Posts Tagged ‘unemployment rate’
Monday, January 16th, 2012
The United States added more than 200,000 jobs in December of 2011, building on a strengthening employment market that dominated the second half of the year. This brought the unemployment rate down to 8.5 percent from the revised 8.7 percent, which had been predicted in November. The primary growth was in transportation — primarily courier services that hired for the holidays — healthcare and manufacturing, according to the U.S. Bureau of Labor Statistics.
“It would have been even better without the drag from Europe,” said John Canally, economic strategist at LPL Financial, a stock brokerage firm. “The Europe situation created uncertainty, and uncertainty was used as a reason not to hire until now.” The year ended even more strongly than economists had predicted. They had forecast that employers would add a net 150,000 jobs in December, according to a survey by Factset. They also had predicted that the unemployment rate would tick up to 8.7 percent from November’s 8.6 percent; this is the lowest rate since March 2009.
In the end, November’s unemployment rate was revised up in this report, to 8.7 percent. The better-than-expected monthly gain of 219,000 private-sector jobs means American businesses have replaced more than three million of the 4.2 million private-sector jobs that were lost the past 13 months. The private-sector jobs gained since employment bottomed in February of 2010 marks the strongest recovery since the 1990-1992 recession, when U.S. businesses added 4.2 million jobs in the same amount of time.
The new job numbers highlight the fact that the U.S. economy is on its way to recovery even as strains in Europe persist,” said David Watt, senior currency strategist at RBC Capital in Toronto. The fact that the labor market is gaining traction should be good news to the Obama administration, whose economic policies are relentlessly attacked by the political opposition.
This string of better-than-anticipated economic indicators has highlighted the stark contrast between the recovery in the world’s biggest economy and Europe, which faces bad times for months or even years. Even with the good news, the American economy needs an even faster pace of job growth over a sustained period to make a noticeable dent in the pool of the 23.7 million people who remain out of work or underemployed in the wake of the 2007-09 recession.
December marked the 15th consecutive month that employment numbers have risen. Marcus Bullus, trading director at MB Capital, said: “That’s one hell of a number. Such an impressive fall in both the number of jobless Americans and the unemployment rate will cheer everyone bar Republican spin doctors. The Obama administration could be forgiven for showboating over this convincing evidence that America’s economy is pulling away from Europe’s. From a market perspective, strong US data like this will add to optimism, but nobody doubts the considerable downward pressure the Eurozone will continue to place on the global marketplace during 2012.”
Automatic Data Processing’s (ADP) numbers for December are even more impressive, saying the government added 325,000 jobs in December. ADP’s figures do not always match the government’s, and economists warned that seasonal factors could have boosted the figures. Even so, all the major measures of the job market appear to be on the upswing.
Lasting payroll gains are needed to chip away at joblessness and support household spending, which accounts for approximately 70 percent of the world’s largest economy. The labor market figures come on the heels of recent data showing increased manufacturing and a rebound in consumer sentiment that show the U.S. is barely impacted by Europe’s debt crisis. “You got the trifecta — more people working, wages up and the average work week up,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc., who accurately forecast the December payroll gains. “You can’t really argue that that isn’t a sign of significant improvement in the job market.”
Yearly benchmark revisions showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still ranks as the worst three-year period since 1939 to 1941.
Writing in the Wall Street Journal, Phil Izzo says the increase is “for real.” According to Izzo, “While the unemployment rate has been falling in part due to people leaving the labor force, a large portion of this month’s number appears to come from people finding jobs.
“The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The actively looking for work’ definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force.
“The key to the drop in the broader unemployment rate was due to a 371,000 drop in the number of people employed part time but who would prefer full-time work, that comes on top of big drops in that category over the past two months. That number could reflect people having their hours increased or part-time workers moving on to full time work,” Izzo concluded.
Tags: : U.S. Bureau of Labor Statistics, ADP, Europe, European debt crisis, Eurozone, Factset, Obama administration, Private-sector jobs, recession, unemployment, unemployment rate
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Wednesday, January 11th, 2012
American companies added 244,000 jobs to the economy in April, the fastest pace in five years. In an ironic twist, however, the unemployment rate climbed to nine percent, according to the Department of Labor. The unemployment rate fell to 8.8 percent in March after dropping continuously since November’s rate of 9.8 percent rate. Economists had predicted that just 186,000 jobs would be added, so the numbers show that the economy is gaining strength. “What we’re seeing is a sustained pick-up in hiring and it suggests that businesses have gained enough confidence to look past short-term fluctuations in demand,” said Aaron Smith, a senior economist at Moody’s Analytics.
