Federal Reserve: Economy Growing, Prices Rising

According to the Federal Reserve, the economy is expanding at a "modest to moderate pace." The Fed claims that retailers and manufacturers are seeing higher costs that are being passed on to consumers, and that housing continues to struggle. Tell us something we don’t already know!

CNN reports:

Both commercial and residential construction continues to be one of the slower segments of the economy, while manufacturers, retailers and financial firms reported slight growth.

Meanwhile, it's still tough to get credit, and in some regions, banks are actually tightening their standards.

The Fed reported little evidence of wages increasing in most of its districts.

The report echoes recent comments from Fed Chairman Ben Bernanke, who acknowledges rising prices are impacting the average American, but not yet at a level that will derail the recovery.

Read more here

GDP Report: Consumers Boost Economy at Year-End

Some good news to start the week! According to reports, American consumers loosened their purse strings during the fourth quarter of 2010, giving the economy a sizable boost. Good News? Certainly. However, the jump is still lower than economists were predicting.

CNN reports:

Gross domestic product, the broadest measure of the nation's economic activity, grew at an annual rate of 3.2% in the last three months of the year, a significant increase from a 2.6% rise in the previous quarter, the government said Friday.

But that's still weaker than expectations. A group of 27 economists surveyed by CNNMoney had predicted GDP growth of 3.5%.

"The U.S. economy is finally, after three years, producing as much as it did before the Great Recession hit. But this is by no means 'mission accomplished,'" Economic Policy Institute economist Josh Bivens said in a research note.

"The 3.2% growth registered in the last quarter of 2010 would, if sustained over the next year, provide almost no downward push to the unemployment rate," he said.

The faster pace came mainly on the backs of American consumers, who headed back to the shopping malls during the holiday season. Personal consumption, a measure of consumer spending, jumped by 4.4% in the fourth quarter -- the strongest increase in that reading in at least four years.

Read more here

New US Home Sales Surge in December

According to new data from the commerce department, home sales in the US jumped by 17.5% last month. This number shattered expectations of the modest 3.5% increase that many economists had expected. Hooray for more signs of recovery, now let’s keep it going!

From Yahoo! News:

The Commerce Department said sales jumped 17.5 percent to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November.

Economists polled by Reuters had forecast new home sales rising to a 300,000-unit pace in December from a previously reported 290,000 unit rate.

Compared to December last year, sales were down 7.6 percent. Overall 2010 sales dropped 14.4 percent to a record 321,000-unit rate.

Data last week showed a surge in sales of previously owned home in December, but progress could be frustrated by a glut of homes from an unrelenting wave of foreclosures. The housing market has remained on the margins even as the broader economy shows signs of gaining strength and broadening out.

Read More at Yahoo! News

Retail Sales Rise For Sixth Month In A Row

More good news for the economy! Retail sales are up, meaning that despite Federal Reserve chairman Ben Bernanke's expectations of only moderate economic growth this year, American taxpayers are more willing to spend their money.

From HuffingtonPost.com:

This change in attitude is reflected in the numbers. The Commerce Department reported that retail sales were up in December, the sixth month in a row, making for the strongest holiday sales retailers have seen in recent years.

Sales rose 0.6 percent last month to $381 billion, lifting sales for the year by the largest amount in more than a decade.

Speaking to the Senate Budget Committee last week Ben Bernanke expressed the hope that "a self-sustaining recovery in consumer and business spending may be taking hold."

Despite the private sector adding 113,000 last month and 50,000 jobs in November, Chris Christopher, the IHS Global Insight economist who conducted the analysis, expects the unemployment rate, currently 9.4 percent, to remain above 9 percent in 2011.

"Businesses are hiring people, but they're not hiring them at a fast enough rate because they're waiting to see consumer spending increase more. They're still a little hesitant," Christopher said.

Continue reading at Huffington Post.com...

3Q 2010 Tax Collections up Nationwide

According to tax collection data released yesterday by the U.S. Census, considerable economic gains were made during the third quarter of 2010.

The City Wire.com reports:

Overall state and local tax revenues grew in the third quarter compared to the third quarter of 2009, marking the fourth straight quarter of positive growth. Property tax, general sales tax and individual income tax revenues increased, while corporate income tax revenue declined. The decline in corporate income tax revenue is the third consecutive quarter of decline.

In Arkansas, general sales tax collections at the state level were up 7.8% in the quarter, individual income tax collections were up 3.2%, corporate net income taxes received were up 38.2%, and the severance tax total was up 41.5%.

