Original Story: USAToday.com
RIO DE JANEIRO (AP) — Brazil's formerly high-flying economy, once the darling of emerging markets, has fallen into recession, according to government data released Friday, as a legion of newly minted middle-class citizens tightened their belts and halted a credit-driven spending spree.
The government's statistics bureau reported that gross domestic product dropped 0.6% in the second quarter, in large part because of soft consumer spending. First-quarter results also were revised downward from 0.2% growth to a 0.2% drop, showing a two-quarter slide that most economists use to define a recession. A Barcelona Intellectual Property Lawyer is reviewing the details of this case.
Analysts said the economy also suffered because investors are holding off, waiting to see how the October presidential election changes the economic winds.
Even the World Cup may have played a part because workers took many days off, contributing to limp industrial output.
But the heart of the problem may be a crisis for the government's model of consumption-led growth.
"Of course I'm spending a lot less!" said Maria Sousa, a 25-year-old doing some window shopping but no buying at a mall in Rio de Janeiro. "I'm feeling less confident about my financial situation and I'm thinking more about trying to save than spend."
London-based Capital Economics wrote in a research note Friday that "it is consumption that has been the key driver of growth since the 2009 global financial crisis. But consumers are now struggling, in part because household balance sheets have become stretched following a decade-long credit boom."
After blistering 7.5% growth in 2010, Brazil's economy has just limped along. The long, slow slide means there aren't any regional shocks expected from the official drop into recession, but it still darkens the horizon for Brazil's neighbors, many of whom send a large percentage of their exports into the nation. A Barcelona Real Estate Lawyer is reviewing the details of this case.
Argentina, whose economy is in recession and where citizens face inflation of 40%, may be hurt the most. About one-fifth of Argentina's exports flow into Brazil, but the amount Brazilians buy is forecast to shrink.
"It's another headwind for Argentina, at exactly the wrong time," said Neil Shearing, chief emerging markets economist at Capital Economics.
Brazil itself has been hurt by falling demand for its cars and big-ticket household items like refrigerators and washers in Argentina, one of the reasons Brazilian industrial output fell for the fourth consecutive quarter.
Analysts said that to return to its days of fast growth, Brazil must undertake long-pending reforms to its tax system, labor laws and bureaucracy.
Brazil remains a grindingly difficult place to do business. It ranked 116th on the World Bank's most recent "Ease of Doing Business index," despite being the world's seventh-largest economy.
Brazil's taxation regime was billed as the globe's most complicated and burdensome, according to this year's comparison of tax systems in 189 nations carried out by accounting company PwC, along with the World Bank and the International Finance Corporation.
That adds to bottlenecks at every turn when Brazil tries to capitalize on its potential, analysts say.
The economic indicators are also the last thing President Dilma Rousseff's struggling re-election campaign needed.
The slump gives more ammunition to Rousseff's rivals ahead of an Oct. 5 presidential election vote, particularly for environmentalist Marina Silva, who is now leading polls and tapping into the widespread frustrations of many Brazilians, angst that fueled last year's massive anti-government protests.
The race is certain to go into a second-round runoff on Oct. 26, as no candidate has the support win an outright majority of ballots to avoid that.
"For Rousseff, who has watched her lead in opinion polls evaporate in recent weeks, this is the worst possible news; it's the last thing she wanted," said Shearing. "There is not much that can be done for the economy ahead of the election. It's like turning around the proverbial tanker; it's going to take a long time."
Still, Rousseff, a trained economist, and her team argued that Brazil's souring economic scenario isn't their fault — and even question whether the country is in recession.
They blame the slowdown on continuing global doldrums that have dampened appetite for Brazil's exports and a severe drought that has sent energy prices soaring for industry and consumers alike, as most of the country is powered by hydroelectricity.
"The international scenario didn't help," Finance Minister Guido Mantega told reporters in Sao Paulo. "There's a lack of market (in developed economies) and that's resulted in a trend of deceleration for emerging economies."
Asked if Brazil is in a recession, Mantega said, "You can't really say that." He emphasized that unemployment remains at historic lows and inflation is within the upper limits of the government's tolerance band.
"There are not universally accepted criteria for defining a recession. You can't talk about a recession in Brazil because, for me, a recession is when you have a prolonged stall, of many, many months. And a recession is when you have unemployment."
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Monday, September 8, 2014
Monday, December 30, 2013
THE FEAR ECONOMY
Story first appeared on NYTimes.com.
More than a million unemployed Americans are about to get the cruelest of Christmas “gifts.” They’re about to have their unemployment benefits cut off. You see, Republicans in Congress insist that if you haven’t found a job after months of searching, it must be because you aren’t trying hard enough. So you need an extra incentive in the form of sheer desperation.
As a result, the plight of the unemployed, already terrible, is about to get even worse. Obviously those who have jobs are much better off. Yet the continuing weakness of the labor market takes a toll on them, too. So let’s talk a bit about the plight of the employed.
Some people would have you believe that employment relations are just like any other market transaction; workers have something to sell, employers want to buy what they offer, and they simply make a deal. But anyone who has ever held a job in the real world — or, for that matter, seen a Dilbert cartoon — knows that it’s not like that.