“Headwinds remain, but not enough to derail the recovery or set us back momentarily,” said Diane Swonk, chief economist at Mesirow Financial in Chicago, although she remains cautious about the outlook. According to Swonk, the increase in new unemployment claims were reported in the weeks after the April jobs surveys. Job losses in the public sector could intensify, with more teachers getting laid off as the school year ends and local governments deal with budget shortfalls.
The number of officially unemployed Americans totaled 13.75 million in April, an increase over the 205,000 reported in March, according to the Labor Department. “At this point, coming out of a recession this deep, we should be getting unambiguously huge growth, of 300,000 to 400,000 (new jobs) a month,” said Heidi Shierholz, a labor economist at the Economic Policy Institute. “And it’s just nowhere near that. We’re still in a rocky place.”
April’s job growth was in multiple sectors. For example, the retail industry added 57,100, approximately half at general merchandise stores. Manufacturing added 29,000 more workers in April. Since December 2009, factory payrolls have risen by 250,000, according to the Labor Department. Business and professional services, whose wages tend to be higher than average, grew by 51,000, with consulting businesses, computer services and architectural firms experiencing growth. Educational and health services, and the leisure industry, each also added nearly as many jobs. Even the construction industry saw a small gain in April. Government was the sole employment group that declined; its payrolls contracted by 24,000, primarily due to cuts at state and public agencies.
According to Austan Goolsbee, Chairman of the White House Council of Economic Advisers, “The last three months we’ve added more than a quarter million jobs, on average, every month. That’s very heartening and the fact that it was, really, across a whole lot of industries.”
According to Heather Boushey, an economist at the Center for American Progress, a non-profit think tank in Washington, D.C., “We need to see job growth break above 300,000 a month and stay at that level for many months before the unemployment rate will begin to come back down. Today’s report provides a number of data points that point toward caution in interpreting the data positively in anticipation of that level of jobs growth returning anytime soon. The average hours worked for production and nonsupervisory employees was 33.6 hours per week in April, the same as in March. This remains below the 2000s recovery peak of 33.9 hours per week, and far below the late 1990s peak of 34.6 hours per week. At the same time, employers shed 2,300 temporary workers, which either means they are hiring permanent employees or they are no longer seeing an increase in demand.
Tags: Austan Goolsbee, Budget shortfalls, Center for American Progress, Department of Labor, Diane Swonk, Economic Policy Institute, hiring, Institute for Women's Policy Research, jobs, layoffs, Mesirow Financial, Moody’s Analytics, unemployment, unemployment rate, White House Council of Economic Advisers, “Man-cession”
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Wednesday, January 11th, 2012
Leading economic indicators (LEI) rose 0.9 percent in October, a sign that the U.S. economy is likely to see accelerated growth and not slip into a feared double-dip recession. According to The Conference Board, its index of leading economic indicators rose significantly faster than the revised 0.1 percent rise in September and the 0.3 percent increase in August. After growing at an anemic pace of just 0.9 percent in the first six months of 2011, the economy grew 2.5 percent in the July – September quarter. Some analysts are looking for even stronger growth in the 4th quarter.
Economists said the October gain and other positive reports recently should ease fears that the nation is in danger of slipping into a double-dip recession. According to Conference Board economist Ken Goldstein, the latest leading indicators report was pointing “to continued growth this winter, possibly even gaining a little momentum by spring.”
The leading economic indicators is a subjective gauge of 10 indicators designed to signal business cycle highs and lows. Among the 10 indicators, nine made positive contributions in October, led by building permits, the interest-rate spread, and average weekly manufacturing hours. The sole negative contribution came from faster supplier deliveries.
Increases in consumer spending, manufacturing and homebuilding — along with fewer job losses – highlight an economy that is weathering the turbulence in financial markets caused by the European debt crisis. Even so, a nine percent unemployment rate and political gridlock over deficit-cutting are hurting confidence, which may hamper a further pickup in the pace of growth. “The economy looks to be getting better despite the continued drumbeat of negativity in financial markets,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc., who accurately forecast the gain. “That speaks to U.S. resiliency. If we can put some of these fiscal issues behind us, even for a short period of time, we might be able to come back.”
Another positive sign can be found in the University of Michigan’s six-month index of consumer expectations which rose to 56.2 in November, a five-month high, compared with 51.8 in October. A word of caution — the measure remains below the 80.5 average of the previous expansion that ended in December 2007.