It’s likely the fourth quarter report will show continued gains for Arkansas. The Arkansas Department of Finance & Administration reported Dec. 2 that year-to-date (July-November) total revenues are $2.198 billion, up 2.4% over the same period in 2009. Year-to-date gross receipts collections — primarily sales and use tax collections — total $891.9 million, up 7.8% above the 2009 period and up 0.9% above forecast.

Oklahoma saw the general sales tax totals up 9.8% in the quarter, individual income tax collections up 3.4%, corporate net income tax up 33.4%, and the severance tax up 26.4%.

During the 2010 third quarter 2010 tax revenues for state and local governments totaled $284.3 billion, up 5.21%, but down compared to the $285.6 billion in the third quarter of 2008.

Continue reading at The City Wire.com...

Census: 1 in 7 Americans Live in Poverty

Earlier today the U.S. Census Bureau published its annual report on the economic well-being of American households. According to their data, 43.6 million people – or 1 in 7 taxpayers – lived in poverty last year. This represents the highest poverty levels since the 1960’s.

The Washington Post reports:

The poverty rate climbed from 13.2 percent, or 39.8 million people, in 2008.

The share of Americans without health coverage rose from 15.4 percent to 16.7 percent - or 50.7 million people - mostly because of the loss of employer-provided health insurance during the recession. Congress passed a health overhaul this year to address rising numbers of the uninsured, but the main provisions will not take effect until 2014.

The new figures come at a politically sensitive time, just weeks before the Nov. 2 congressional elections, when voters restive about high unemployment and the slow pace of economic improvement will decide whether to keep Democrats in power or turn to Republicans.

The 14.3 percent poverty rate, which covers all ages, was the highest since 1994. Still, it was lower than estimates of many demographers who were bracing for a record gain based on last year's skyrocketing unemployment. Many had predicted a range of 14.7 percent to 15 percent.

Read more here

Obama Considering Tax Cuts to Boost Economy

Earlier today new reports emerged predicting that the Obama administration will propose a set of new cuts to Congress. These tax incentives are said to be aimed at helping small business owners to help with the country’s ongoing unemployment problem.

CBS News reports:

On the morning after President Obama told Americans in a primetime address from the Oval Office on Iraq that getting the economy moving again was his "central responsibility as president," The Wall Street Journal ($) reported the administration is considering tax cuts to give the economy a boost.

Unnamed sources tell the newspaper that Mr. Obama's economic team might ask Congress for additional tax cuts for small businesses in addition to the $30 billion of similar cuts awaiting a vote in the Senate.

The Journal reports there's not a clear view of what kinds of small businesses would benefit from the yet-to-be-proposed cuts or how much revenue the government would lose.

The administration might also propose a payroll tax cut for businesses and individuals, the sources told the newspaper. Tax cuts passed during the president of George W. Bush are scheduled to expire at the end of the year, which would make income taxes rise.

Whether any major proposal will receive congressional approval between now and the pivotal mid-term elections is uncertain. The House and the Senate aren't scheduled to convene again until Sept. 13. Democratic aides on Capitol Hill told the newspaper that there's not much of a chance for any immediate action with the party's majorities at stake.

Read more here

Romer Resigns as Chief of Obama's Economic Council

President Obama’s Chief of Economic Council, Christina Romer will be stepping down and returning to her teaching position at the University of California. According to CNN Money the resignation will take effect on September 3.

CNN Money reports:

Romer, who has been a big supporter of health care reform and the president's stimulus plan, is one of Obama's principle economic advisers -- certainly, one of the most visible. The two meet on almost a daily basis.

"Christy Romer has provided extraordinary service to me and our country during a time of economic crisis and recovery," Obama said in a statement. "While Christy's family commitments require that she return home, I'm gratified that she will continue to offer her insights and advice as a member of my Economic Recovery Advisory Board."

Romer had previously expressed an interest in returning to California once her son starts high school in the fall, Obama added.

Read more here

Could We Be Entering a Third Depression?

At the recent G20 Summit meeting in Toronto, governments pledged to halve their deficits by 2013. According to the Huffington Post, Nobel Prize winning economist Paul Krugman believes this move will plunge us into a “third depression.” Krugman states:

“We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost -- to the world economy and, above all, to the millions of lives blighted by the absence of jobs -- will nonetheless be immense.”

