Report: Job Outlook Brightens to Start New Year

The job market is looking a little brighter at the start of the new year.

The Associated Press reported that weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Holiday sales were solid. Service companies grew a little faster in December. And many small businesses say they plan to add jobs over the next three months.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

The mostly positive reports had little impact on financial markets. Traders seemed more focused on the debt crisis in Europe, which could slow U.S. growth later this year. The Dow Jones industrial average dropped 37 points in midday trading. Broader indexes were mixed.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday. That’s 11% lower than the same time last year.

The four-week average, which smooths fluctuations, fell to 373,250 — the lowest level since June 2008.

When applications drop below 375,000 — consistently — they generally signal that hiring is strong enough to reduce the unemployment rate.

 

USA Today: Banks Resuming Business Lending

Banks are lending again.

USA Today reported that after three years of Scrooge-like underwriting following 2008′s financial crisis, banks have turned on the spigot, boosting lending at annual rates as high as 8.2% since July, according to Federal Reserve statistics.

Lending had fallen from mid-2008 through this year’s second quarter, deepening what became the worst recession since the Great Depression. The data seem to allay fears that making banks keep more capital on their books as a cushion against future downturns and loan losses will take away the cash flow businesses need to keep the recovery moving.

Among the reasons: The economy is improving, while smaller banks have positioned themselves to pick up slack left as bigger banks remain cautious, says Stuart Hoffman, chief economist at Pittsburgh-based PNC Financial. The most bullish part of the upturn is that it occurred when banks knew the Fed was preparing for last week’s preliminary announcement of tougher new capital standards, he says.

“What the Fed did was well-advertised,” Hoffman says. “As for any sudden negative effect on lending, that’s not going to happen.”

The sharpest improvement has come in business lending, raising hopes that it can spur increased capital investment, the seed corn of business expansions. Commercial and industrial loans grew at an annualized pace of more than 20% in August and more than 15% in October, the best growth since early 2008. In between, commercial lending dropped 19% in 2009 and an additional 9% last year.

Even small businesses have seen a difference, says Bill Dunkelberg, chief economist of the National Federation of Independent Business. In a monthly NFIB survey, only 3% of small-business owners say lack of credit is their most important problem, trailing taxes, regulation and still-sluggish demand.

The last one especially is making entrepreneurs wary of borrowing, he says: Only 12% think business will be better in six months than it is now.

USA Today reported that amall businesses are also missing out on the cheap money that homeowners are seeing, he says, with commercial loan rates above 6%.

“Two-thirds of business owners say, ‘Who wants a loan?’ ” says Dunkelberg, who is also chairman of a small Pennsylvania bank. “In thirty years, I’ve never seen anything like it. The banks all have money to lend, but there’s a shortage of eligible customers coming in.”

Low Jobless Filings May Indicate U.S. Growth

The fewest workers in three years filed claims for U.S. jobless benefits last week, indicating the world’s largest economy is strengthening heading into 2012.

Bloomberg reported that the number of applications for unemployment payments dropped by 19,000 to 366,000 in the week ended Dec. 10, less than the lowest forecast of economists surveyed by Bloomberg News and the least since May 2008, according to Labor Department figures issued today in Washington. Other reports showed manufacturing accelerated this month after pausing in November.

“The U.S. economy, unlike the rest of the world, is gathering momentum as we head toward year-end,” said Eric Green, chief market economist at TD Securities Inc. in New York. “The labor market is improving sharply,” he said, and “we look for gains in industrial production.”

A reduction in firings may pave the way for an increase in employment that will help spur consumer spending, which accounts for about 70% of the economy. Lean inventories and growing demand may probably spark gains in production that will keep factories at the forefront of the expansion.

 

Federal Reserve Holds Off on Further Stimulus

The Federal Reserve is holding off on any new actions to help the economy because stronger growth is giving it time to gauge the impact of steps it’s already taken. The Associated Press reported that Fed policymakers made the announcement after a two-day meeting.

