November 2010 U.S. Economic Fundamentals
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U.S. Home prices expected to slide another 8%
NEW YORK (CNNMoney.com) -- The robo-signing controversy is just another issue that the already sluggish housing market didn`t need -- but most analysts do not think it will have far-reaching impact.
Nevertheless, the housing market still faces many problems: a weak economy, sluggish hiring, tight mortgage underwriting, falling home prices, and slowing sales.
Then there`s the potentially disastrous number of foreclosures that may occur over the coming years.
"The market faces much bigger problems than the robo-signing issue," said Mike Larson, a housing market analyst for Weiss Research.
Prime among them are declines in home prices. And while cheaper homes are good for buyers, they also speak to a housing market that won`t stabilize.
Read the full article here.
NEW YORK (CNNMoney.com) -- The robo-signing controversy is just another issue that the already sluggish housing market didn`t need -- but most analysts do not think it will have far-reaching impact.
Nevertheless, the housing market still faces many problems: a weak economy, sluggish hiring, tight mortgage underwriting, falling home prices, and slowing sales.
Then there`s the potentially disastrous number of foreclosures that may occur over the coming years.
"The market faces much bigger problems than the robo-signing issue," said Mike Larson, a housing market analyst for Weiss Research.
Prime among them are declines in home prices. And while cheaper homes are good for buyers, they also speak to a housing market that won`t stabilize.
Read the full article here.
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U.S. sees slowing consumer spending, shrinking incomes
WASHINGTON—Americans slowed their spending in September to the weakest pace in three months and their incomes fell for the first time in 14 months.
Personal spending rose at an annual rate of 0.2 per cent in September, the Commerce Department said Monday. That`s below the 0.5 per cent gains recorded in July and August.
Incomes fell 0.1 per cent in September, following a 0.4 per cent rise in August that had been pushed higher by the return of extended unemployment benefits.
The drop in incomes was the first decline since incomes fell 0.3 per cent in July 2009. The August gain had been skewed by the reinstatement of an extended unemployment benefits program, which had temporarily lapsed in July after Republicans had blocked an extension.
Those extended benefits expire at the end of November. It`s unclear if Democrats can muster enough votes to pass one more extension of benefits before the year ends.
The weak growth in spending and incomes underscored how fragile the economy remains. Consumers facing high unemployment and slow job growth remain reluctant to spend.
Read the full article here.
WASHINGTON—Americans slowed their spending in September to the weakest pace in three months and their incomes fell for the first time in 14 months.
Personal spending rose at an annual rate of 0.2 per cent in September, the Commerce Department said Monday. That`s below the 0.5 per cent gains recorded in July and August.
Incomes fell 0.1 per cent in September, following a 0.4 per cent rise in August that had been pushed higher by the return of extended unemployment benefits.
The drop in incomes was the first decline since incomes fell 0.3 per cent in July 2009. The August gain had been skewed by the reinstatement of an extended unemployment benefits program, which had temporarily lapsed in July after Republicans had blocked an extension.
Those extended benefits expire at the end of November. It`s unclear if Democrats can muster enough votes to pass one more extension of benefits before the year ends.
The weak growth in spending and incomes underscored how fragile the economy remains. Consumers facing high unemployment and slow job growth remain reluctant to spend.
Read the full article here.
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Are taxes, regulation killing Keynesian `animal spirits`?
The Great Suppression
Strategists at UBS Securities say the United States
is in an era of "the Great Suppression," where rising taxes and regulation are killing what Keynes called "animal spirits," that spontaneous urge to action instead of inaction.
And the gains expected by the Republicans in tomorrow`s mid-term elections will, they say, mark the beginning of the the political reaction to that. While it`s difficult to "un-pass" legislation amid swollen budget deficits, it`s not clear how successful the effort to roll back this era will be, or how long that will take.
"We think growth in GDP and employment is being retarded by an interlocking set of policies, put in place over the past couple of years, that we call `The Great Suppression,`" the UBS strategists said in a lengthy report.
"... We think The Great Suppression is curbing hiring and domestic economic growth by dampening Keynesian `animal spirits` and diverting investment elsewhere."
Read the full article here.
