Strong Exports Lift Agriculture, A Bright spot in U.S Economy

Even during the time of recession, one sector that is boosting the U.S economy is the Agriculture. With countries like Canada, Mexico, and China on its top export list, U.S will have exported $107.5 billion in agricultural products by the end of the fiscal year. The major reason for the growth in the export has been the reduction of supply in the international agriculture market, which has also caused the prices of the agricultural goods to shoot up. Interestingly, the article also states that prices for agricultural goods will only increase moderately as the the farmer's value added is only a small amount compared to the final price of the goods produced.

What's after the Jobs report?

The forecast for US private jobs gains is actually higher than expected, reducing the pressure put on Federal Reserve policy makers to add monetary stimulus this month. It means that they do not have to save up for a move later on this year. As reflected on the report done by Labor Department in Washington, private payrolls climbed 67000 in August after a revised 107000 increase in July that was more than initially estimated.

In addition, public opinion polls show jobs and the economy are top concerns among voters two months before November congressional elections in which the Democrats are at risk of losing their majorities in the House of Representatives and the Senate. Amongst those, a poll done by the USA Today/ Gallup Poll on August 30th found that Americans believe Republicans in Congress would do a better job on the economy that Democrats by 49 to 38 percent. More over, the Bloomberg News survey pointed a decrease of 54000 in employment for a second month as the government fired census workers. At the same time, the unemployment rate rose to 9.6 percent from 9.5 percent as more people joined the labor force. This maybe a good sight when people constantly seeking for jobs, however, they maybe just being active in order to stay being unemployed and taking advantage of unemployment benefits.

The report reduces the odds of a relapse into a recession while also reinforcing the view of Fed policy makers that the economy is recovering more slowly than they would like. This is totally contradicting to previous analysis just two days ago over the new about the chance of avoiding a second relapse of recession. The Federal Open Market Committee may still consider a second round of large-scale purchases of securities, a strategy known as quantitative easing, this year.

Recession? What Recession? Good Times Roll On at the U.S. Open

United States Open generates 120 million dollars in TR- 80% of the U.S.T.A.'s revenue. The US Open is booming while all other US Sports teams are loosing out due to the recession.

Back to school sales get an A

One the biggest problems during this recession was the fall in consumption. The figures for August though seem to be more encouraging. Thomson Reuters tracked store sales for a group of 28 national chains. He said that sales in August for this group rose up 3.3%; a much better number than the 2.5% forcasted one. Here we have to consider that Retailers same-store sales declined 2.9% for the same month a year ago. The stores that hit the jack-pot were clothing and department stores.

Limited Brands (LTD, Fortune 500), parent of Victoria's Secret and Bath & Body Works chains, posted a 10% surge in sales last month, trouncing analysts' estimates for a 7.3% increase.

Sales at Abercrombie & Fitch (ANF) jumped 6% in the month, beating estimates for a gain of 5.7%.

Trendy clothing chain Wet Seal reported a 1.1% sales gain versus estimates for a 3.5% decline.

Second quarter economy slows

The original estimates of 2.4% growth were lowered to 1.6% during the second quarter. Also sales of both new and old homes were the lowest of the decade. This news makes many worried about creation of new Jobs. With unemployment at a level of nearly 10%, economist fear that these low numbers could put fear into employers and cause them to hold back on hiring new employees. However, chairman of the federal Reserve, Ben Bernanke expects that the economy will continue to grow. He expects this growth to be slow and overtime.

Afghanistan Economics

Well, it looks like Afghanistan is going to have its' first economic crisis. The main major bank, the Kabul Bank invested heavily into real estate in Dubai. With the collapse of the real estate market worldwide, the Kabul Bank is not unstable. The Afghan government has asked the United States Treasury Department in order to help shore up the Kabul Bank. The government owned Central Bank is thinking of doing an American style bail out.

After Bargains of Recession, Air Fares Soar

During recent months, all air fares have increased a lot, even the economy has improved and demand has picked up. For leisure travelers, domestic fares increased by more than 20 percent; international fares increased by 30 percent. For business travelers, prices increased by 12 percent. Airlines use many ways to increase ticket prices: reduce the number of seats they offer; find a variety of new services worthy of a fee; charge for items they once provided for free, etc.. Experts expect prices will continue to increase in coming months because of year-end holidays. The past low point of industry put big pressure on the airlines: consumers cut back on air travel spending and airlines struggled with high energy prices at the same time. But now, airlines is turning small recovery into big profits, and those methods do improve fortune to airlines.