October’s results suggest strong ongoing economic activity, said Millan Mulraine, TD Securities’ economics strategist. “On the whole, this report underscores the positive tone of the recent flow of economic reports pointing to a meaningful pick-up in overall economic activity during the quarter,” Mulraine said. “And while the economy remains vulnerable to missteps in Europe and Washington, there is every indication that the recovery is slowly moving into the clear, building on the momentum from the last quarter.”
According to Ataman Ozyildirim, an economist at The Conference Board, “The October rebound of the LEI — largely due to the sharp pick-up in housing permits — suggests that the risk of an economic downturn has receded. Improving consumer expectations, stock markets, and labor market indicators also contributed to this month’s gain in the LEI as did the continuing positive contributions from the interest rate spread. The Coincident Economic Index also rose somewhat, led by higher industrial production and employment.”
Tags: Average weekly manufacturing hours, Building permits, Conference Board, Deficit cutting, Double-dip recession, Economic indicators, European debt crisis, Interest-rate spread, unemployment rate
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Wednesday, November 30th, 2011
American companies ordered more heavy machinery, computers and other long-lasting manufactured goods in September, an encouraging sign for the shaky economy. The increase in demand for these durable goods suggests businesses are staying with investment plans, despite slow growth and a lack of consumer confidence.
Durable goods are products expected to last a minimum of three years. Core capital goods are products that have nothing to do with defense or aircraft. The gains are driven by tax breaks given to businesses for investments made this year, an incentive Congress approved last December to boost the lethargic economy.
“Demand for big ticket items seems to be alive and well,” said John Ryding, an analyst at RDQ Economics. “Outside of the volatile transportation sector, the gains in durable orders were broad based in September, and point to a manufacturing sector that continues to expand at a solid rate.”
“Despite the understandable concern about economic growth, businesses are still investing,” said Jennifer Lee, senior economist at BMO Capital Markets.
Robust demand for core capital goods is a strategic reason why economists expect an annual growth rate of 2.4 percent in the 3rd quarter. That would be a major improvement from the first six months of the year, when the economy expanded at just 0.9 percent, the worst growth since the recession ended more than two years ago. A 2.4 percent growth rate could ease fears that the economy is on the verge of sliding back into a recession. Even so, the growth rate needs to nearly double to make a substantial dent in the unemployment rate, which remained stuck at 9.1 percent in September for the third consecutive month.
“Manufacturing is in pretty decent shape, and this ends the quarter on a high note,” said Brian Jones, a senior U.S. economist at Societe Generale, who accurately forecast demand for non-transportation equipment. “We’ve got decent momentum going into the 4th quarter.” Orders for computers and related products jumped as much as six percent. A Commerce Department report is projected to show the world’s largest economy grew at a 2.5 percent annual pace in the 3rd quarter, an increase of the 1.3 percent rate in the previous three months. Societe Generale’s Jones said the gain in durable goods demand has the potential to bring GDP growth for last quarter closer to three percent.
Boeing, the largest American aircraft maker, received 59 airplane orders in September, compared with 127 the preceding month. September’s decline came on the heels of a 25 percent gain in August. Orders for non-defense capital goods excluding aircraft jumped 17 percent at an annualized rate compared with an 11 percent increase in the previous three months, an indication that business investment is picking up.
Additional indicators show that manufacturing, which accounts for approximately 12 percent of the economy, continues to grow. The Institute for Supply Management’s factory index rose a full point to 51.6 in September, compared with 50.6 in August. A level greater than 50 indicates that expansion is taking place. Industrial production advanced in September on demand for items such as cars and computers, according to the Federal Reserve.
According to Mike Shea, Managing Partner and Trader at Direct Access Partners LLC, “The number wasn’t bad, and having a decent number in durables is far better than having a bad number, since with the overhang of Europe, if we were getting lousy data here, then we wouldn’t have anything to hang our hats on. If not for what was going on in Europe, this market would be running on all cylinders. The summit in Europe is the tradable event. We could have one hundred percent earnings positive surprises today, we could have great economic data come out, all of that could come in rosy domestically, but if the news out of Europe is judged to be bad, none of what happens in the U.S. will matter. This market will not shrug off a lousy plan coming out of Europe. It will not shrug off any plan that is not fundamentally based in reality.”