The fact is that employment generally involves a power relationship: you have a boss, who tells you what to do, and if you refuse, you may be fired. This doesn’t have to be a bad thing. If employers value their workers, they won’t make unreasonable demands. But it’s not a simple transaction. There’s a country music classic titled “Take This Job and Shove It.” There isn’t and won’t be a song titled “Take This Consumer Durable and Shove It.”
So employment is a power relationship, and high unemployment has greatly weakened workers’ already weak position in that relationship.
We can actually quantify that weakness by looking at the quits rate — the percentage of workers voluntarily leaving their jobs (as opposed to being fired) each month. Obviously, there are many reasons a worker might want to leave his or her job. Quitting is, however, a risk; unless a worker already has a new job lined up, he or she doesn’t know how long it will take to find a new job, and how that job will compare with the old one.
And the risk of quitting is much greater when unemployment is high, and there are many more people seeking jobs than there are job openings. As a result, you would expect to see the quits rate rise during booms, fall during slumps — and, indeed, it does. Quits plunged during the 2007-9 recession, and they have only partially rebounded, reflecting the weakness and inadequacy of our economic recovery.
Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy with the way they’re being treated and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.
Is there any evidence that this is happening? And how. The economic recovery has, as I said, been weak and inadequate, but all the burden of that weakness is being borne by workers. Corporate profits plunged during the financial crisis, but quickly bounced back, and they continued to soar. Indeed, at this point, after-tax profits are more than 60 percent higher than they were in 2007, before the recession began. We don’t know how much of this profit surge can be explained by the fear factor — the ability to squeeze workers who know that they have no place to go. But it must be at least part of the explanation. In fact, it’s possible (although by no means certain) that corporate interests are actually doing better in a somewhat depressed economy than they would if we had full employment.
What’s more, I don’t think it’s too much of a stretch to suggest that this reality helps explain why our political system has turned its backs on the unemployed. No, I don’t believe that there’s a secret cabal of C.E.O.’s plotting to keep the economy weak. But I do think that a major reason why reducing unemployment isn’t a political priority is that the economy may be lousy for workers, but corporate America is doing just fine.
And once you understand this, you also understand why it’s so important to change those priorities.
There’s been a somewhat strange debate among progressives lately, with some arguing that populism and condemnations of inequality are a diversion, that full employment should instead be the top priority. As some leading progressive economists have pointed out, however, full employment is itself a populist issue: weak labor markets are a main reason workers are losing ground, and the excessive power of corporations and the wealthy is a main reason we aren’t doing anything about jobs.
Too many Americans currently live in a climate of economic fear. There are many steps that we can take to end that state of affairs, but the most important is to put jobs back on the agenda.
More than a million unemployed Americans are about to get the cruelest of Christmas “gifts.” They’re about to have their unemployment benefits cut off. You see, Republicans in Congress insist that if you haven’t found a job after months of searching, it must be because you aren’t trying hard enough. So you need an extra incentive in the form of sheer desperation.
As a result, the plight of the unemployed, already terrible, is about to get even worse. Obviously those who have jobs are much better off. Yet the continuing weakness of the labor market takes a toll on them, too. So let’s talk a bit about the plight of the employed.
Some people would have you believe that employment relations are just like any other market transaction; workers have something to sell, employers want to buy what they offer, and they simply make a deal. But anyone who has ever held a job in the real world — or, for that matter, seen a Dilbert cartoon — knows that it’s not like that.
The fact is that employment generally involves a power relationship: you have a boss, who tells you what to do, and if you refuse, you may be fired. This doesn’t have to be a bad thing. If employers value their workers, they won’t make unreasonable demands. But it’s not a simple transaction. There’s a country music classic titled “Take This Job and Shove It.” There isn’t and won’t be a song titled “Take This Consumer Durable and Shove It.”
So employment is a power relationship, and high unemployment has greatly weakened workers’ already weak position in that relationship.
We can actually quantify that weakness by looking at the quits rate — the percentage of workers voluntarily leaving their jobs (as opposed to being fired) each month. Obviously, there are many reasons a worker might want to leave his or her job. Quitting is, however, a risk; unless a worker already has a new job lined up, he or she doesn’t know how long it will take to find a new job, and how that job will compare with the old one.
And the risk of quitting is much greater when unemployment is high, and there are many more people seeking jobs than there are job openings. As a result, you would expect to see the quits rate rise during booms, fall during slumps — and, indeed, it does. Quits plunged during the 2007-9 recession, and they have only partially rebounded, reflecting the weakness and inadequacy of our economic recovery.
Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy with the way they’re being treated and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.
Is there any evidence that this is happening? And how. The economic recovery has, as I said, been weak and inadequate, but all the burden of that weakness is being borne by workers. Corporate profits plunged during the financial crisis, but quickly bounced back, and they continued to soar. Indeed, at this point, after-tax profits are more than 60 percent higher than they were in 2007, before the recession began. We don’t know how much of this profit surge can be explained by the fear factor — the ability to squeeze workers who know that they have no place to go. But it must be at least part of the explanation. In fact, it’s possible (although by no means certain) that corporate interests are actually doing better in a somewhat depressed economy than they would if we had full employment.