Fed Reserve Chairman attacks government regulators

Federal Reserve Chairman Ben Bernanke attacked governemnt regulators in the second day of hearings held by the Financial Crisis Inquiry Commission. The job of the commission is to chronicle why the current financial crisis occured, and what the government's response was. Bernanke blamed government regulators for not using their powers "forcefully or effectively" to halt risky financial practices by large wall street firms and banks. The chairman also said that the United States government must be prepared to heavily regulate or shut down Americas largest firms if they pose a significant risk to the market. This power was given to regulators earlier this summer when Obama signed the new financial reforms. Bernanke closed his testimony with a warning that firms that are considered "too big to fail" must be fixed so that what happened to several large investment firms at the beginning of the current recession wont be repeated.

Dow back in the black for 2010

The Dow Jones industrial average recovered 142 points friday to finish at 10,448. This is approximately .2% higher than the market when it closed December 31, of last year. The economy lagged in the beginning of 2010 due to fears of a double dip recession and a lack of consumer confidence. The recovery is attributed to data that showed an improvement in manufacturing. The jobs report that released Thursday also helped the surge in stocks as companies reported fewer job cuts than expected. However, with many traders on vacation for labor day weekend, it is unclear what effect these reports will have on the market in the following weeks. Investors are also concerned about short term growth in the US economy, and continuing debt problems in Europe which could disrupt the economic recovery.

Government to Deploy Broader Mortgage Aid

The Obama administration is making great efforts in reducing mortgage balances for homeowners who owe more than the value of their houses. About 500,000 and 1.5 million underwater loans could be modified through the program. Those who are still on mortgage payments but have no equity in their homes will be put on priority.

In this program, banks and other creditors that write down mortgages to less than the value of the property can essentially hand off the reduced loan to the government. The process involves refinancing borrowers into loans backed by the Federal Housing Administration.

While the program puts taxpayers at risk—officials estimate one in five loans in the program could default—the government has set aside $14 billion previously earmarked for housing aid from the Troubled Asset Relief Program to cover losses.

However, half of the 1.3 million borrowers that enrolled in temporary loan modifications have fallen out of HAMP because they didn't qualify. Only one-third has received permanent modifications.One of the biggest dangers facing the housing market is the glut of underwater homeowners who could default if their personal finances or home prices worsen.

But not every homeowner who is underwater can participate. The bank or investors that own the loan must be willing to write down its value. For more than a year, many of those investors, which include hedge funds and pension funds, have been clamoring for such a program because they have already had to mark down the value of their holdings.

But that could be hard to do because mortgage servicers, which handle loan payments and decide which loans should be modified, are overwhelmed. And some borrowers might be discouraged from taking part because receiving a principal reduction will show up on their credit score.

Moreover, investors may not be able to participate as hoped because certain contracts that govern mortgage securitizations say modifications can only proceed if there is an "imminent" risk that the borrower would default.

Foreclosures and Crime, Society's Well-Being

This past week, I began an internship with the Delaware Court of Common Pleas. It was astonishing to me that on the first day the Administrative Secretary I am working with showed me a newly published report concerning Delaware County population growth rates as well as foreclosure rates. Delaware County is now the fastest growing county in all of Ohio and, not surprisingly, Delaware foreclosure rates continue to climb. However, the rates are no where near that of other counties in Ohio. Why is this significant? The Court of Common Pleas needs to be aware of things like foreclosure rates for the real estate cases that come to its' magistrates but also for purposes of tracking and interpreting rise in crime.

One comment from the University of Texas (linked), noted that studies have found that while there seems to be a correlation between crime and foreclosure rates, it is more casual and not a cause and effect relationship. On one hand, foreclosed and unoccupied homes do lead to an increase in crimes like burglary but on the other hand the relationship can be explained by recognizing the unstable communities, with high rates of foreclosure, in which the economy or general disorganization begin to cause a decrease in the level of social control a local government and its' police may have. The comment suggested that when foreclosure rates in a community change rapidly, it is likely to lead to lack of social control.

