Doors Floors and More

Cited: Reuters

Last week saw the unexpected rise of unemployment benefits to the highest level since April, highlighting a fragile economic recovery as well as unemployment.

Weekly claims data are volatile and the figures released on Thursday, August 5, by the Labor Department have little bearing on the governments closely watched monthly employment report, due on Friday, August 6, as they fall outside the survey period.

Still, they are indicative of a slow expansion in the labor market which is putting a strain on the economy’s recovery from its longest and deepest downturn since the Great Depression.

“While these numbers are volatile, we haven’t really made progress in the labor market and that’s kind of troubling when you think about the broader economic recovery,” said Andrew Gledhill, an economist at Moody’s Economy.com in West Chester, Pennsylvania.

“For the recovery to turn into a self-sustaining expansion we need people to have wage income coming in and until that happens, we are still in a tenuous position.”

Initial claims for state unemployment benefits rose 19,000 to a seasonally adjusted 479,000, the Labor Department said. That compared to market expectations for a drop to 455,000.

Stocks on Wall Street ended marginally lower amid investor disappointment with the claims data and below forecast sales from U.S. retail stores. Yields on U.S. government debt fell, while the U.S. dollar fell against the Japanese yen.

According to a Reuter’s poll, the U.S. Labor Department is expected to report on Friday August 6, that nonfarm payrolls fell 65,000 last month after declining 125,000 in June, as temporary workers hired to conduct the decennial census were let go.

Private-sector payrolls are seen rising a modest 90,000 and the unemployment rate is expected to climb to 9.6% from 9.5% in June.

THE ECONOMY IS A CAMPAIGN ISSUE

This will be unwelcome news for President Barack Obama, whose popularity has tumbled amid growing unhappiness over the health of the economy, which is the top campaign issue for the November mid-term Congressional elections. Obama, on Thursday, August 5, defended his policies and said the economy still needed more time to heal.

“We’ve gone through a very, very difficult time. Our economy is not yet where it needs to be,” Obama told workers at a Ford assembly plant in Chicago. “It’s going to take more time to heal from all the damage that was done. We are headed in the right direction.”

The sluggish pace of economic growth threatens to keep unemployment high for months, posing trouble for Democrats hoping to retain their Congressional majorities.

Economic growth slowed to a 2.4% annual rate in the second quarter after expanding at a 3.7% pace in the first three months of this year.

After falling rapidly in 2009, jobless claims have stalled this year and have leveled out in the 400,000 to 450,000 range that analysts say is normally associated with jobs growth.

“The rise in initial claims is a disturbing sign that hiring remains depressed,” wrote economists at Goldman Sachs.

The four-week average of new jobless claims, considered a better measure of underlying labor market trends, rose 5,250 to 458,500.

Stubbornly high unemployment is causing households to become more frugal, forcing retailers to slash prices in a bid to attract shoppers.

Of U.S. retailers tracked by Thomson Reuters, 28 reported a 2.9% rise in July sales at stores open at least one year, missing Wall Street forecasts of 3.1%. Of those, 17 reported lower-than-expected sales, while nine beat estimates.

While the number of people still receiving unemployment benefits after an initial week of aid fell 34,000 to 4.54 million in the week ended July 24, it was likely a reflection of people dropping off benefits rolls rather than finding jobs.

The number of people on emergency benefits increased to 3.31 million in the week ended July 17. Congress last month restored aid to about 2.5 million unemployed Americans, whose benefits had lapsed in May. The benefits, which were extended until November, were renewed retroactively to June 2.

An economist at BNP Paribas in New York, Yelena Shulyatyeva said, “We are likely to see some pick up in the number of extended and emergency claims in the short term, and however, there are still large numbers of people who are reaching the maximum 99 weeks of benefits.”

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My Take: I think they should call this the 2nd Great Depression instead of bouncing around with the words “economic recession”. There are many good things to consider about this rough period of financial problems. Babies are still being born and expectant mothers are still sending out baby shower invitations. Teenagers are still anxiously waiting the time they can get their driver’s license, which means they will be going to academy driving school in NY to learn the proper way to drive.