What’s more, I don’t think it’s too much of a stretch to suggest that this reality helps explain why our political system has turned its backs on the unemployed. No, I don’t believe that there’s a secret cabal of C.E.O.’s plotting to keep the economy weak. But I do think that a major reason why reducing unemployment isn’t a political priority is that the economy may be lousy for workers, but corporate America is doing just fine.
And once you understand this, you also understand why it’s so important to change those priorities.
There’s been a somewhat strange debate among progressives lately, with some arguing that populism and condemnations of inequality are a diversion, that full employment should instead be the top priority. As some leading progressive economists have pointed out, however, full employment is itself a populist issue: weak labor markets are a main reason workers are losing ground, and the excessive power of corporations and the wealthy is a main reason we aren’t doing anything about jobs.
Too many Americans currently live in a climate of economic fear. There are many steps that we can take to end that state of affairs, but the most important is to put jobs back on the agenda.
Monday, January 14, 2013
Homelessness Increases in Wyoming, Product of Economic Boom
originally appeared in The New York Times:
After losing everything last year to Southern California’s soured economy, A woman and her family packed up three boxes and a diaper bag and caught a Greyhound bus to Wyoming, their best chance at a fresh start.
They were drawn to Wyoming, where she has family, by the promise of plentiful jobs and a booming energy sector, and a thin hope of rebuilding their futures on the High Plains. But like a growing number of people here, they ended up on the underside of the boom.
Unable to scrape together enough money for an apartment, her family, who once rented a four-bedroom house north of Los Angeles, bounced from motel rooms to friends’ couches. They ended up in a single room at a shelter run by a local nonprofit organization.
We lost everything, she said, her husband works for an oil services company. We needed somewhere to go.
There is a surprising downside to Wyoming’s economic resilience and its 5.1 percent unemployment rate: a sharp rise in homelessness.
As another winter settles in, many people who moved here fleeing foreclosures and chasing jobs in the oil, gas and coal industries now find themselves without a place to live. Apartments are scarce and expensive, and the economy, while strong, is not growing at the swift pace of drilling towns in western North Dakota, where cashiers can earn $20 an hour and fast-food workers can be paid thousand-dollar signing bonuses.
As homeless rates held steady nationwide last year, federal data show that Wyoming’s homeless population soared by 67 percent, to 1,813 people from 1,083 in 2011. Advocates attribute the surge in part to a more aggressive attempt to count the state’s homeless.
As in any other place in the country, many homeless people in Wyoming have lived on the streets for years or suffer from mental illness or drug and alcohol addictions. But social service workers say they have seen a growing number of economic migrants from Florida and Michigan, Wisconsin and California, with nowhere to settle.
They’d pack up their pit bulls, their children and they’d move to Wyoming with nothing, just the clothes on their backs, according to a housing counselor with Interfaith of Natrona County, a nonprofit group. They keep saying, ‘I’ve never been in this situation before.’
When jobs elude them or a trip to the hospital eats away at their money, some of these new arrivals and returnees visit social service groups to find a way out of town: enough money to fix their car or catch a bus back home. But caseworkers said most were determined to stay and came seeking housing.
Around Casper, population 56,000, robust growth in oil and gas drilling has helped cut unemployment to 4.3 percent, but the boom has also made it nearly impossible for struggling families to find an apartment. Vacancy rates are close to 1 percent, housing officials say, and two-bedroom apartments can rent for $800 to $1,000, out of reach for many of the working poor.
Advocates say the town’s few shelters and temporary housing are full, and the wait for low-income apartments has swelled to as long as two and a half years. On particularly bitter nights, when the wind tears in from the west and temperatures plummet, homeless advocates spread mattresses on their office floors or set out space heaters in storefronts to accommodate people who might otherwise freeze.
We literally do not have anyplace for people to live, according to the executive director of Interfaith. Where are all these people coming from?
One 56-year-old man came from Altamonte Springs, Fla., north of Orlando, where you couldn’t buy a job, he said. In July, a friend from Wyoming visited and told him about the opportunities here: jobs that paid $18 and $19 an hour for anyone who walked in the door.
Like a worm on the hook, I bit, he said.
He found work on the night shift at a pipe extrusion plant, but the job paid only $10 an hour, and those hours have been erratic lately, he said. He has worked only a handful of shifts since Christmas.
Like others, he is staying at a motel, the Royal Inn, where weekly rents run about $250. But Mr. Meek is quickly falling behind. He and a friend met with a landlord but were told they could not sign a lease without $3,000 cash for the rent and the security deposit.
Still others are squeezed into subsidized single-room occupancy apartments or live out of campers in RV parks. A housing counselor, recalled one woman from Denver who came to town last summer looking for work. She pitched a tent at a campground on the west side of town and told her two children they were going on an extended camping trip.
At night, the far edge of a Walmart parking lot on the east side of town is transformed into an impromptu campground. Pickup trucks and minivans driven by people looking for a place to sleep slip into the spaces where the night-shift workers park, to blend in and reduce the chance anyone will notice them.
Among those in the parking lot is a 39-year-old woman, who spends the cold nights on the bench seat of her 2005 Dodge Durango. Her husband once worked in the oil fields in North Dakota, she said, but became addicted to methamphetamines and lost his job. After losing their apartment in Casper in April, she sent her 15-year-old son to stay with friends, and she and her husband made the truck their home.