As noted in class, unemployment rates are also compared to crime rates to show the effects macroeconomics have on the well-being of the general population.

Obama promises new jobs initiative, slams GOP

This month the number of jobless Americans has increased from 9.5% to 9.6%. 54,000 jobs were lost last month. However, the loss of jobs can be attributed to government cuts of temporary census workers. Private businesses, on the other hand, added 67,000 new jobs to the economy. President Obama expressed frustration with the Republican party for blocking small business aid legislation that would help increase bank loans to private businesses. This legislation would also provide tax cuts to small businesses that bought new equipment and hired unemployed workers.

Republicans combated Presidents Obama's announcement saying that $30 billion dollar legislation was too costly and Obama's "Recovery Summer" ended where it started with little economic improvement. Republicans argue that Obama's actions have had little economic improvement while adding to national debt.

Obama later stated that the economy is moving in a positive direction. He added, "...We just have to speed it up."

Obama to Announce New Economic Measures

President Obama hailed the addition of 67,000 jobs by the private sector in August as a sign that the economy is moving in a positive direction, despite a net loss of 54,000 jobs due to mostly government layoffs. Obama will reveal new economic proposals next week, and has scheduled a press conference on Friday. Pressure to decrease unemployment continues to rise for Obama as the midterm elections loom. The Republicans stand to gain congressional seats by blaming Obama for the slow economic recovery, and are accusing him of defending "failed policies." It is ironic that Republicans blame Obama for failed policies when they are the ones who have obstructed many of Obama's proposals involving increased government spending to stimulate the economy. With this in mind, Obama is encouraging Congress to pass a small business jobs bill when it returns from recess. Since Republicans use concern for the deficit as justification for attempting to sabotage Obama's recovery plan, Obama is explicit that the small business jobs bill is already paid for, so it will not add to the deficit.

August US job losses less than expected, double-dip recession not so likely

Fears of a double-dip recession have been mitigated by recent employment data. For instance, the number of job losses reported for August 2010 fell to 54000—the minimum over the past three months. Euronews attributes the increase in the unemployment rate from 9.5% in June and July 2010 to 9.6% in August to an increase in the labor force, that is, previously discouraged workers are now seeking jobs.

The report also points out that the employment rate in the private sector, which is a better way of assessing the performance of the labor market has increased by 67000. On the other hand, the revised payrolls for the government sector indicate that there are actually 123000 fewer jobs that have been lost.

Jobless claims decline, but not enough

The number of first-time filers for unemployment insurance fell for a second straight week last week, but the level suggests that the labor market remains sluggish.

There were 472,000 initial jobless claims filed in the week ended Aug. 28, down 6,000 from an upwardly revised 478,000 the previous week, according to the Labor Department's weekly report. Economists surveyed by Briefing.com were expecting 475,000 new claims.

The 4-week moving average of initial claims -- a number that tries to smooth out week-to-week volatility -- was 485,500, down 2,500 from the previous week.

Claims have been stuck in the mid- to upper-400,000 range for about nine months, though last month they spiked above 500,000 for the first time since November, before edging lower again.

"This report is a step in the right direction, but this range is not where we want to stay," said Robert Dye, senior economist at PNC Financial Services. "Labor market conditions are stabilizing, but we're not generating as many jobs as we would like to since economic activity has stalled."

Last week, the government said the economy sputtered to a near stop in the second quarter, growing at an annual rate of 1.6% during the period.

Dye expects economic growth to remain stagnant during the third quarter, but begin to pick up toward the end of the year and into 2011.

Strongest Jobs Recovery in Decades?

As compared to the last 2 U.S. recessions (1990-91 and 2001), sustained job growth actually returned faster. Unfortunately, the recent recession was so severe that even though job losses ended quicker, job growth has been at a far lesser rate than in previous recessions. Even though unemployment peaked in October 2009 at 10.1%, it has only dropped to 9.5% since. The improvement of the stock market, banks, and big businesses during a period of almost stagnant job growth has created the perception of a "jobless recovery," which is damaging to a government that from some economists' perspectives interfered too much in the private sector in attempt to restart the economy and from other economists' perspective didn't spend enough stimulus money to make the desired impact. The article gives hope that businesses will increase their hiring in the Fall as the holiday season approaches, but some economists are warning that another stimulus may be needed to prevent more job losses, which could lead to a double-dip recession.