Tags: Auto parts, Autos, BMO Capital Markets, Boeing, Commercial aircraft, computers, congress, Core capital goods, Department of Commerce, Durable goods, Durable goods orders, Europe, Federal Reserve, GDP, Heavy machinery, Institute for Supply Management, RDQ Economics, recession, Societe Generale, unemployment rate
Posted in Development, Economics, General | No Comments »
Wednesday, November 2nd, 2011
American companies ordered more heavy machinery, computers and other long-lasting manufactured goods in September, an encouraging sign for the shaky economy. The increase in demand for these durable goods suggests businesses are staying with investment plans, despite slow growth and a lack of consumer confidence.
Durable goods are products expected to last a minimum of three years. Core capital goods are products that have nothing to do with defense or aircraft. The gains are driven by tax breaks given to businesses for investments made this year, an incentive Congress approved last December to boost the lethargic economy.
“Demand for big ticket items seems to be alive and well,” said John Ryding, an analyst at RDQ Economics. “Outside of the volatile transportation sector, the gains in durable orders were broad based in September, and point to a manufacturing sector that continues to expand at a solid rate.”
“Despite the understandable concern about economic growth, businesses are still investing,” said Jennifer Lee, senior economist at BMO Capital Markets.
Robust demand for core capital goods is a strategic reason why economists expect an annual growth rate of 2.4 percent in the 3rd quarter. That would be a major improvement from the first six months of the year, when the economy expanded at just 0.9 percent, the worst growth since the recession ended more than two years ago. A 2.4 percent growth rate could ease fears that the economy is on the verge of sliding back into a recession. Even so, the growth rate needs to nearly double to make a substantial dent in the unemployment rate, which remained stuck at 9.1 percent in September for the third consecutive month.
“Manufacturing is in pretty decent shape, and this ends the quarter on a high note,” said Brian Jones, a senior U.S. economist at Societe Generale, who accurately forecast demand for non-transportation equipment. “We’ve got decent momentum going into the 4th quarter.” Orders for computers and related products jumped as much as six percent. A Commerce Department report is projected to show the world’s largest economy grew at a 2.5 percent annual pace in the 3rd quarter, an increase of the 1.3 percent rate in the previous three months. Societe Generale’s Jones said the gain in durable goods demand has the potential to bring GDP growth for last quarter closer to three percent.
Boeing, the largest American aircraft maker, received 59 airplane orders in September, compared with 127 the preceding month. September’s decline came on the heels of a 25 percent gain in August. Orders for non-defense capital goods excluding aircraft jumped 17 percent at an annualized rate compared with an 11 percent increase in the previous three months, an indication that business investment is picking up.
Additional indicators show that manufacturing, which accounts for approximately 12 percent of the economy, continues to grow. The Institute for Supply Management’s factory index rose a full point to 51.6 in September, compared with 50.6 in August. A level greater than 50 indicates that expansion is taking place. Industrial production advanced in September on demand for items such as cars and computers, according to the Federal Reserve.
According to Mike Shea, Managing Partner and Trader at Direct Access Partners LLC, “The number wasn’t bad, and having a decent number in durables is far better than having a bad number, since with the overhang of Europe, if we were getting lousy data here, then we wouldn’t have anything to hang our hats on. If not for what was going on in Europe, this market would be running on all cylinders. The summit in Europe is the tradable event. We could have one hundred percent earnings positive surprises today, we could have great economic data come out, all of that could come in rosy domestically, but if the news out of Europe is judged to be bad, none of what happens in the U.S. will matter. This market will not shrug off a lousy plan coming out of Europe. It will not shrug off any plan that is not fundamentally based in reality.”
Tags: Auto parts, Autos, BMO Capital Markets, Boeing, Commercial aircraft, computers, congress, Core capital goods, Department of Commerce, Durable goods, Durable goods orders, Europe, Federal Reserve, GDP, Heavy machinery, Institute for Supply Management, RDQ Economics, recession, Societe Generale, unemployment rate
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Tuesday, August 30th, 2011
Emerging from a financial crisis of the enormity that the United States has lived through the last several years, it is natural that the road to recovery is slower and bumpier than in a typical recession. This is the opinion of Rick Mattoon, a Senior Economist and Economic Advisor at the Federal Reserve Bank of Chicago, Previously a Policy Advisor to the governor of Washington, he is also a lecturer at the Kellogg School of Management at Northwestern University.
According to Mattoon, the irony of the Monday after Standard & Poor’s downgraded the United States’ credit rating from AAA to AA+ is that while the Dow Jones Industrial Average nosedived by 635 points, investors were still putting their money into Treasury notes. Treasuries, which theoretically should have been affected by the credit downgrade, remain attractive to savvy investors. The most significant impact of the credit downgrade is its effect on municipal bond issuances and the cost of certain kinds of credit that historically have been backed by the United States’ AAA standing.