This is the first winter she has been homeless, and she never thought she could be so cold. She said she turns on the engine once or twice each night to run the heater, but she cuts it quickly to save gas, and the cold seeps back in. The nights seem to stretch on forever.
At 7 a.m., she wakes up, scrapes the frost from the windshield and drives to a nearby truck stop to wash herself and clean off her work uniform. Then she heads to work at the Hamburger Stand, where she makes $7.60 an hour — barely enough to pay for food, gas and the $450 monthly payments on her truck. Getting an apartment feels like a distant dream.
I’m just lost, she said.
If families like hers are strained by splitting up, others are trying to stay afloat by doubling up. Another woman and her two teenagers moved back to Wyoming last January from Texas. She got a job cleaning hotel rooms for $9.50 an hour and worked as many shifts as the week allowed. But as the economy slowed for the winter and tourists headed toward the ski slopes 300 miles away, her hours were cut to eight per week. She ran out of money to pay for propane or electricity, her pipes froze and the landlord taped an eviction notice to the door of her mobile home.
Now, she and her children are staying with friends, all six of them crammed into a single mobile home at the Aspen Park trailer court. Her friend has been welcoming, but she still worries about what she will do now.
I came back for some stability, for some hope, she said. It didn’t work out that way. Now, I’m just trying to survive the winter.
After losing everything last year to Southern California’s soured economy, A woman and her family packed up three boxes and a diaper bag and caught a Greyhound bus to Wyoming, their best chance at a fresh start.
They were drawn to Wyoming, where she has family, by the promise of plentiful jobs and a booming energy sector, and a thin hope of rebuilding their futures on the High Plains. But like a growing number of people here, they ended up on the underside of the boom.
Unable to scrape together enough money for an apartment, her family, who once rented a four-bedroom house north of Los Angeles, bounced from motel rooms to friends’ couches. They ended up in a single room at a shelter run by a local nonprofit organization.
We lost everything, she said, her husband works for an oil services company. We needed somewhere to go.
There is a surprising downside to Wyoming’s economic resilience and its 5.1 percent unemployment rate: a sharp rise in homelessness.
As another winter settles in, many people who moved here fleeing foreclosures and chasing jobs in the oil, gas and coal industries now find themselves without a place to live. Apartments are scarce and expensive, and the economy, while strong, is not growing at the swift pace of drilling towns in western North Dakota, where cashiers can earn $20 an hour and fast-food workers can be paid thousand-dollar signing bonuses.
As homeless rates held steady nationwide last year, federal data show that Wyoming’s homeless population soared by 67 percent, to 1,813 people from 1,083 in 2011. Advocates attribute the surge in part to a more aggressive attempt to count the state’s homeless.
As in any other place in the country, many homeless people in Wyoming have lived on the streets for years or suffer from mental illness or drug and alcohol addictions. But social service workers say they have seen a growing number of economic migrants from Florida and Michigan, Wisconsin and California, with nowhere to settle.
They’d pack up their pit bulls, their children and they’d move to Wyoming with nothing, just the clothes on their backs, according to a housing counselor with Interfaith of Natrona County, a nonprofit group. They keep saying, ‘I’ve never been in this situation before.’
When jobs elude them or a trip to the hospital eats away at their money, some of these new arrivals and returnees visit social service groups to find a way out of town: enough money to fix their car or catch a bus back home. But caseworkers said most were determined to stay and came seeking housing.
Around Casper, population 56,000, robust growth in oil and gas drilling has helped cut unemployment to 4.3 percent, but the boom has also made it nearly impossible for struggling families to find an apartment. Vacancy rates are close to 1 percent, housing officials say, and two-bedroom apartments can rent for $800 to $1,000, out of reach for many of the working poor.
Advocates say the town’s few shelters and temporary housing are full, and the wait for low-income apartments has swelled to as long as two and a half years. On particularly bitter nights, when the wind tears in from the west and temperatures plummet, homeless advocates spread mattresses on their office floors or set out space heaters in storefronts to accommodate people who might otherwise freeze.
We literally do not have anyplace for people to live, according to the executive director of Interfaith. Where are all these people coming from?
One 56-year-old man came from Altamonte Springs, Fla., north of Orlando, where you couldn’t buy a job, he said. In July, a friend from Wyoming visited and told him about the opportunities here: jobs that paid $18 and $19 an hour for anyone who walked in the door.
Like a worm on the hook, I bit, he said.
He found work on the night shift at a pipe extrusion plant, but the job paid only $10 an hour, and those hours have been erratic lately, he said. He has worked only a handful of shifts since Christmas.
Like others, he is staying at a motel, the Royal Inn, where weekly rents run about $250. But Mr. Meek is quickly falling behind. He and a friend met with a landlord but were told they could not sign a lease without $3,000 cash for the rent and the security deposit.
Still others are squeezed into subsidized single-room occupancy apartments or live out of campers in RV parks. A housing counselor, recalled one woman from Denver who came to town last summer looking for work. She pitched a tent at a campground on the west side of town and told her two children they were going on an extended camping trip.