Krugman believes that our skyrocketing number of long-term unemployed workers combined with government budget slashing will lead us into a long-term depression that may not be as severe as the Great Depression, could last years. And Krugman isn’t alone. The Wall Street Journal has reported that the Federal Reserve members are preparing for a potential “double-dip” recession in the US, as is Market Watch’s in-house economist.

What do you think? Are we on the verge of recovery, or on the verge of a long-term depression? Tell me your impressions via Facebook or @ronideutch/Twitter.

Read the Full article here.

Mortgage rates hit new low

Wow, CNNMoney.com is reporting that 30-year fixed mortgage rates have dropped to an amazing 4.69%. Freddie Mac is saying it is the lowest level since they started tracking it 38 years ago. This means, yes, it is cheaper to buy a house. Unfortunately it is doubtful there will be a spike in home sales with unemployment so high, wages stagnant and tax incentives expiring.

With low home sales, home prices will continue to fall. Economists on CNNMoney.com predict by the end of next year, home prices will be at least 5% lower. However, lower home prices are bittersweet news. It’s great news for buyers, but bad news for all of those in or near foreclosure.

Read the full article here.

Bernanke Says the Federal Debt Is ‘Unsustainable’

The chairman of the Federal Reserve, Ben S. Bernanke, offered little comfort to Democrats or Republicans on policy recommendations, the New York Times is reporting. Mr. Bernanke warned everyone on Wednesday that “the federal budget appears to be on an unsustainable path.” He did, however, recognize that the “exceptional increase” in the deficit had been necessary to ease the recession. Mr. Bernanke also was quoted in the New York Times as saying, that he felt "increased taxes, cuts in spending that are too large, would be a negative, a drag on recovery."

Basically, Mr. Bernanke was telling the House Budget Committee so that everyone will understand they need to formulate a plan. He confirmed on Monday in a question –and –answer broadcast that, he, like Congress, was waiting for the outcome of a bipartisan fiscal commission appointed by President Obama before making policy recommendations.

Read the full article here.

Economists: The Stimulus Didn't Help

Although the economy appears to be recovering, a new survey was released yesterday asserting that a majority of the economists in the country believe the economic recovery had little to do with President Obama’s stimulus efforts. According to this CNN Money article, the latest quarterly survey by the National Association for Business Economics showed job growth for the first time in nearly two years.

NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act, which the White House's Council of Economic Advisers says is on track to create or save 3.5 million jobs by the end of the year.

That sentiment is shared for the recently passed $17.7 billion jobs bill that calls for tax breaks for businesses that hire and additional infrastructure spending. More than two-thirds of those polled believe the measure won't affect payrolls, while 30% expect it to boost hiring "moderately."

But the economists see conditions improving. More than half of respondents -- 57% -- say industrial demand is rising, while just 6% see it declining. A growing number also said their firms are increasing spending and profit margins are widening.

Continue reading at CNN.com…

Pistons Rick Mahorn files for bankruptcy

Even the extremely well paid NBA stars are not immune to our struggling economy, paying overdue bills, and IRS debt. Rick Mahorn, former Detroit Pistons “Bad Boy and member of the 1989 championship team had earned $6.8 million during an 18-year career but public records, according to the article I read, are showing that since 2006, the IRS has filed liens against him for almost $214,000 in delinquent taxes. Rick Mahorn’s lawyer said the tax debt has been repaid. The IRS actually seized an estimated $35,000 from his paychecks last year to satisfy the tax debt. Mahorn has since had to file bankruptcy due to failed investments and has lost his $500,000 home.

Read the full article here.

No Job For Years and Still Looking

From CNN Money.com:

John Miller wasn't too nervous when he lost his job in the mortgage industry in June 2008.

The worst of the financial crisis was still months away. While the subprime mortgage industry had already imploded, there was still a debate at the time whether a recession had started. Job losses were steady but not dramatic.

Miller lost his job when Deutsche Bank shut down a unit making government-guaranteed FHA loans, but he had found work in the past when an employer had closed a unit. He thought that even if it took a few months to find another job, something would turn up.

Almost two years later, he's still looking.

"It's unfathomable to me," said Miller. "Never in my wildest dreams did I think I'd be coming up on two years without a job."

Miller is exhibit A of why this economic downturn feels so much worse to most than any other since the Great Depression. Long-term unemployment is at a level that dwarfs anything since the government started tracking the problem shortly after World War II.

U.S., U.K. Move Closer to Losing Rating, Moody’s Says

From Bloomberg.com:

The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.

The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.

Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.

“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”

The pound fell against the dollar and the euro for the first time in three days, depreciating 0.8 percent to $1.5090, while the dollar index snapped a four-day drop, adding 0.3 percent to 90.075.