From the Federal Reserve’s perspective, Mattoon says the central bank is going to continue making it easy for people to borrow and lend money to create the favorable conditions that will turn the economy around. At present, he says the issue isn’t so much one of supply but demand. A lot of people would like to take advantage of the current low interest rates, but can’t because they are not considered creditworthy due to tighter lending standards. The Fed’s policy of quantitative easing (QE) has had some success, primarily — and until recently – the stock market rally and low interest rates.
The expression of “stall speed” is used to describe the pace of economic recovery as compared with the five percent rate of growth the country needs. Mattoon says that this is a difficult process that has not been helped by other one-time shocks to the economy. A case in point is March’s Japanese earthquake and tsunami, which caused supply-chain disruptions. Another was the unanticipated spike in oil prices that dampened consumer spending.
The slow pace of job creation – just 117,000 created in July after two months of little employment growth – is also negatively impacting the economy. The way the public sees it, job creation is currently the # 1 economic factor – particularly to the approximately 50 percent of the unemployed who have been jobless for six months or longer.
One game changer lies in the fact that Americans are currently saving more money than they did in the past – as much as six or seven percent of income when compared with a few years ago.
In terms of commercial real estate, the 1st half of the year saw tremendous amounts of capital raised for acquisitions, primarily for core $100 million transactions. The market’s comeback depends on job growth. According to Mattoon, if office employment ticks up, there will be greater demand for commercial real estate, especially in gateway cities like New York. Retail will be the most difficult sector to recover, especially in strip malls, which were significantly overbuilt. The demise of some big-box retailers – most notably Circuit City and Borders – is opening significant retail space that often anchored shopping centers.
To listen to Rick Mattoon’s full interview on whether the economy is on the brink or on the mend, click here.
Rick Mattoon on the Economy: On the Brink or On the Mend?:
Download
Tags: big-box retailers, Borders, Circuit City, Credit downgrade, Dow Jones Industrial Average, Federal Reserve Bank of Chicago, financial crisis, interest rates, Japanese earthquake and tsunami, Kellogg School of Management, Northwestern University, oil prices, Quantitative easing, recession, Rick Mattoon, Standard & Poor’s, Supply-chain disruptions, treasury bills, unemployment rate
Posted in Economics, General | No Comments »
Tuesday, August 23rd, 2011
The American economy expanded at a snail’s pace of just 1.3 percent in the 2nd quarter, according to a report from the Department of Commerce. Growth in the first three months of 2011 was reduced to 0.4 percent from an earlier reading of 1.9 percent.
“Today’s first look at GDP in the 2nd quarter confirms what we already knew: The economy isn’t growing as fast as it needs to,” said Commerce Secretary Gary Locke. “Experts have repeatedly warned that if this uncertainty continues, our economy will pay the price. We can’t afford to return to the same failed policies that brought us here. We must build on the progress we’ve made over the last two years and reach a balanced compromise that will reduce our debt and at the same time strengthen our job-creating ability and global competitiveness for the future.”
Soaring gas prices and meager income gains caused consumers to limit their spending in the spring. The abrupt slowdown means the economy in 2011 will likely grow at a slower pace than in 2010. Additionally, economists don’t expect growth to pick up enough in the 2nd half to cut the unemployment rate, which rose to 9.2 percent In June. Economists originally thought that a Social Security payroll tax cut would spur adequate growth to reduce the unemployment rate. Unfortunately, the lion’s share of that money was spent filling up gas tanks as gas prices soared. In an unfortunate twist, employers pulled back on hiring because Americans spent less. Thanks in part to high gas prices, consumer spending was virtually flat throughout the spring. It grew a mere 0.1 percent, after experiencing 2.1 percent growth in the winter. Spending on long-lasting manufactured goods — primarily autos and appliances — declined 4.4 percent.
Usually reliable government spending fell for the 3rd consecutive quarter. State and local governments also slashed spending, the seventh time in eight quarters since the recession officially came to an end. Corporate spending on equipment and software grew 5.7 percent in the 2nd quarter, down from the 1st quarter’s impressive 8.7 percent pace and below 2010’s double-digit gains. Additionally, American incomes are not growing. After-tax incomes, adjusted for inflation, rose just 0.7 percent, similar to the 1st quarter and the weakest numbers since the recession ended.
Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, said the poor new data could push the American economy back into recession. Although she said that the chances of that are still low. “Anemic consumption, still declining state and local government spending, tepid business investment, and soft housing activity all combined to offset some strength in exports,” she said. “Concerns about the weak labor market and rising food and energy prices continue to weigh on consumer confidence.” In June, the Federal Reserve cut its estimate of economic growth for the year. The Fed now thinks that the economy will grow between 2.7 percent and 2.9 percent, down from an April estimate of 3.1 percent to 3.3 percent.
The economy is struggling to recover from the recession that lasted from 2007 to 2009, a time when the GDP contracted. According to a government report, the recession was even worse than originally estimated. Between the last few months of 2007 and the middle of 2009, the economy declined by 5.1 percent. That is one percentage point more than previous estimates.
Writing in the Washington Post’s “Political Economy” column, Neil Irwin says that “But even if the number comes in somewhat higher than economists are expecting, it will be no cause for celebration. The U.S. economy is capable of growing at about 2.5 percent a year over the longer term, as the population increases and workers become more productive. But when the economy grows at that rate, the labor market can only tread water — accommodating the rise in the labor force, but unable to put the millions of Americans still unemployed back to work. So, what happens to employment when the nation’s economic growth stays below that 2.5 percent rate, as it has in the 1st half of this year? The U.S. jobless rate has risen for three months straight. Among the major culprits in keeping job seekers out of work are the financial struggles faced by state and local governments that are cutting tens of thousands of jobs and billions of dollars in spending each month to balance their budgets. State and local government cutbacks subtracted 1.2 percentage points from 1st quarter GDP, the Commerce Department has estimated. Friday’s GDP release shows the amount of drag in the 2nd quarter. States were able to delay those cutbacks when they received hundreds of billions of dollars from the federal government in 2009 to ride out the recession. That money has all been spent, and now states are being forced to slash spending and raise taxes to comply with balanced-budget requirements. Congress has given little serious consideration to reviving the stimulus program.”
Some economists see the light at the end of the tunnel. “The pace of fiscal retrenchment is likely to pick up in coming years,” said Jan Hatzius, Goldman Sachs’ chief economist, “and this year’s experience confirms our view that this adjustment is likely to weigh on GDP growth.”
Tags: After-tax incomes, Conference Board, consumer confidence, Department of Commerce, economic growth, exports, Federal Reserve, Gary Locke, Gas prices, Goldman Sachs, Government spending, Incomes, inflation, recession, Social Security payroll tax cut, unemployment rate
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Monday, July 18th, 2011
Conventional wisdom tells us that no sitting president is ever re-elected when the unemployment rate tops seven percent and people have less disposable income. Others wonder if President Barack Obama should have taken on housing reform before tackling healthcare because home ownership and the value of the residence is perceived by Americans as a measure of personal wealth.
In the opinion of Douglas Hibbs, a retired economics professor who taught at the University of Gothernburg in Sweden, “The best predictions of 2012 election results, as of earlier elections, will almost surely be delivered by price data at thick-market betting sites like Intrade because they indicate the level of disposable income.
Writing in The New Yorker, Samantha Henig says that “The Republican field may be full of Eccentrics and Implausibles, but President Obama does have a formidable foe in the economy, Elaine Kamarck, a lecturer at Harvard’s Kennedy School of Government, says. The President also has to contend with Americans’ newfound belief, stemmed from the economic disaster in Greece, that ‘deficits are the roots of all economic evils.’”
Alan Abramowitz’s “Time for Change” model tries to achieve this task. Using 2nd quarter GDP growth in the election year, presidential approval in the election year, and a dummy variable (one or zero) for whether the party in the White House has completed one or more terms, he finds that the term variable is very important. President Obama is expected to win 4.4 percent more of the popular vote than he would if his party were in its second term in the White House for a projected percentage between 53 – 54 percent.
The fact that President Obama raised a record-breaking $86 million for his re-election campaign from April to June, exceeding a $60 million quarterly target and effortlessly surpassing all Republican challengers, lends credibility to Hibbs’ and Intrade’s prognostications. Small donations drove that enormous cash collection in the 2nd quarter; 98 percent of those donations totaled $250 or less. The average donation was approximately $69, according to campaign manager Jim Messina. Obama’s campaign received donations from more than 552,000 individuals and noted that it had “more grass-roots support at this point in the process than any campaign in political history.” According to Chris Arterton, a political management professor at George Washington University, “They have smashed all records. I think it is quite dramatic.”