At night, the far edge of a Walmart parking lot on the east side of town is transformed into an impromptu campground. Pickup trucks and minivans driven by people looking for a place to sleep slip into the spaces where the night-shift workers park, to blend in and reduce the chance anyone will notice them.
Among those in the parking lot is a 39-year-old woman, who spends the cold nights on the bench seat of her 2005 Dodge Durango. Her husband once worked in the oil fields in North Dakota, she said, but became addicted to methamphetamines and lost his job. After losing their apartment in Casper in April, she sent her 15-year-old son to stay with friends, and she and her husband made the truck their home.
This is the first winter she has been homeless, and she never thought she could be so cold. She said she turns on the engine once or twice each night to run the heater, but she cuts it quickly to save gas, and the cold seeps back in. The nights seem to stretch on forever.
At 7 a.m., she wakes up, scrapes the frost from the windshield and drives to a nearby truck stop to wash herself and clean off her work uniform. Then she heads to work at the Hamburger Stand, where she makes $7.60 an hour — barely enough to pay for food, gas and the $450 monthly payments on her truck. Getting an apartment feels like a distant dream.
I’m just lost, she said.
If families like hers are strained by splitting up, others are trying to stay afloat by doubling up. Another woman and her two teenagers moved back to Wyoming last January from Texas. She got a job cleaning hotel rooms for $9.50 an hour and worked as many shifts as the week allowed. But as the economy slowed for the winter and tourists headed toward the ski slopes 300 miles away, her hours were cut to eight per week. She ran out of money to pay for propane or electricity, her pipes froze and the landlord taped an eviction notice to the door of her mobile home.
Now, she and her children are staying with friends, all six of them crammed into a single mobile home at the Aspen Park trailer court. Her friend has been welcoming, but she still worries about what she will do now.
I came back for some stability, for some hope, she said. It didn’t work out that way. Now, I’m just trying to survive the winter.
Sunday, December 23, 2012
Is President Obama Really A Socialist? Let's Analyze Obamanomics
originally appeared in Forbes:
President Obama says that income taxes must be raised on the rich because they don’t pay their fair share. The indisputable facts from official government sources say otherwise.
The CBO reports based on official IRS data that in 2009 the top 1% of income earners paid 39% of all federal income taxes, three times their share of income at 13%. Yet, the middle 20% of income earners, the true middle class, paid just 2.7% of total federal income taxes on net that year, while earning 15% of income. That means the top 1% paid almost 15 times as much in federal income taxes as the entire middle 20%, even though the middle 20% earned more income.
Moreover, the official data, as reported by CBO and the IRS, show that the bottom 40% of income earners, instead of paying some income taxes to support the federal government, were paid cash by the IRS equal to 10% of federal income taxes as a group on net.
Any normal person would say that such an income tax system is more than fair, or maybe that “the rich” pay more than their fair share. So why does President Obama keep saying that the rich do not pay their fair share? Is he ignorant? Wouldn’t somebody in his Administration whisper to him that he is peddling nonsense?
The answer is that to President Obama this is still not fair because he is a Marxist. To a Marxist, the fact that the top 1% earn more income than the bottom 99% is not fair, no matter how they earn it, fairly or not. So it is not fair unless more is taken from the top 1% until they are left only with what they “need,” as in any true communist system. Paying anything less is not their “fair” share. That is the only logical explanation of President Obama’s rhetoric, and it is 100% consistent with his own published background.
Notice that Obama keeps saying that “the rich,” a crass term implying low class social envy, don’t “need” the Bush tax cuts. That is reminiscent of the fundamental Marxist principle, From each according to his ability, to each according to his need.
Good tax policy is not guided by “need.” It is guided by what is needed to establish the incentives to maximize economic growth. The middle class, working people and the poor are benefited far more by economic growth than by redistribution. That is shown by the entire 20th century, where the standard of living of American workers increased by more than 7 times, through sustained, rapid economic growth.
But President Obama’s tax policy of increasing all tax rates on savings and investment will work exactly contrary to such economic growth. It is savings and investment which creates jobs and increases productivity and wages. Under capitalism, capital and labor are complementary, not adversarial, exactly contrary to the misunderstanding of Marxists. More capital investment increases the demand for labor, bidding up wages to the level of worker productivity, which is enhanced by the capital investment.
Increasing marginal tax rates on savings and investment, however, will mean less of it, not more. That will mean fewer jobs, and lower wages, just as we have experienced so far under President Obama, with median household incomes (hello middle class) declining by 7.3% (a month’s worth of wages) during his first term, even faster after the recession supposedly ended in 2009. That will only get worse in Obama’s unearned second term, which can only be explained as “democracy failure” analogous to “market failure.”
If the tax increases are limited to those who earn $1 million or more, I don’t know if that alone will be enough to create a recession, as I am certain would be the result with Obama’s original policy of targeting couples making over $250,000 a year, and singles making over $200,000.
But there is so much in the Obama economic program that is contractionary. His second term promises enormous new regulatory burdens and barriers. The EPA is shutting down the coal industry, and Interior will join with it to sharply constrain oil production further, despite Obama’s duplicitous campaign rhetoric taking credit for the production produced by the policies and efforts of others. I expect Obama’s EPA to burden natural gas fracking until it goes the way of the coal industry as well, stealing new found prosperity for many Americans. All of this will sharply raise energy prices, which will be another effective tax on the economy.