The U.S. government will spend about 7 percent of its revenue servicing debt in 2010 and almost 11 percent in 2013, according to the baseline scenario of moderate economic recovery, fiscal adjustments in line with government plans and a gradual increase in interest rates, Moody’s said.

U.S. Consumer Bankruptcies Rose 24 Percent in August

From Bloomberg.com:

U.S. consumer bankruptcy filings rose 24 percent in August from the previous year to 119,874, according to the American Bankruptcy Institute and National Bankruptcy Research Center.

“Consumers continue to turn to bankruptcy as a shield from the sustained financial pressures of today’s economy,” said Samuel Gerdano, the executive director of the American Bankruptcy Institute. “As a result, we expect consumer filings to top 1.4 million this year.”

While the August figure was an increase over the prior year, filings declined from July’s total of 126,434, the groups said in a statement.

The current wave of consumer bankruptcies has swept up celebrities such as actor Stephen Baldwin, former baseball player Lenny Dykstra and celebrity photographers Markus Klinko and Indrani Pal-Chaudhuri.

Watchdog Says Bad Assets Still Threaten Banks

Despite numerous reports that the TARP program had stabled U.S. financial institutions, a new congressional watchdog report has been published asserting that many banks are still holding onto billions of dollars in bad loans. The report claims that a sharp rise in unemployment or a drop in the real estate values could cause the entire banking system to loose its footing once again.

“In its latest assessment of the $700 billion financial system bailout, the Congressional Oversight Panel warns that banks still hold many risky loans of uncertain value. If unemployment rises sharply or the commercial real estate market collapses - as many economists fear - the banking system could again lose its footing, the panel says in a report to be released Tuesday.”

"The financial system (remains) vulnerable to the crisis conditions that (the bailout) was meant to fix," the panel wrote in a draft copy of Tuesday's report.

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The report says many of the Obama administration's financial stability efforts are working - including infusions of new capital for banks, heightened scrutiny of capital ratios, "stress-testing" of large financial firms. It also pointed to a public-private investment plan designed to buy up bad assets that has yet to get off the ground.

Continued here…

Good News on Unemployment Rates

As foreclosures begin to stabilize in certain parts of the country, it looks like there is finally some good news on the unemployment front. According to new reports from the Labor Department, claims for state unemployment insurance fell 38,000 to a seasonally adjusted 550,000 in the week ended August 1 from 588,000 the prior week.

A Labor Department official described the period under review as "uneventful" and said it appeared the distortions to the weekly data caused by the auto plant closures were out of the way. Analysts polled by Reuters had forecast new claims to edge down to 580,000 last week.

U.S. stock index futures extended gains on the data, while government bond prices slipped.

"The claims data are another sign that the recession could be behind us," said Kevin Flanagan, fixed-income strategist at Global Wealth Management, Morgan Stanley in Purchase, New York.

"I am optimistic that a recovery is in the process of beginning, but we will need to see continued improvement in claims going through (below) the 500,000 level before the consumer is willing to come on board and be part of the recovery."

Analysts said the report also bodes well for July non-farm payrolls data due on Friday.

"We should see a decline of 300,000. It's a big step in the right direction in the labor market," said Lindsey Piegza, market analyst at FTN Financial in New York.

US Food Stamp List Tops 34 Million for First Time

From Forbes.com:

For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression

Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available.

It was the sixth month in a row that enrollment set a record. Every state recorded a gain in participation from April. Florida had the largest increase at 4.2 percent.

Food stamp enrollment is highest during times of economic stress. The U.S. unemployment rate of 9.5 percent is the highest in 26 years.

Average benefit was $133.65 in May per person. The economic stimulus package enacted earlier this year included a temporary increase in food stamp benefits of $80 a month for a family of four.

Vice President Biden Announces “We Misread How Bad the Economy Was”

In an interview that has gotten a lot of people talking, last night on ABC’s “This Week” Vice President Joe Biden admitted that the Obama administration "misread how bad the economy was.” He did go on to say that he stood by their stimulus package and that it would create more jobs as the spending pace picks up. However, with unemployment rates continuing to rise, many people are justly concerned over this admission. Check out the video of the interview below.

According to the Associated Press Biden went on to say “that the $787 billion economic stimulus package was set up to spend the money over 18 months. Major programs will take effect in September, including $7.5 billion for broadband Internet service, plus new money for high-speed rail and the nation's electrical grid.”