In a statement released Wednesday, the officials said the economy has strengthened and consumers have stepped up spending. But they said the economy continues to face significant downside risks, including strain in global financial markets — a reference to the crisis in Europe.

The Fed left open the possibility of taking further steps later to try to boost the sluggish economy. But it gave no hint as to what those moves might be.

The vote was 9-1. Charles Evans, the president of the Chicago Federal Reserve Bank, dissented. The statement said he wanted to take stronger action.

After their September meeting, the policymakers said they would shuffle the Fed’s investment portfolio to try to further reduce long-term interest rates. And in their previous meeting in August, they had said they plan to keep short-term rates near zero until at least mid-2013, unless the economy improved.

The Fed repeated the mid-2013 target in its statement Wednesday, and also said it was continuing its program to rebalance its portfolio to try to lower long-term rates.

The Fed has kept its key short-term interest rate at a record low since December 2008. This is the rate that banks charge on overnight loans. It serves as the benchmark for millions of business and consumer loans.

Later today, the Fed will also release its economic forecasts and Chairman Ben Bernanke will hold a news conference.

The debt crisis in Europe could force the Fed to lower its economic projections. The Greek prime minister’s surprise move to call a referendum on the country’s latest rescue plan sparked fears that the debt deal could unravel, that Greece could default on its debt and that the crisis could infect the global financial system.

Even if Europe dodges a financial catastrophe, many economists think it’s headed for a recession that would affect the U.S. and global economies. The Fed expressed such concerns after its August meeting.

Still, the Fed remains deeply divided over what, if any, action to take next. The actions taken in August and September were adopted on 7-3 votes, the most dissents in nearly 20 years.

 

Report: Economy Shows Modest Growth in 3Q

A summer of modest economic growth is helping dispel lingering fears that another recession might be near. Whether the strength can be sustained, though, is far from clear.

The Associated Press reported that buoyed by a resurgent consumer and strong business investment, the economy expanded at an annual rate of 2.5% in the July-September quarter, the government said Thursday (Oct. 27).

The expansion, the strongest quarterly growth in a year, came as a relief after anemic growth in the first half of the year and weeks of wild stock market shifts.

The economy must grow at nearly double the third-quarter pace to lower high unemployment, which has been near 9% for the more than two years since the recession officially ended.

And though consumer spending was triple the level of the second quarter, Americans earned less, on an inflation-adjusted basis, in the July-September period. That meant that many people financed their spending binges by cutting back on savings. Few economists think that can continue.

Economists believe that growth in consumer spending, which accounts for about 70% of economic activity, will be restrained until incomes start growing at healthier levels. That is unlikely until hiring picks up.

Paul Ashworth, chief U.S. economist for Capital Economics, predicts that growth will cool off in the fourth quarter and next year.

Nonetheless, the report on U.S. gross domestic product, or GDP, sketched a more optimistic picture for an economy that only two months ago seemed destined for another recession.

And it was delivered on the same day that European leaders announced a deal in which banks would take 50% losses on Greek debt and raise new capital to protect against defaults on sovereign debt. Stocks surged on the European deal and maintained their gains after the report on U.S. growth was released.

“This has been a morning of encouraging news,” said Jennifer Lee, a senior economist for BMO Capital Markets. “The fourth quarter may see some pullback in U.S. economic growth … but the positive details underlying the GDP report should help ease fears of a U.S. recession..somewhat.”

 

Report: Pump Prices Heading for 8-Month Low

Gasoline is tumbling to an eight- month low as reduced U.S. growth causes pump prices to follow crude oil’s decline after lagging behind since April.

Prices may drop 20 cents to $3.19 a gallon by early November, according to the median estimate of eight analysts in a survey by Bloomberg News. Gasoline has fallen 15% from this year’s high of $3.985 on May 4, according to Heathrow, Florida-based AAA, the largest U.S. motoring organization. West Texas Intermediate oil, the most-traded U.S. crude grade, retreated about 30% over the same period.