Moreover, President Obama has said that a priority in his second term will be global warming, even though global temperatures have not been increasing for 16 years now, and the developing world led by Brazil, Russia, India and China (the BRIC countries), which are contributing to “greenhouse gases” at a much greater accelerating rate than the U.S., have rejected sacrificing any slice of their economies to that ideological phantom. While even the Democrat Congress of Obama’s first term failed to adopt “cap and trade,” EPA is advancing with global warming regulations that will cost the economy trillions in still another effective tax.
Then there are the onrushing regulatory burdens of Obamacare, including the employer mandate, which will require all businesses with 50 employees or more to buy the most expensive health insurance available. That will be an effective tax on employment. As Obamacare forces up the cost of health insurance, that will be still another effective tax increase on all employers already providing health coverage. Hundreds of regulations still in the pipeline under the “Dodd-Frank” legislation are already forcing the financial sector to contract, and threaten the business and consumer credit essential to full recovery.
In addition, few are adequately considering the longer term contractionary effects of the Fed’s current policy mischief. For years now, businesses and investments have been launched all over the country based on the near zero interest rates, and even below zero real rates, that Fed policies have perpetuated, along with the easy free money . When those rates inevitably rise back to normal, most likely after these Fed policies have resparked inflation, the basis for those businesses and investments will be gone, and many if not most will go into liquidation, which will be highly contractionary as well.
However, I am certain in any event that the Obama tax increases will result in less revenue rather than more. Obama has been proposing to increase the capital gains tax rate by 58% on the nation’s job creators, investors and successful small businesses, counting his Obamacare tax increases that take effect on January 1 as well the expiration of the Bush tax cuts. While his misleading talking points say there will be no tax increases for 97% of small businesses, that counts every Schedule C filed for every part time or hobby sole proprietorship, however marginal the earnings. The small businesses that would bear President Obama’s originally proposed tax increases earn 91% of all small business income, and employ 54% of the total private sector U.S. work force, as reported in Investors Business Daily on November 9.
Over the last 45 years, every time capital gains tax rates have been raised, revenues have fallen, and every time they have been cut, revenues have increased. The capital gains rate was raised 4 times from 1968 to 1975, climbing from 25% to 35%. The 25% rate produced real capital gains revenues in 1968 of $40.6 billion in 2000 dollars. By 1975, at the higher rate, capital gains revenues had plummeted to $19.6 billion in constant 2000 dollars, less than half as much.
After the capital gains rate was cut from 35% to 20% from 1978 to 1981, capital gains revenues had tripled by 1986 compared to 1978. Then the capital gains rate was raised by 40% in 1987 to 28%. By 1991, capital gains revenues had collapsed to $34.4 billion, down from $92.9 billion in 1986, in constant 2000 dollars adjusted for inflation.
Obama’s capital gains tax increase next year will reduce capital gains revenues again as well.
President Obama says that income taxes must be raised on the rich because they don’t pay their fair share. The indisputable facts from official government sources say otherwise.
The CBO reports based on official IRS data that in 2009 the top 1% of income earners paid 39% of all federal income taxes, three times their share of income at 13%. Yet, the middle 20% of income earners, the true middle class, paid just 2.7% of total federal income taxes on net that year, while earning 15% of income. That means the top 1% paid almost 15 times as much in federal income taxes as the entire middle 20%, even though the middle 20% earned more income.
Moreover, the official data, as reported by CBO and the IRS, show that the bottom 40% of income earners, instead of paying some income taxes to support the federal government, were paid cash by the IRS equal to 10% of federal income taxes as a group on net.
Any normal person would say that such an income tax system is more than fair, or maybe that “the rich” pay more than their fair share. So why does President Obama keep saying that the rich do not pay their fair share? Is he ignorant? Wouldn’t somebody in his Administration whisper to him that he is peddling nonsense?
The answer is that to President Obama this is still not fair because he is a Marxist. To a Marxist, the fact that the top 1% earn more income than the bottom 99% is not fair, no matter how they earn it, fairly or not. So it is not fair unless more is taken from the top 1% until they are left only with what they “need,” as in any true communist system. Paying anything less is not their “fair” share. That is the only logical explanation of President Obama’s rhetoric, and it is 100% consistent with his own published background.
Notice that Obama keeps saying that “the rich,” a crass term implying low class social envy, don’t “need” the Bush tax cuts. That is reminiscent of the fundamental Marxist principle, From each according to his ability, to each according to his need.
Good tax policy is not guided by “need.” It is guided by what is needed to establish the incentives to maximize economic growth. The middle class, working people and the poor are benefited far more by economic growth than by redistribution. That is shown by the entire 20th century, where the standard of living of American workers increased by more than 7 times, through sustained, rapid economic growth.
But President Obama’s tax policy of increasing all tax rates on savings and investment will work exactly contrary to such economic growth. It is savings and investment which creates jobs and increases productivity and wages. Under capitalism, capital and labor are complementary, not adversarial, exactly contrary to the misunderstanding of Marxists. More capital investment increases the demand for labor, bidding up wages to the level of worker productivity, which is enhanced by the capital investment.