The Great Suppression
Strategists at UBS Securities say the United States
is in an era of "the Great Suppression," where rising taxes and regulation are killing what Keynes called "animal spirits," that spontaneous urge to action instead of inaction.And the gains expected by the Republicans in tomorrow`s mid-term elections will, they say, mark the beginning of the the political reaction to that. While it`s difficult to "un-pass" legislation amid swollen budget deficits, it`s not clear how successful the effort to roll back this era will be, or how long that will take.
"We think growth in GDP and employment is being retarded by an interlocking set of policies, put in place over the past couple of years, that we call `The Great Suppression,`" the UBS strategists said in a lengthy report.
"... We think The Great Suppression is curbing hiring and domestic economic growth by dampening Keynesian `animal spirits` and diverting investment elsewhere."
Read the full article here.
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U.S. headed for fiscal train wreck: Roubini
What has been the fiscal performance of President Barack Obama
? He inherited the worst economic crisis since the Great Depression, as well as a budget deficit that – after much needed bail-outs and a series of reckless tax cuts – was already close to $1,000-billion. His stimulus package, together with a backstop of the financial system, low rates and quantitative easing from the Federal Reserve, prevented another depression. Mr. Obama also deserves credit that the U.S., alone among advanced economies, currently supports a "growth now", rather than an "austerity now" path.
But this is but one half of the picture; we must also judge his first two years on his ability to anticipate what the economy will need tomorrow. Here the picture is much less positive. Given the likely path of fiscal policy after next Tuesday`s election – with the expiration of existing stimulus and transfer payments, and even with most of the 2001-03 tax cuts being kept – the U.S. economy will soon experience serious fiscal drag just when it needs a further boost. Problematically, the administration`s failures leave it relying on the Fed, which is bent on further QE, likely to be announced next Wednesday. But studies show this will have little effect on U.S. growth in 2011, so fiscal policy should be doing some of the lifting to prevent a double dip recession.
In an ideal world Mr. Obama would also have been able to move towards reforming and reducing entitlement spending, with commitments to measures that could be phased in over the next few years, therefore avoiding short-term fiscal pain. He would also have committed to increase, gradually over the next few years, less distortionary taxes such as a VAT and a carbon tax
. This would have reduced the fiscal deficit, and created a climate in which no investor would worry about additional stimulus.
Read the full article here.
What has been the fiscal performance of President Barack Obama
? He inherited the worst economic crisis since the Great Depression, as well as a budget deficit that – after much needed bail-outs and a series of reckless tax cuts – was already close to $1,000-billion. His stimulus package, together with a backstop of the financial system, low rates and quantitative easing from the Federal Reserve, prevented another depression. Mr. Obama also deserves credit that the U.S., alone among advanced economies, currently supports a "growth now", rather than an "austerity now" path.But this is but one half of the picture; we must also judge his first two years on his ability to anticipate what the economy will need tomorrow. Here the picture is much less positive. Given the likely path of fiscal policy after next Tuesday`s election – with the expiration of existing stimulus and transfer payments, and even with most of the 2001-03 tax cuts being kept – the U.S. economy will soon experience serious fiscal drag just when it needs a further boost. Problematically, the administration`s failures leave it relying on the Fed, which is bent on further QE, likely to be announced next Wednesday. But studies show this will have little effect on U.S. growth in 2011, so fiscal policy should be doing some of the lifting to prevent a double dip recession.
In an ideal world Mr. Obama would also have been able to move towards reforming and reducing entitlement spending, with commitments to measures that could be phased in over the next few years, therefore avoiding short-term fiscal pain. He would also have committed to increase, gradually over the next few years, less distortionary taxes such as a VAT and a carbon tax
. This would have reduced the fiscal deficit, and created a climate in which no investor would worry about additional stimulus.Read the full article here.
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U.S. consumer spending slows in September
Americans slowed their spending in September to the weakest pace in three months and their incomes fell for the first time in 14 months.
Personal spending rose at an annual rate of 0.2 per cent in September, the Commerce Department said Monday. That`s below the 0.5 per cent gains recorded in July and August.
Incomes fell 0.1 per cent in September, following a 0.4 per cent rise in August that had been pushed higher by the return of extended unemployment benefits
.
The drop in incomes was the first decline since incomes fell 0.3 per cent in July 2009. The August gain had been skewed by the reinstatement of an extended unemployment
benefits program, which had temporarily lapsed in July after Republicans had blocked an extension.
Those extended benefits expire at the end of November. It`s unclear if Democrats can muster enough votes to pass one more extension of benefits before the year ends.
Read the full article here.
