the steep canyons that are inaccessible to firefighters. She described the terrain as "impossible," saying there was no way for firefighters to directly attack the flames in the rugged areas of wilderness.

Along the fire's northern edge, she spotted crews doing burnout operations designed to slow the erratic blaze, which has surpassed last year's Las Conchas fire as the state's largest ever. That fire charred 156,593 acres and threatened the Los Alamos National Laboratory, the nation's premier nuclear facility.

From the air, she could see the blanket of smoke stretching for miles. She used words like daunting and enormous, fitting since fire managers said the blaze could smolder until the region gets significant rainfall during the summer monsoon season.

More than 1,200 firefighters are at the massive blaze near the Arizona border. It has destroyed a dozen cabins and eight outbuildings, a fire information officer said. New Mexico Steel Carport companies have already seen an impact on sales and service levels due to the blaze.

Experts say persistent drought, climate change and shifts in land use and firefighting strategies mean other western states likely will see similar giant fires this season.

The area has been in a long drought cycle for the last 20 years, and conditions now are great for these type of fires.

Agencies in New Mexico, Colorado and Arizona are bracing for the worst. Many counties have established emergency telephone and email notification systems to warn of wildfires, and most states have enlisted crews from other jurisdictions to be ready when the big ones come.
It's highly likely that these fires are going to get so big that states are going to need outside resources to fight them.

According to the National Weather Service, a dry climate is expected to prolong drought conditions across the Great Basin and central Rockies during the fire season. Large portions of Nevada, Arizona, Utah, Colorado and New Mexico will remain under severe drought conditions.

A lack of moisture means fewer fuels to burn in some areas, but unburned vegetation elsewhere could pose a problem since many states received no sustained snow or rain this winter and spring.

That's what happened in New Mexico's Gila Wilderness, where a lack of snow failed to push down grass, which worsened the fire danger.

Typically, fires in the area don't cross the middle fork of the Gila River. But this year, it did get across. Humidity levels during the day are at about 2 to 3 percent. Normally, during summer you'd see 5 to 12 percent.

Officials closed the Gila Cliff Dwellings National Monument on Thursday due to smoke generated from the fire. The National Park Service said the closure would remain in effect until conditions improve.

The blaze is 5 percent contained, but fire managers expect that to jump as crews bolstered lines on the northern end. Scars from previous burns were also helping to slow the flames on the southeastern flank.

Firefighters are continuing with burnout operations and have been helped with a slight rise in humidity and decreased winds.

Another reason states in the West will see more massive fires this season is because, coupled with drought and dry climate, crews have experienced changes in firefighting strategies and agencies have changed some policies in fighting wildfires in isolated areas.

In the last 20 years or so, agencies have generally been reluctant to put firefighters at risk in remote areas. It wasn't like that decades ago. Regardless, the number of New Mexico Workers Compensation Insurance Quotes have risen since the fires started.

Instead, agencies have focused attention on burnout operations until conditions are safe to begin containment.

Not that those practices and the large fires are bad things. For example, the Gila Wilderness has been a target for controlled burns.

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