Increasing marginal tax rates on savings and investment, however, will mean less of it, not more. That will mean fewer jobs, and lower wages, just as we have experienced so far under President Obama, with median household incomes (hello middle class) declining by 7.3% (a month’s worth of wages) during his first term, even faster after the recession supposedly ended in 2009. That will only get worse in Obama’s unearned second term, which can only be explained as “democracy failure” analogous to “market failure.”
If the tax increases are limited to those who earn $1 million or more, I don’t know if that alone will be enough to create a recession, as I am certain would be the result with Obama’s original policy of targeting couples making over $250,000 a year, and singles making over $200,000.
But there is so much in the Obama economic program that is contractionary. His second term promises enormous new regulatory burdens and barriers. The EPA is shutting down the coal industry, and Interior will join with it to sharply constrain oil production further, despite Obama’s duplicitous campaign rhetoric taking credit for the production produced by the policies and efforts of others. I expect Obama’s EPA to burden natural gas fracking until it goes the way of the coal industry as well, stealing new found prosperity for many Americans. All of this will sharply raise energy prices, which will be another effective tax on the economy.
Moreover, President Obama has said that a priority in his second term will be global warming, even though global temperatures have not been increasing for 16 years now, and the developing world led by Brazil, Russia, India and China (the BRIC countries), which are contributing to “greenhouse gases” at a much greater accelerating rate than the U.S., have rejected sacrificing any slice of their economies to that ideological phantom. While even the Democrat Congress of Obama’s first term failed to adopt “cap and trade,” EPA is advancing with global warming regulations that will cost the economy trillions in still another effective tax.
Then there are the onrushing regulatory burdens of Obamacare, including the employer mandate, which will require all businesses with 50 employees or more to buy the most expensive health insurance available. That will be an effective tax on employment. As Obamacare forces up the cost of health insurance, that will be still another effective tax increase on all employers already providing health coverage. Hundreds of regulations still in the pipeline under the “Dodd-Frank” legislation are already forcing the financial sector to contract, and threaten the business and consumer credit essential to full recovery.
In addition, few are adequately considering the longer term contractionary effects of the Fed’s current policy mischief. For years now, businesses and investments have been launched all over the country based on the near zero interest rates, and even below zero real rates, that Fed policies have perpetuated, along with the easy free money . When those rates inevitably rise back to normal, most likely after these Fed policies have resparked inflation, the basis for those businesses and investments will be gone, and many if not most will go into liquidation, which will be highly contractionary as well.
However, I am certain in any event that the Obama tax increases will result in less revenue rather than more. Obama has been proposing to increase the capital gains tax rate by 58% on the nation’s job creators, investors and successful small businesses, counting his Obamacare tax increases that take effect on January 1 as well the expiration of the Bush tax cuts. While his misleading talking points say there will be no tax increases for 97% of small businesses, that counts every Schedule C filed for every part time or hobby sole proprietorship, however marginal the earnings. The small businesses that would bear President Obama’s originally proposed tax increases earn 91% of all small business income, and employ 54% of the total private sector U.S. work force, as reported in Investors Business Daily on November 9.
Over the last 45 years, every time capital gains tax rates have been raised, revenues have fallen, and every time they have been cut, revenues have increased. The capital gains rate was raised 4 times from 1968 to 1975, climbing from 25% to 35%. The 25% rate produced real capital gains revenues in 1968 of $40.6 billion in 2000 dollars. By 1975, at the higher rate, capital gains revenues had plummeted to $19.6 billion in constant 2000 dollars, less than half as much.
After the capital gains rate was cut from 35% to 20% from 1978 to 1981, capital gains revenues had tripled by 1986 compared to 1978. Then the capital gains rate was raised by 40% in 1987 to 28%. By 1991, capital gains revenues had collapsed to $34.4 billion, down from $92.9 billion in 1986, in constant 2000 dollars adjusted for inflation.
Obama’s capital gains tax increase next year will reduce capital gains revenues again as well.
Tuesday, June 12, 2012
Families Net Worth Falls
Story first appeared in The Wall Street Journal.
Families’ median net worth fell almost 40% between 2007 and 2010, down to levels last seen in 1992, the Federal Reserve said in a report Monday.
As the U.S. economy roiled for three tumultuous years, families saw corresponding drops in their income and net wealth, according to the Fed’s Survey of Consumer Finances, a detailed snapshot of household finances conducted every three years.
Median net worth of families fell to $77,300 in 2010 from $126,400 in 2007, a drop of 38.8%–the largest drop since the current survey began in 1989, Fed economists said Monday. Net worth represents the difference between a family’s gross assets and its liabilities. Average net worth fell 14.7% during the same three-year period.
Much of that drop was driven by the housing market’s collapse. Families whose assets were tied up more in housing saw their net worth decline by more. Among families that owned homes, their median home equity declined to $75,000 in 2010, down from $110,000 three years earlier.
Between 2007 and 2010, incomes also dropped sharply. In 2010, median family income fell to $45,800 from $49,600 in 2007, a drop of 7.7%. Average income fell 11.1% to $78,500, down from $88,300. That was a departure from earlier in the decade. During the preceding three years, median income had been constant, while the mean had climbed 8.5%.