Workers Decrease Productivity in Hard Times

The American work force has been hit hard by layoffs the over the last 2 years, companies have demanded more out of there employee's. American workers had increased there productivity at the beginning of the recession as workers were laid off, in 2009 productivity rose 3.5 percent. But with the most recent report from the labor department stated that productivity dropped at an annual rate of 1.8 percent, this means firms will need to reevaluate there strategies to increase output. Overall with the fall in productivity companies will need to restart hiring or investment to increase output.

Economic Benefits of Hurricanes

With Earl churning toward the eastern seaboard, let us stop and ponder the effect that a hurricane has on a local economy. In the short run, the economy is destroyed and most capital is ruined. However, the removal of older capital can actually help the economy in the long run. After Katrina, the reconstruction effort generated new jobs and stimulated the local economy. Older gas and oil lines were fixed and facilities were expanded.

Bush Tax Cuts

The Bush tax cuts are set to expire at the end of this year. These cuts " lowered income and investment tax rates, boosted the child credit, reduced the estate tax, and narrowed inequalities affecting married taxpayers." If the tax cuts are extended it will add an additional 2.2 trillion dollars to the federal deficit. Obama suggests extending the tax cuts to families who bring in less than 250,000 dollars a year, which will reduce the deficit by 678 billion dollars from what it would be if all families were given the tax break. No recommendations on this matter will be released until December 1 and it is unclear at this time what will happen. However, at some point the taxes will have to rise again because of the deficit. Merely taxing the top 3% of the population will not eliminate the federal deficit.

Monetary Fund Warns G-7 on Debt Levels

The IMF warned on Wednesday that the G7 economies have little room to move after the "record levels of debt" they faced in 2008/2009. However, they also stated that Greece, Italy and Portugal's risk of default "had been significantly overestimated." A fear of this is that it could “trigger an increase in interest rates that would drive a formerly sustainable country into a situation of unsustainability.” The IMF thinks a way to fix the financial pressures is not to respond in a quick and drastic manner but to "downsize" the role of the government except when it comes to dealing with provisions of basic goods and services and when it comes to giving equal opportunities. The low interest rates among the G7 has done a good job in keeping debt payments low, and also has allowed a window of opportunity to start an adjustment process.

Strongest jobs recovery in decades. Seriously

Avoiding Recession Relapse!

The US economy is already so bad that it has a good chance to avoid a double dip back into recession.

According to Ethan Harris, the head of developed markets economic research at BofA Merrill Lynch Global Research in New York, many sectors of the economy that traditionally drive it into recession are already so depressed - not devastated - that it is so difficult to see them getting any worse. Since the beginnings of the Great Recession, manufacturing firms have started to cut their production and just retain a low level of inventories. At this point, inventories are near record lows in proportion to sales. In addition, in other sectors such as housing, residential construction is less than half the level of the housing boom and there is a decrease of more than 40 percent of vehicle sales below 5 years ago. Regarding all of that, Ethan Harris said in his report that the possibility the economy lapsing into another contraction during the next year is around 25 percent. Although the economy may not get worsen, it does not mean that we are getting better since it is just less likely for a contraction during next year.

Add to that, the Federal Reserve also agreed that a renewed contraction is unlikely despite the risks have also risen. "I expect the economy to continues to expand in the half of this year, albeit at a relatively modest pace," said Fed Chairman Ben S.Bernanke in an Aug 27th speech.

On September 2nd (Bloomberd) - Paul Donovan, deputy head of global economics at UBS AG talks about the outlook for the US economy and Federal Reserve monetary policy.

Unemployment claims drop for second straight week

WASHINGTON (AP) -- The number of people requesting unemployment benefits declined for the second straight week, suggesting that the slowing economy isn't prompting widespread job cuts. New claims for unemployment aid fell last week by 6,000 to a seasonally adjusted 472,000, the Labor Department said Thursday. Economists had expected a slight increase, according to a survey by Thomson Reuters.The four-week average of claims, a less-volatile measure, fell by 2,500 to 485,500, its first decrease after four straight increases.