The President’s successful fundraising likely surpassed that of all his declared opponents. Combining the known fundraising totals, Republican candidates brought in $35.5 million. Former Massachusetts Governor Mitt Romney raised a paltry $18 million in the quarter. “We did this from the bottom up,” Messina said. “We didn’t accept one single dollar from Washington lobbyists or special-interest PACs.”
The ability to raise campaign cash, a key indicator of the success of any presidential candidate, is more important in the 2012 presidential election, which is expected to be the most expensive in history. Quarterly fundraising statistics are a closely watched barometer of early-stage presidential races because they offer clues to a candidate’s long-term viability, organizational expertise and the enthusiasm among supporters. The enormous intake of campaign cash for the president comes as the importance of having an effective fundraising operation is greater than ever, in part because of the 2010 Supreme Court Citizens United decision that lets corporations and unions exercise free speech rights by spending unlimited amounts on campaign ads. President Obama, who filled his 2008 campaign coffers with millions in small donations, is now armed with the power of incumbency, and is likely get sizeable donations from corporate and establishment donors.
“Your early support means we can make more investments now, giving our organizers more time to build relationships on the ground, reach more people and recruit more volunteers,” Messina said. “The most important thing isn’t the dollar total, but the number of people who pitched in to own a piece of this campaign.”
Tags: 2012 election, Barack Obama, Campaign fundraising, Citizens’ United, Democratic National Committee, Disposable income, Douglas Hibbs, Elaine Kamarck, Free speech rights, GDP growth, healthcare reform, housing reform, Intrade, James Messina, Kennedy School of Government, Mitt Romney, New Democrats movement, PACs, Personal wealth, Supreme Court, unemployment rate, University of Gothernburg, Washington lobbyists
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Monday, June 13th, 2011
Sluggish job growth in May could be a sign that the economic recovery is losing momentum.According to the ADP May Employment Report, a mere 38,000 jobs were added in the private sector on a seasonally adjusted basis. That was well below consensus estimates of 170,000 new jobs. The report also revised downwards the estimated change from March to April from 179,000 to 177,000. “A deceleration in employment, while disappointing, is not entirely surprising,” the report said. “In the 1st quarter, GDP grew at only a 1.8 percent rate and only about 2¼ percent over the last four quarters. This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment.”
Patrick O’Keefe, director of economic research at J.H. Cohn, said that although some seasonal factors may have been at work in the recent claims data and in the ADP estimates, the report still disappointed. “We can put away our balloons and party hats today,” he said. “We expected a pull back in the rate of acceleration, instead we got deceleration. It appears that the general expansion has lost a bit of momentum and employment numbers, which were already lethargic, are slowing further.”
“This only adds fuel to the argument that the slowdown story is here in the U.S.,” said Tom Porcelli, chief economist at RBC Capital Markets. “I am fairly confident that people are going to be scaling back their estimates for nonfarm payrolls. While it is a good thing that small and medium-sized companies are adding payrolls, there is no doubt that the pace has slowed. This is exactly what we do not want when other significant data shows things are slowing down as well. Having said that, I still do not believe the Fed will initiate QE3.”
Writing in the National Journal, Jim Tankersley takes a more optimistic viewpoint. According to Tankersley, “Reality is a little more positive and a lot more complicated than that. Wall Street analysts are fairly united in their view that the recovery has entered a “soft patch,” just like it did last year, and that sooner or later, growth and job-creation are on track to pick up again. Several analysts and columnists have been reminding Americans that recoveries from financial crises can often feel like stop-and-go traffic on the freeway. For now, the economic brakes seem to be pumping. The 2010 slowdown flowed from worries over Europe’s sovereign debt crisis. This one is likely a combination of several factors. The spike in oil and food prices has spooked confidence — though consumers are still spending apace, dipping into their savings to keep up — and may be driving businesses to scale back hiring.”
On the MarketWatch website, Rex Nutting says that “If you recall that government employment is declining by almost that much every month, the ADP report implies only a very small increase in total employment. This is no way to get the unemployment rate down from nine percent. The economy has been buffeted by both natural and man-made forces. Extremely bad weather earlier in the year depressed activity, as did the surge in commodity prices, especially for energy and food. Then the Japanese earthquake and tsunami knocked out vital supply chains. Global economic growth, which had given a big boost to U.S. exporters, is slowing. Europe is dead in the water, so is Japan. The fast-growing developing nations such as China, India and Brazil are downshifting to avoid overheating. The strongest sector of the U.S. economy — manufacturing — is still growing, but the momentum is fading. The Institute for Supply Management’s closely watched diffusion index (Defined by Investopedia as “A measure of the breadth of a move in any of the Conference Boards Business Cycle Indicators (BCI), showing how many of an indicators components are moving together with the overall indicator index) plunged by 6.9 points to 53.5 percent in May, the largest one-month decline since 1984.