Family incomes also dropped the most in regions of the country hardest hit by the housing market tumble. Median family income in the West and South decreased substantially, while those in the Northeast and Midwest saw little change.
Incomes dropped the most among middle-class families. The wealthiest 10%, by net worth, saw their median income fell 1.4% over the three years, while families in the second and third quartiles experienced a drop of 12.1% and 7.7%, respectively. The lowest quartile’s median income fell by 3.7%.
Families also grew less confident about how much income they could expect in the future. In 2010, just over 35% of families said they did not “have a good idea of what their income would be for the next year,” up from 31.4% in 2007.
Meanwhile, families worked to drive down their level of debt. Fewer families reported having debt of any kind in 2010 than three years earlier: 74.9% of families had some sort of debt in 2010, down from 77%. However, among families with some kind of debt in 2010, the median value of their debt was unchanged from three years earlier and the fraction of families with debt payments larger than 40% of their income remained nearly constant.
Some families appeared successful in shaving down their burden of debt, particularly on their credit cards. The proportion of families carrying a balance on their credit cards fell 6.7 percentage points to 39.4% in 2010. Among those families, the median balance fell 16.1% to $2,600, while the average balance fell 7.8% to $7,100.
However, some families struggled more to pay their bills on time: the share of families making debt payments that were late by 60 or more days increased to 10.8% in 2010, up from 7.1% in 2007.
And overall, debt as a percent of families’ assets grew to 16.4% in 2010, up from 14.8% in 2007, largely because the value of the assets, such as housing, decreased.
Families were also less likely to save up money. The proportion of families that said they had saved in the preceding year fell from 56.4% in 2007 to 52% in 2010, the lowest level since the Fed began collecting that information in 1992.
Families’ median net worth fell almost 40% between 2007 and 2010, down to levels last seen in 1992, the Federal Reserve said in a report Monday.
As the U.S. economy roiled for three tumultuous years, families saw corresponding drops in their income and net wealth, according to the Fed’s Survey of Consumer Finances, a detailed snapshot of household finances conducted every three years.
Median net worth of families fell to $77,300 in 2010 from $126,400 in 2007, a drop of 38.8%–the largest drop since the current survey began in 1989, Fed economists said Monday. Net worth represents the difference between a family’s gross assets and its liabilities. Average net worth fell 14.7% during the same three-year period.
Much of that drop was driven by the housing market’s collapse. Families whose assets were tied up more in housing saw their net worth decline by more. Among families that owned homes, their median home equity declined to $75,000 in 2010, down from $110,000 three years earlier.
Between 2007 and 2010, incomes also dropped sharply. In 2010, median family income fell to $45,800 from $49,600 in 2007, a drop of 7.7%. Average income fell 11.1% to $78,500, down from $88,300. That was a departure from earlier in the decade. During the preceding three years, median income had been constant, while the mean had climbed 8.5%.
Family incomes also dropped the most in regions of the country hardest hit by the housing market tumble. Median family income in the West and South decreased substantially, while those in the Northeast and Midwest saw little change.
Incomes dropped the most among middle-class families. The wealthiest 10%, by net worth, saw their median income fell 1.4% over the three years, while families in the second and third quartiles experienced a drop of 12.1% and 7.7%, respectively. The lowest quartile’s median income fell by 3.7%.
Families also grew less confident about how much income they could expect in the future. In 2010, just over 35% of families said they did not “have a good idea of what their income would be for the next year,” up from 31.4% in 2007.
Meanwhile, families worked to drive down their level of debt. Fewer families reported having debt of any kind in 2010 than three years earlier: 74.9% of families had some sort of debt in 2010, down from 77%. However, among families with some kind of debt in 2010, the median value of their debt was unchanged from three years earlier and the fraction of families with debt payments larger than 40% of their income remained nearly constant.
Some families appeared successful in shaving down their burden of debt, particularly on their credit cards. The proportion of families carrying a balance on their credit cards fell 6.7 percentage points to 39.4% in 2010. Among those families, the median balance fell 16.1% to $2,600, while the average balance fell 7.8% to $7,100.
However, some families struggled more to pay their bills on time: the share of families making debt payments that were late by 60 or more days increased to 10.8% in 2010, up from 7.1% in 2007.
And overall, debt as a percent of families’ assets grew to 16.4% in 2010, up from 14.8% in 2007, largely because the value of the assets, such as housing, decreased.
Families were also less likely to save up money. The proportion of families that said they had saved in the preceding year fell from 56.4% in 2007 to 52% in 2010, the lowest level since the Fed began collecting that information in 1992.
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Monday, June 11, 2012
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.
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.
For more national and worldwide Business News, visit the Peak News
Room blog.
For more local and state of Michigan Business News, visit
the Michigan Business News blog.
For more Health News, visit the
Healthcare and Medical News blog.
For more Electronics
News, visit the Electronics America blog.
For more Real Estate News,
visit the Commercial and Residential Real Estate blog.
For more Law News,
visit the Nation of Law blog.
For more Advertising
News, visit the Advertising, Marketing and Media blog.
For more Environmental News,
visit the Environmental Responsibility News blog.
For information on website optimization or for the latest SEO News, visit the SEO Done Right
blog.
Tuesday, June 5, 2012
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.
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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