Jobs: 'Stopped firing, not yet hiring'

The jobs picture still looks sour, but there could be light at the end of the tunnel.

The bad news: The private sector slashed more jobs than expected in August, reversing a sixth-month trend of job gains. The good news: Overall employers announced fewer planned job cuts.

Private sector employers cut 10,000 jobs in August -- a drop from the downwardly revised 37,000 jobs they added the month before, according to a report by payroll processing firm Automatic Data Processing.

Those cuts were worse than predicted. Economists polled by Briefing.com had expected the report to show 13,000 jobs added in August.

While jobs statistics are often a volatile measure, the drop is still enough to "heighten fears about a double-dip recession," Paul Ashworth, senior U.S. economist with Capital Economics said in a note to investors.

Consumer Spending in U.S. Tops Forecast, Incomes Lag

Consumer purchases in July rose .4 percent; this was a larger growth than was initially forecasted by many analysts. This serves as a positive indicator for the future of our economy which is currently in shambles. Obviously, more purchases means that their is more money being injected into the market which hopefully foreshadows that the economy should avoid slipping back into a recession.
However, a counteractive force to the positive news of the consumer spending growth was the finding that disposable income has actually gone down this past month. Theoretically, this means that people will likely be spending less this coming month. Allow me to clarify that although actual income increased due many workers working more hours, disposable income dipped due to the fact that inflation has increased.
I'd love to entertain any ideas as to what people forecast will happen in the coming month. Will people continue to increase their spending habits or will the economy once again slow due to the drop in disposable income?

Weak auto sales for August amid economic worries

This was the worst August since 1983 for car sales in America. The four giants General Motors, Toyota, Ford, and Honda all reported a decline in sales from this August, and the year before. Although with the success of the Government's cash for clunkers program last year, this August was not expected to be similar in sales numbers; however, consumers are still fearful of the slow economy, and similarly, the automakers are not offering consumer incentives.

Without incentives, the consumers are less likely to purchase cars in the United States, but automakers are confident that once consumers see that those incentives will never return, sales will actually increase again. Meanwhile, foreign markets carry the burden of making profits for these car companies while the United States car market remains dormant.

Manufacturing Growth Speeds Up

Growth in manufacturing activity accelerated last month in both the U.S. and China, defying mounting signs of a global slowdown and cheering investors. The Institute for Supply Management, which surveys U.S. purchasing managers, said Wednesday its manufacturing index rose to 56.3 in August from 55.5 the prior month. A parallel index in China clicked up to 51.7 from 51.2 in the same period, while indexes in Europe slid. Any reading over 50 indicates expansion.

FED minutes show division on right course of action for economy

At the most recent Federal Reserve Meeting, members of the organization demonstrated division over the right course of action for our struggling economy. The predominant view is for the FED to continue to bolster the US economy through investing in US treasuries; thus, keeping money pumping into our frail economy. However, some members of the Reserve expressed concern that continuing to invest into US treasuries will spur inflation and set a precedent of too much government intervention. Despite this division, the FED voted in favor of investing in more US treasuries with a nine to one vote – Kansas City FED President Thomas Hoenig being the only hold-out. In addition, the FED seems to be willing to do even more to help spur the economy upward, with some suggesting that a second, further-reaching stimulus is needed.

Consumer spending picks up

Although the consumer spending increased in the month of July, it is not a large enough increase to suggest consumer confidence has been regained in the market. As the article states, the increase was "modest". While this does reflect the direction in which we hope the consumer spending will grow, it does not necessarily mean it will continue. The savings rate decreased, however it still remains at a historical high suggesting that consumers are still not fully confident about the recovery of the economy.

Textbooks on a budget.

Students are now taking courses based on course materials they can afford. For those whose parents are writing tuition checks and covering living expenses, college textbooks might not seem like a big expense. But for students who are working to pay for tuition, books are part of a limited budget.