Americans slowed their spending in September to the weakest pace in three months and their incomes fell for the first time in 14 months.
Personal spending rose at an annual rate of 0.2 per cent in September, the Commerce Department said Monday. That`s below the 0.5 per cent gains recorded in July and August.
Incomes fell 0.1 per cent in September, following a 0.4 per cent rise in August that had been pushed higher by the return of extended unemployment benefits
.The drop in incomes was the first decline since incomes fell 0.3 per cent in July 2009. The August gain had been skewed by the reinstatement of an extended unemployment
benefits program, which had temporarily lapsed in July after Republicans had blocked an extension.Those extended benefits expire at the end of November. It`s unclear if Democrats can muster enough votes to pass one more extension of benefits before the year ends.
Read the full article here.
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ISM Manufacturing Index: Economic Recovery is Real, and Consistent with Real GDP Growth of 5.2%"Economic activity in the manufacturing sector expanded in October for the 15th consecutive month, and the overall economy grew for the 18th consecutive month, say the nation`s supply executives in the latest Manufacturing ISM Report On Business":
Highlights include:
1. The last time the ISM Manufacturing Index (PMI) remained above 50% (signaling expansion) for 15th straight months was back in the 2005-2006 period (see chart above).
2. Compared to the 16-months following the 2001 recession, the recovery of the manufacturing sector has been much stronger in the recent 16-month period from June 2009 to October 2010 (see chart above). The ISM Index has now been at a level of about 54 or above for the last 12 months, and that marks the strongest 12 month expansion in manufacturing since 2004.
Read the full article here.
Highlights include:
1. The last time the ISM Manufacturing Index (PMI) remained above 50% (signaling expansion) for 15th straight months was back in the 2005-2006 period (see chart above).
2. Compared to the 16-months following the 2001 recession, the recovery of the manufacturing sector has been much stronger in the recent 16-month period from June 2009 to October 2010 (see chart above). The ISM Index has now been at a level of about 54 or above for the last 12 months, and that marks the strongest 12 month expansion in manufacturing since 2004.
Read the full article here.
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Flaherty says U.S. housing a threat
WHITBY, Ontario (Reuters) - The faltering U.S. housing market is a potential threat to a Canadian economy that is likely to produce only moderate growth, Canadian Finance Minister Jim Flaherty said on Friday.
"The American housing sector remains a major concern," he told reporters at an event in Whitby, Ontario.
The IMF warned on Thursday that risks to Canada`s economic outlook have increased and include the impact of housing market weakness in the United States, Canada`s largest trading partner.
Even so, Canada`s economy resumed growing in August after a brief downturn in July, bolstered by wholesale trade, manufacturing and oil and gas extraction, data showed on Friday.
Gross domestic product climbed 0.3 percent, as expected, compared with a 0.1 percent contraction in July.
Read the full article here.
WHITBY, Ontario (Reuters) - The faltering U.S. housing market is a potential threat to a Canadian economy that is likely to produce only moderate growth, Canadian Finance Minister Jim Flaherty said on Friday.
"The American housing sector remains a major concern," he told reporters at an event in Whitby, Ontario.
The IMF warned on Thursday that risks to Canada`s economic outlook have increased and include the impact of housing market weakness in the United States, Canada`s largest trading partner.
Even so, Canada`s economy resumed growing in August after a brief downturn in July, bolstered by wholesale trade, manufacturing and oil and gas extraction, data showed on Friday.
Gross domestic product climbed 0.3 percent, as expected, compared with a 0.1 percent contraction in July.
Read the full article here.
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Roubini sees another `disaster` if house prices drop
Nouriel Roubini, the New York University professor who predicted the global financial crisis, said another "disaster" will happen if U.S. house prices fall again and prime mortgage defaults increase.
"If house prices are going to fall another 5% to 10%, another eight million households are going to be in negative equity," Mr. Roubini said on Tuesday at a conference in Cape Town. "We are going to have another nasty crisis. That`s going to happen unless we do something about it. Forget about subprime, look at prime."
Home prices in 20 U.S. cities rose 1.7% in August from a year earlier, after posting annual declines for 37 consecutive months to January, according to the S&P/Case-Shiller index of property values. The housing recovery has slowed for three months because of unemployment, which may exceed 9% through 2011, and foreclosures that add to the inventory of unsold homes.