People are still having birthdays, which mean they are sending out party invitations. People are changing their careers to truck drivers, and this means they need to go to a truck driving school in NY. And businesses are still looking after their employees by purchasing safety equipment like platform trucks and safety cabinets. They might even be reducing their workbenches for their factories.

What I am trying to get at is that things are still going along as they should, albeit, things do cost more right now. The worst thing of all this is that even when things start to get better, the prices will not go back down! That is the worst part of this whole recession. The companies raise their prices to make up for losses and when things get back to an even keel, they keep the same prices. It would be nice if they lowered their prices again, that’s a laugh!

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Cited: Reuters/The Economist

On August 9, San Francisco Federal Reserve Bank researchers said there is a good chance that the economy will slip back into a recession sometime in the next 2 years, but it is unlikely to happen in the next few months. That means that over the next 8 teen-24 months the probability of another recession is higher than that of expansion according to the researchers in the latest issue of the regional Fed banks Economic Letter.

Concern has risen in recent months that the United States might be headed for a ‘double-dip’ recession as measures of consumer spending and confidence have dropped and private company hiring has fallen short of expectations.

The soft economic data will be top of mind tomorrow when members of the Fed’s monetary policy-setting committee meet. Recent comments from Fed officials signal strong disagreement over whether the Fed — the U.S. central bank — should move to offer further support to the economy than it already has.

The researchers — Travis Berge, a graduate student at the University of California, Davis, and Oscar Jorda, a professor there as well as a visiting scholar at the San Francisco Fed — used leading economic indicators to try to predict the possibility of a renewed economic downturn.

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The experiment yielded vastly different results, depending on which indicators were used. But overall, they said, the numbers “indicate that the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer.”

“Of course, economic policy can strongly influence the outcome,” the researchers said. “The policies that are adopted today could play a decisive role in shaping the pace of growth.”

Any forecast 24 months into the future is very uncertain. At two years out, the odds of recession vary from almost three times more likely than expansion, to expansion being almost five times more likely than recession, depending on which LEI components are used. Nevertheless, LEI forecast trends indicate that the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer, even if the data suggest that a renewed recession is unlikely over the next several months. Of course, economic policy can strongly influence the outcome. The policies that are adopted today could play a decisive role in shaping the pace of growth.

This is the “animal spirits” aspect of business activity. An economy is the product of billions of aggregated decisions, and all those decisions are made based on beliefs about what everyone else is going to do. And the recursive nature of this process means that multiple equilibria are possible. And the goal of policy is to keep the economy out of bad equilibrium. And what much of that comes down to is expectations management.

The double-dip question is do we believe policymakers can manage expectations in a way to keep the likelihood of a recession return and low level? If you have a sick feeling in your stomach when you hear this question, you are not alone.

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My Take: I would like to know who said we were out of recession! There are still too many people without jobs, too many people losing their homes to foreclosure and prices are still going sky-high. The ones who can tell this the most are the smokers. Thanks to so much legislation and taxes people who smoke really can’t afford it anymore. Some still manage to purchase their cigarettes and pay their bills. Others find it difficult and resort to other methods. That other method is the electronic cigarette. Electronic cigarettes are not only cheaper, they are better for your health because they don’t have any of the carcinogens.

Of course, the FDA has reserved their opinion until further testing can be done. In the meantime, smokers breathe easier, in more ways than one, because of the E-Cig or e cigarette, as it is sometimes called. It would be nice if there were alternatives for other things that people need that were cheaper.

It is really bad when you’ve noticed that parents are unable to get the formal dresses for their daughter’s prom date for the tuxedos for their son’s prom date. It’s even worse when a father can afford to buy his daughter’s bridesmaid’s dresses. Things are better start changing quick printers might be another revolution in this country.

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Other Resources

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