Iraq 'independent' as the US combat operation ends

According to the Prime Minister of Iraq, the country is finally independent as the last of the US combat operations formally leave Iraq. However, many citizens say that they will not consider Iraq independent until and unless all American troops have left the country and Iraq is able to fend for themselves.
At this point, they also believe that Iraq is not ready for complete independence firstly because they do not yet have a government formed nor do they have a complete air force among other military groups.
So what makes up Iraq's government and will it survive with most of government spending focused on building the countries 'core'?

Tax Reform: These Small Steps Could Help Deficit, Economy

As the Bush administration’s tax cuts near the Dec. 31, 2010 end, the Obama administration looks for ways to keep many of the cuts in place, excluding cuts for individuals making more than $200,000 a year. Throughout history, taxation has faced four major overhauls, all around times of financial crisis (the Civil War, World War I, the Great Depression, and World War II). According to Joseph J. Thorndike, tax reformation tends to occur when the tax code can’t keep-up with demands. Today, the tax code has proven to be insufficient for our economy’s needs. A tax overhaul plan isn’t expected until after mid-term elections and after Obama’s bipartisan deficit commission report on Dec. 1. This plan may prove essential to securing the US’s long-term stability.

Global Markets Fall as Investors are Braced for Poor US Economic Results

Poor employment figures and the state of manufacturing have foreign markets concerned that the US will face a second recession. Results of this fear are causing financial markets around the globe to fall. Investors expect this Friday’s report to indicate that 110,000 non-farm jobs were lost in August. This may pressure Ben Bernanke into extending the stimulus plan. However, the fund manager argues that the problem is not liquidity in the banking system but demand. The American public is still skeptical and until that passes and demand increases, stimulus money may not help. Ultimately, weak employment numbers may determine the Fed’s decision regarding additional stimulus money.

Credit is finally available, but no one wants it.

Banks are now providing more credit facilities to individuals and small businesses. However, the demand for credit is not increasing as fast as we would have expected. People are more focused on saving than on taking loans.

'Bush-ama' tax cuts: The $2.2 trillion decision

'Bush-ama' tax cuts: The $2.2 trillion decision

Monetary Fund Warns of Debt Levels

A paper directed at the G7 economies warns that increasing debt levels are not something to be ignored. The authors, Carlo Cottarelli and Andrea Schaechter further warn that as populations age, they will face more and more pressure from mounting debt. However, while they do say reform is necessary, it should not be too swift. They say government as a whole must shrink, but it must still play roles in areas of basic services and " in particular in maintaining a level playing field by giving equal opportunities to all individuals regardless of their conditions at birth."
Another paper, by Jonathan Ostry, states that different countries naturally have different levels of debt they can absorb before reaching an unsustainable level of debt. He warns that countries with lower levels, like Japan, need more immediate reform from their traditional practices.
However, another paper says defaulting on debts is “unnecessary, undesirable and unlikely." This paper says that defaults will not help in the long-term with debt, because the structural causes of these debts and deficits are the real problems, not the interest payments.
This article from the New York Times presents a short summary of three separate papers on debt and deficits that go beyond saying "debt is bad" and actually suggest realistic ramifications, future possibilities, and suggest courses of action to take and to avoid. It's not a long read and I thought the part at the end about defaults being a terrible option was particularly interesting. If anyone is interested more in the governmental and international relationship sides of economics, this is a good article to read.

Global Recovery is likely to stay on track, according to bankers

Fed officials are consumed by a debate about whether they should do more to support growth and to prevent already-low inflation from falling further. The top option—laid out by Fed Chairman Ben Bernanke in a speech Friday—would be to resume buying long-term bonds to drive long-term interest rates down more. The Fed already has purchased $1.7 trillion worth of government bonds and mortgage debt and long-term rates are at their lowest levels in decades.

Most others at Jackson Hole endorsed Mr. Bernanke's view that the U.S. economy would resume moderate growth in 2011 after a sluggish second half of this year. "The most likely outcome is that the world is on track for a moderate recovery," said John Lipsky, the IMF's deputy managing director. The IMF expects to make only minor adjustments to its forecast, currently being reviewed ahead of IMF meetings in early October. "We had always anticipated there would be somewhat of a slowdown in the second half," he said. "Emerging markets are, if anything, stronger than we had anticipated and the latest data out of Europe is better."