Even if house prices gain, the world`s advanced economies will show "anemic" growth, while Japan is an "accident waiting to happen," Mr. Roubini said, forecasting that U.S. growth may slow to 1% by year-end. As the United States prepared to go to the polls on Tuesday, he said the prospect of Republican control of the House of Representatives will discourage further fiscal stimulus.
Read the full article here.
Nouriel Roubini, the New York University professor who predicted the global financial crisis, said another "disaster" will happen if U.S. house prices fall again and prime mortgage defaults increase.
"If house prices are going to fall another 5% to 10%, another eight million households are going to be in negative equity," Mr. Roubini said on Tuesday at a conference in Cape Town. "We are going to have another nasty crisis. That`s going to happen unless we do something about it. Forget about subprime, look at prime."
Home prices in 20 U.S. cities rose 1.7% in August from a year earlier, after posting annual declines for 37 consecutive months to January, according to the S&P/Case-Shiller index of property values. The housing recovery has slowed for three months because of unemployment, which may exceed 9% through 2011, and foreclosures that add to the inventory of unsold homes.
Even if house prices gain, the world`s advanced economies will show "anemic" growth, while Japan is an "accident waiting to happen," Mr. Roubini said, forecasting that U.S. growth may slow to 1% by year-end. As the United States prepared to go to the polls on Tuesday, he said the prospect of Republican control of the House of Representatives will discourage further fiscal stimulus.
Read the full article here.
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Volatility ahead as U.S. economy teeters
North American stock markets rebounded from early losses to eke out small gains on Tuesday as U.S. consumer confidence rose unexpectedly but housing data fell, that added more uncertainty about the economy south of the border and prospects for a new round of monetary stimulus from the U.S. Federal Reserve.
The S&P/TSX Composite Index rose 21.10 points or 0.17%, to another two-year high of 12,684.68, as eight of 10 sub-indexes rose, led by consumer and technology stocks. The resource-heavy junior Venture exchange also advanced, adding 7.54 points or 0.40%, to 1908.07.
In New York, the Dow Jones industrial average added 5.41 points or 0.05%, to 11,169.46, while the S&P 500 was relatively unchanged adding just 0.02 to 1,185.64. The Nasdaq composite index gained 6.44 points or 0.26%, to 2,497.29.
"Trading was choppy again Tuesday with equity and commodity markets starting out the day lower and then rebounding in the afternoon," said Colin Cieszynski, a market analyst at CMC Markets Canada.
Read the full article here.
North American stock markets rebounded from early losses to eke out small gains on Tuesday as U.S. consumer confidence rose unexpectedly but housing data fell, that added more uncertainty about the economy south of the border and prospects for a new round of monetary stimulus from the U.S. Federal Reserve.
The S&P/TSX Composite Index rose 21.10 points or 0.17%, to another two-year high of 12,684.68, as eight of 10 sub-indexes rose, led by consumer and technology stocks. The resource-heavy junior Venture exchange also advanced, adding 7.54 points or 0.40%, to 1908.07.
In New York, the Dow Jones industrial average added 5.41 points or 0.05%, to 11,169.46, while the S&P 500 was relatively unchanged adding just 0.02 to 1,185.64. The Nasdaq composite index gained 6.44 points or 0.26%, to 2,497.29.
"Trading was choppy again Tuesday with equity and commodity markets starting out the day lower and then rebounding in the afternoon," said Colin Cieszynski, a market analyst at CMC Markets Canada.
Read the full article here.
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U.S. personal income falls unexpectedly in September
Households saw their earnings fall at an annualised rate of 0.1% compared with August, the largest fall in personal income in 14 months
In August, incomes rose by a revised 0.4%.
The market is expecting that the Federal Reserve will announce a new round of quantitative easing this week.
Analysts had expected earnings to rise by 0.3%.
The fall in personal income was mainly driven by lower benefit payments, following the temporary rise in benefits during August due to emergency unemployment insurance legislation passed by Congress.
Dipping into savings
Consumer spending still rose by an annualised 0.2%, according to the new datahttp://http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm, indicating that Americans cut back on their savings - to 5.3% of their income, from 5.6% in August - in order to maintain their spending.
Read the full article here.
Households saw their earnings fall at an annualised rate of 0.1% compared with August, the largest fall in personal income in 14 months
In August, incomes rose by a revised 0.4%.
The market is expecting that the Federal Reserve will announce a new round of quantitative easing this week.