Companies may need to start hiring again as a new report from the Department of Labor is showing that the productivity of American workers slowed in the 1st quarter and labor costs rose as companies boosted employment to meet rising demand. The measure of employee output per hour increased at a 1.8 percent annual rate after a 2.9 percent gain in the prior three months, revised figures from the Labor Department showed today in Washington, D.C. Employee expenses climbed at a 0.7 percent rate after dropping 2.8 percent the prior quarter.
Productivity measures the amount of output per hour of work. A slowdown in growth is bad for the economy if it persists. But it can be good in the short term when unemployment is high because it can mean that companies are reaching the limits on how much extra output they can get from their existing work forces. Output grew 3.9 percent in 2010, the biggest increase since 2002. But many economists believe it will slow to 50 percent of that rate this year. The expectation is that companies will hire new workers to further boost output.
Tags: ADP, ADP’s May Employment Report, Brazil, China, Department of Labor, Federal Reserve, GDP, global economic growth, Government hiring, India, J. H. Cohn, Japanese earthquake and tsunami, job growth, MarketWatch, National Journal, Productivity, QE3, unemployment rate, Wall Street
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Wednesday, April 13th, 2011
Americans’ confidence in having adequate money to retire on has hit a 20-year low, according to a survey by the Employee Benefits Research Institute (EBRI). “We’re getting the most pessimistic results we’ve ever seen,” said Jack VanDerhei, EBRI’s research director and the study’s co-author. “Those that are not well prepared are finally starting to get it. The bad news is they’re not really reacting to it yet,” VanDerhei said. “Hopefully this will be something that in the future will generate more savings. People were shell shocked to some extent by what was going on in 2008 and 2009,” said VanDerhei. “Many people wouldn’t even open their 401(k) statements when they came every quarter because they were too afraid to look.” Now these same people are determining if they have adequate money saved. This pessimism is despite the fact that the average balance of a 401(k) account rose to $71,500 at the end of 2010, an increase of approximately 11 percent when compared with 2009, according to Fidelity Investments.
Approximately 27 percent reported that they have little confidence about the amount of their retirement savings, an increase over the 22 percent reported last year. The increase was driven by people with less than $100,000 in savings, according to the report. The percentage of those with less than $25,000 in savings who lack confidence about having enough money in retirement soared to 43 percent in 2011, an increase from the 19 percent reported in 2007. Five percent reported that their savings totaled more than $100,000, about the same as 2007. Nearly 1,000 workers and 250 retirees aged 25 and older were interviewed for the survey. EBRI has conducted the survey since 1990.
High unemployment rates, the size of the federal deficit, rising healthcare costs, lower returns on investment and worries about Social Security and Medicare funding have forced Americans to redefine retirement, VanDerhei said. Regulators and legislators are examining the risk of Americans outliving their savings as life expectancies increase and funds have shifted from traditional pension plans to defined-contribution plans such as 401(k)s. The Labor Department is examining whether it should be easier for employers to add annuities to retirement accounts. Senator Jeff Bingaman (D-NM) re-introduced legislation that would require 401(k) plan sponsors to inform workers of the projected monthly income they can expect at retirement based on their current account balance.
Not all the news in the EBRI study is bad. “In the past, investors in general were clueless about how big of a nest egg it takes to accomplish their goals,” said Harold Evensky, a Coral Gables, FL, financial planner. “The silver lining of going through a bad economy is that people are substantially more realistic about what they need to do.” Although the majority of people have not yet made major changes, at least 62 percent say it is possible for them to save $25 a week for retirement. One expectation may need to be adjusted. Among the 1,004 workers surveyed, 74 percent plan to work in retirement to supplement their savings, but just 23 percent of the 254 retirees surveyed say they have worked in retirement.
Tools are available online to help Americans saving for retirement determine how far they are on the road to financial stability. Generally speaking, financial planners suggest putting away between 11 and 15 percent of each paycheck for retirement. Additionally, the Department of Labor’s website has a section called “Top 10 Ways to Prepare for Retirement”.
Tags: 401k, deficit, Employees Benefit Research Institute, Fidelity Investments, Government deficit, Healthcare costs, Labor Department, Life expectancies, Medicare, Nest eggs, retirement, Savings, Senator Jeff Bingaman, social security, unemployment rate
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