Analysts had expected earnings to rise by 0.3%.
The fall in personal income was mainly driven by lower benefit payments, following the temporary rise in benefits during August due to emergency unemployment insurance legislation passed by Congress.
Dipping into savings
Consumer spending still rose by an annualised 0.2%, according to the new datahttp://http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm, indicating that Americans cut back on their savings - to 5.3% of their income, from 5.6% in August - in order to maintain their spending.
Read the full article here.
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Federal Reserve to pump $600 billion into U.S. economy
This stimulus equates to $75bn a month, in a second round of "quantitative easing" (QE).
The US economy grew by an annual rate of 2% between July and September, which is not enough to reduce high unemployment.
Some analysts see QE as the last chance to get the US economy back on track.
The move was widely flagged, with most analysts expecting the Fed to inject $500bn into the economy.
For this reason, stock markets rose only slightly, with the Dow Jones closing up 26 points at 11,215, still enough to take the index to its highest level for two years.
Second step
Interest rates are already close to zero, which means the Fed cannot reduce rates any further in order to boost demand - the more traditional policy used by central banks to stimulate growth.
Read the full article here.
This stimulus equates to $75bn a month, in a second round of "quantitative easing" (QE).
The US economy grew by an annual rate of 2% between July and September, which is not enough to reduce high unemployment.
Some analysts see QE as the last chance to get the US economy back on track.
The move was widely flagged, with most analysts expecting the Fed to inject $500bn into the economy.
For this reason, stock markets rose only slightly, with the Dow Jones closing up 26 points at 11,215, still enough to take the index to its highest level for two years.
Second step
Interest rates are already close to zero, which means the Fed cannot reduce rates any further in order to boost demand - the more traditional policy used by central banks to stimulate growth.
Read the full article here.
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Quantitive Easing explainedWhat is it?
QE hit the headlines in 2008 when the US central bank reacted to the crisis by spending vast amounts of its own money on US government bonds. It spent more than $1.5tn (£1tn) buying bonds with money it, in effect, created on its own account. Last year the Bank of England followed suit, spending £200bn on UK government bonds. "Printing" electronic money to purchase assets in the economy is termed quantitative easing, so called because it eases monetary conditions.
What does it achieve?
Those who promote QE claim it increased the supply of money at a crucial time. The Fed and the Bank came to the rescue when banks were refusing to lend to each other. The effect was to increase demand for bonds, which in turn lowered the yield. A lower yield brings down long-term interest rates and makes borrowing money cheaper. Gavyn Davies, the former Goldman Sachs chief economist, wrote: "We do not know what would have happened if this had not been done, but there seems a strong chance that the banking collapse would have been worse, and the economic recession much deeper.
Why do we need more of it?
Bankers expected the policy to last a year or two. A recovery in economic fortunes would be coupled with a return to "normal" monetary policy. The central banks would begin to sell back the bonds and allow the market to dictate long-term interest rates again. However, the deep-seated structural problems that gave rise to the crisis remain. In the US, private debt is at record levels. Home repossessions continue. to undermine the housing market. The economy has stagnated and unemployment is stuck at 9.6%.
Read the full article here.
QE hit the headlines in 2008 when the US central bank reacted to the crisis by spending vast amounts of its own money on US government bonds. It spent more than $1.5tn (£1tn) buying bonds with money it, in effect, created on its own account. Last year the Bank of England followed suit, spending £200bn on UK government bonds. "Printing" electronic money to purchase assets in the economy is termed quantitative easing, so called because it eases monetary conditions.
What does it achieve?
Those who promote QE claim it increased the supply of money at a crucial time. The Fed and the Bank came to the rescue when banks were refusing to lend to each other. The effect was to increase demand for bonds, which in turn lowered the yield. A lower yield brings down long-term interest rates and makes borrowing money cheaper. Gavyn Davies, the former Goldman Sachs chief economist, wrote: "We do not know what would have happened if this had not been done, but there seems a strong chance that the banking collapse would have been worse, and the economic recession much deeper.
Why do we need more of it?
Bankers expected the policy to last a year or two. A recovery in economic fortunes would be coupled with a return to "normal" monetary policy. The central banks would begin to sell back the bonds and allow the market to dictate long-term interest rates again. However, the deep-seated structural problems that gave rise to the crisis remain. In the US, private debt is at record levels. Home repossessions continue. to undermine the housing market. The economy has stagnated and unemployment is stuck at 9.6%.
Read the full article here.
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U.S. Federal Reserve launches new round of quantitive easing
America`s central bank announced that it would pump an additional $600bn (£372bn) into the ailing US economy over the next eight months in an attempt to accelerate growth and cut unemployment.
Expressing concern at the sluggish recovery from the worst downturn since the Great Depression, the Federal Reserve said it would buy $75bn of long-term Treasury bills each month until the middle of next year. The expansion of the Fed`s quantitative easing programme was accompanied by a pledge to keep interest rates at ultra-low levels for an "extended period", which Wall Street took as a commitment to leave borrowing costs unchanged for at least the next two years.
Market reaction to the widely anticipated announcement was initially lukewarm, with some disappointment in New York that the package of support for the economy had not been bigger. Hopes of a fresh $1tn boost to activity were dashed, although the Fed did announce that the $600bn injected would be topped up by around $250bn of re-invested assets, mainly mortgages, from the first tranche of QE. In addition, the US policymakers left the door open for an even bigger injection of electronic money into the economy should growth continue to remain weak.
While the US clawed its way out of recession in 2009, recovery has been slower than in previous economic cycles. The Fed said it would "regularly review the pace of its securities purchases and the overall size of its asset-purchase programme in light of incoming information and will adjust the programme as needed to best foster maximum employment and price stability".
The decision to sanction move was taken by 10-1, with only Thomas Hoenig dissenting.
Read the full article here.
America`s central bank announced that it would pump an additional $600bn (£372bn) into the ailing US economy over the next eight months in an attempt to accelerate growth and cut unemployment.
Expressing concern at the sluggish recovery from the worst downturn since the Great Depression, the Federal Reserve said it would buy $75bn of long-term Treasury bills each month until the middle of next year. The expansion of the Fed`s quantitative easing programme was accompanied by a pledge to keep interest rates at ultra-low levels for an "extended period", which Wall Street took as a commitment to leave borrowing costs unchanged for at least the next two years.
Market reaction to the widely anticipated announcement was initially lukewarm, with some disappointment in New York that the package of support for the economy had not been bigger. Hopes of a fresh $1tn boost to activity were dashed, although the Fed did announce that the $600bn injected would be topped up by around $250bn of re-invested assets, mainly mortgages, from the first tranche of QE. In addition, the US policymakers left the door open for an even bigger injection of electronic money into the economy should growth continue to remain weak.
While the US clawed its way out of recession in 2009, recovery has been slower than in previous economic cycles. The Fed said it would "regularly review the pace of its securities purchases and the overall size of its asset-purchase programme in light of incoming information and will adjust the programme as needed to best foster maximum employment and price stability".
The decision to sanction move was taken by 10-1, with only Thomas Hoenig dissenting.
Read the full article here.
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U.S. sees jump in jobless benefits
WASHINGTON—The number of Americans seeking jobless benefits jumped sharply last week, after two straight weeks of declines.
The increase undermines hopes that unemployment claims, after falling four times in the previous five weeks, were on a sustained downward trend. That would signal layoffs were slowing and hiring was picking up. Instead, claims remain stuck at an elevated level.
The Labor Department said Thursday that initial claims for unemployment aid rose by 20,000 to a seasonally adjusted 457,000 for the week ending Oct. 30. Wall Street analysts polled by Thomson Reuters had expected a smaller rise.
Claims have fluctuated around the 450,000 level all year. They will need to drop below 425,000 to signal sustained job gains.
"Those looking for an imminent spurt of job creation are, for yet another week, likely to be disappointed," said Dan Greenhaus, chief economic strategist at Miller Tabak, in a note to clients.
Read the full article here.
WASHINGTON—The number of Americans seeking jobless benefits jumped sharply last week, after two straight weeks of declines.
The increase undermines hopes that unemployment claims, after falling four times in the previous five weeks, were on a sustained downward trend. That would signal layoffs were slowing and hiring was picking up. Instead, claims remain stuck at an elevated level.
The Labor Department said Thursday that initial claims for unemployment aid rose by 20,000 to a seasonally adjusted 457,000 for the week ending Oct. 30. Wall Street analysts polled by Thomson Reuters had expected a smaller rise.
Claims have fluctuated around the 450,000 level all year. They will need to drop below 425,000 to signal sustained job gains.
"Those looking for an imminent spurt of job creation are, for yet another week, likely to be disappointed," said Dan Greenhaus, chief economic strategist at Miller Tabak, in a note to clients.
Read the full article here.
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Faithful mortgage payments may hobble U.S. economy
WASHINGTON -- For almost two years, home foreclosures have swept the nation, spreading misery among once-buoyant families, spattering lenders with red ink and undermining efforts to restart the economy.
But a bigger problem may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst. It`s not that these homeowners will stop making their payments. It`s just the opposite -- that they will keep doing it.
How could that be a source of future trouble? Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending -- a drag on family finances, the housing market and the overall economy.
And the drag could persist for years.
Of the estimated 15 million homeowners underwater, about 7.8 million owed at least 25 percent more than their properties were worth in the first quarter of this year, according to Moody`s Analytics` calculations of Equifax credit records and government data.
More than 4 million borrowers, including 672,000 in California, 424,000 in Florida and 121,000 in Illinois -- three of the biggest real estate markets -- were underwater more than 50 percent. Their average negative equity: a whopping $107,000.
Read the full article here.
WASHINGTON -- For almost two years, home foreclosures have swept the nation, spreading misery among once-buoyant families, spattering lenders with red ink and undermining efforts to restart the economy.
But a bigger problem may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst. It`s not that these homeowners will stop making their payments. It`s just the opposite -- that they will keep doing it.
How could that be a source of future trouble? Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending -- a drag on family finances, the housing market and the overall economy.
And the drag could persist for years.
Of the estimated 15 million homeowners underwater, about 7.8 million owed at least 25 percent more than their properties were worth in the first quarter of this year, according to Moody`s Analytics` calculations of Equifax credit records and government data.
More than 4 million borrowers, including 672,000 in California, 424,000 in Florida and 121,000 in Illinois -- three of the biggest real estate markets -- were underwater more than 50 percent. Their average negative equity: a whopping $107,000.
Read the full article here.
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Jobs returning but slow pace still a concern
NEW YORK — The good news: The United States added 151,000 jobs in October, the first increase since May and more than double the gain economists were anticipating.
The bad news: The country`s overall unemployment rate failed to budge from its stubbornly high 9.6% and nearly 15 million Americans are still out of work.
Friday`s report may be encouraging, but unemployment probably won`t start coming down until at least 200,000 new jobs are created each month. At that pace, the recovery will be a tough slog, lasting years before the level gets down to a more manageable 5%, the rate of "full" employment when most of those willing and able to work have jobs.
"One upbeat employment report does not change the picture that this will be a slow and long-drawn-out recovery," said Nigel Gault, chief U.S. economist with IHS Global Insight. "But [Friday`s] news does further reduce the likelihood of the dreaded "double dip," and as that risk is seen to recede, businesses and households may become more confident to hire and spend."
In Canada, meanwhile, data released yesterd ay showed employment remains on the upswing with 3,000 jobs added last month. While that was considerably fewer than the 15,000 jobs economists anticipated, the underlying figures in the report — including a surge in full-time positions, strong private-sector hiring and a reduction in the overall unemployment rate to 7.9% from 8% in September — show Canada`s job market is recovering.
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NEW YORK — The good news: The United States added 151,000 jobs in October, the first increase since May and more than double the gain economists were anticipating.
The bad news: The country`s overall unemployment rate failed to budge from its stubbornly high 9.6% and nearly 15 million Americans are still out of work.
Friday`s report may be encouraging, but unemployment probably won`t start coming down until at least 200,000 new jobs are created each month. At that pace, the recovery will be a tough slog, lasting years before the level gets down to a more manageable 5%, the rate of "full" employment when most of those willing and able to work have jobs.
"One upbeat employment report does not change the picture that this will be a slow and long-drawn-out recovery," said Nigel Gault, chief U.S. economist with IHS Global Insight. "But [Friday`s] news does further reduce the likelihood of the dreaded "double dip," and as that risk is seen to recede, businesses and households may become more confident to hire and spend."
In Canada, meanwhile, data released yesterd ay showed employment remains on the upswing with 3,000 jobs added last month. While that was considerably fewer than the 15,000 jobs economists anticipated, the underlying figures in the report — including a surge in full-time positions, strong private-sector hiring and a reduction in the overall unemployment rate to 7.9% from 8% in September — show Canada`s job market is recovering.
Read the full article here.
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September pending U.S. home sales fall
WASHINGTON - Pending sales of previously owned U.S. homes fell unexpectedly in September, a report showed on Friday, and activity may remain volatile for months as troubles with foreclosures disrupt the market.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in September, fell 1.8% to 80.9 from an upwardly revised 82.4% in August.
Economists polled by Reuters had expected a 3% rise.
The data reflects home sales contracts, not closings, and is seen as a leading indicator of housing market trends.
"Existing home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead," NAR chief economist Lawrence Yun said in a statement.
Read the full article here.
WASHINGTON - Pending sales of previously owned U.S. homes fell unexpectedly in September, a report showed on Friday, and activity may remain volatile for months as troubles with foreclosures disrupt the market.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in September, fell 1.8% to 80.9 from an upwardly revised 82.4% in August.
Economists polled by Reuters had expected a 3% rise.
The data reflects home sales contracts, not closings, and is seen as a leading indicator of housing market trends.
"Existing home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead," NAR chief economist Lawrence Yun said in a statement.
Read the full article here.
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Geithner says chances of double-dip recession receding
NEW DELHI — U.S. Treasury Secretary Timothy Geithner said Monday that the U.S. economy was starting to pick up and that chances of a "double-dip" recession were lower than at any time in the last 12 months.
"Things are gradually getting stronger in the U.S.," Mr. Geithner told a business audience in New Delhi, where he was accompanying President Barack Obama on an official visit.
"Chances of a double-dip recession look lower than they have been over the last three, six to 12 months," he said. "The risks are diminished.
"The basic tone of the numbers suggest some modest strengthening of growth," he said.
Mr. Geithner`s comments came after U.S. figures earlier in the month showed the country experienced a mini-jobs boom in October, snapping a four-month streak of payroll losses.
Read the full article here.
NEW DELHI — U.S. Treasury Secretary Timothy Geithner said Monday that the U.S. economy was starting to pick up and that chances of a "double-dip" recession were lower than at any time in the last 12 months.
"Things are gradually getting stronger in the U.S.," Mr. Geithner told a business audience in New Delhi, where he was accompanying President Barack Obama on an official visit.
"Chances of a double-dip recession look lower than they have been over the last three, six to 12 months," he said. "The risks are diminished.
"The basic tone of the numbers suggest some modest strengthening of growth," he said.
Mr. Geithner`s comments came after U.S. figures earlier in the month showed the country experienced a mini-jobs boom in October, snapping a four-month streak of payroll losses.
Read the full article here.
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Is QE2 running aground already
A second round of quantitative easing introduced by the U.S. Federal Reserve last week is supposed to keep bond yields low in order to stimulate the economic recovery. Instead, yields are on the rise south of the border, raising questions about the central bank`s latest policy move.
"Bonds are supposedly the mechanism for the Fed to deliver its QE-induced wealth effect," David Rosenberg, chief economist and strategist at Gluskin Sheff said in a note to clients. "If you are [chairman] Ben Bernanke, something is backfiring."
By yesterday`s close, the yield on 10-year U.S. Treasuries climbed 11 basis points to 2.66% and today has risen as high as 2.72%. Meanwhile, the 5-year Treasury soared 13 basis points to 1.25% Tuesday.
Mr. Rosenberg noted that the 10-year yield is now back to where it was when the U.S. Fed first hinted at so-called QE2 in late August and the 5-year is rising even though it is the targeted maturity where the Fed is doing most of its buying.
Read the full article here.
A second round of quantitative easing introduced by the U.S. Federal Reserve last week is supposed to keep bond yields low in order to stimulate the economic recovery. Instead, yields are on the rise south of the border, raising questions about the central bank`s latest policy move.
"Bonds are supposedly the mechanism for the Fed to deliver its QE-induced wealth effect," David Rosenberg, chief economist and strategist at Gluskin Sheff said in a note to clients. "If you are [chairman] Ben Bernanke, something is backfiring."
By yesterday`s close, the yield on 10-year U.S. Treasuries climbed 11 basis points to 2.66% and today has risen as high as 2.72%. Meanwhile, the 5-year Treasury soared 13 basis points to 1.25% Tuesday.
Mr. Rosenberg noted that the 10-year yield is now back to where it was when the U.S. Fed first hinted at so-called QE2 in late August and the 5-year is rising even though it is the targeted maturity where the Fed is doing most of its buying.
Read the full article here.