“The worry that the economy could slip back into a recession is putting pressure on oil prices, and prices at the pump are coming off,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, an oil-industry researcher and former trader for Vitol Group, the world’s biggest independent oil trader, said in a telephone interview on Oct. 4.

Oil Prices Crude oil for November delivery traded today as low as $81.79 on the New York Mercantile Exchange, down from its 2011 peak of $113.93 reached on April 29. Pump prices have dropped to $3.39 a gallon from the high in May, according to AAA data.

“Gasoline prices are going to bottom out pretty soon and it will be supply-driven,” Sander Cohan, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts, a global energy-forecasting and consulting firm, said by phone on Oct. 5.

“Everybody knows demand is pretty awful and there’s shutdowns for economic reasons like Trainer and I think you will see a lot of quiet shutdowns where maintenance is dragged on for months.”

Bernanke: Fed Poised to Inject Further Stimulus

Federal Reserve Chairman Ben Bernanke says the economic recovery “is close to faltering” and the central bank is prepared to take further steps to support it, according to an Associated Press report.

The economy is growing more slowly than the Federal Reserve had expected, Bernanke said Tuesday (Oct. 4) before the congressional Joint Economic Committee. He said the biggest factor depressing consumer confidence is poor job growth.

“We need to make sure that the recovery continues and doesn’t drop back and that the unemployment rate continues to fall downward,” Bernanke said.

Stocks came off their morning lows after Bernanke inferred that the Fed could adopt additional stimulus measures in the coming months.

Bernanke offered his grim assessment after the economy barely grew in the first half of the year and it created no net jobs in August. Consumer confidence fell this summer to the lowest point since the recession. Europe’s debt crisis has also intensified.

After their September meeting, Fed policymakers warned of significant downside risks to the economic outlook. As a result, the Fed voted to shift $400 billion of the Fed’s investment portfolio from short- to longer-term Treasurys to try to drive down long-term rates.

In August, the Fed said it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remained weak.

Both decisions drew three dissenting votes on the Fed’s policy committee. The three dissents, all from regional Fed bank presidents, were the most dissents in nearly 20 years.

Republican leaders in Congress also urged Bernanke and the Fed against taking action to lower rates. The GOP lawmakers and Bernanke have clashed in recent months over how best to invigorate the economy.

On Tuesday, Bernanke wasn’t shy in offering Congress more advice: He reiterated his warning that lawmakers should not cut spending sharply while the economy is weak.

 

Bernanke Surprised by ‘Cautious Consumers’

Federal Reserve Chairman Ben Bernanke said Thursday (Sept. 29) that he’s surprised by how cautious consumers remain more than two years since the recession officially ended. But he offered no hints of further steps the Fed might take to try to boost the weak economy.

The Associated Press reported that Bernanke noted that several factors have kept consumers from spending more: from high unemployment and falling home values to still-heavy debt loads and higher gasoline prices.

“Even taking into account the many financial pressures they face, households seem exceptionally cautious,” Bernanke said in a speech in Minneapolis to the Economic Club of Minnesota.

Bernanke said that higher prices for gas, cars and other consumer goods were due, in part, to temporary factors, such as supply disruptions stemming from Japan’s earthquake and nuclear crisis. As those factors continue to ease, the Fed chief said he expects inflation to moderate in the coming months.

He reiterated that the Fed will consider a range of options at its next policy meeting Sept. 20-21. Some economists have said the Fed must take further steps to drive down long-term interest rates and help the economy avoid another recession.

Bernanke’s remarks Thursday were similar to those he made last month in a speech in Jackson Hole, Wyo. As he did in that speech, Bernanke said he supported Congress’ push to reduce budget deficits over the long run. But he cautioned against cutting spending excessively while the economy remains so weak.

Congress, he said, “should not … disregard the fragility of the economic recovery.”

 

Bernanke Tries to Ease Markets; No New Stimulus

The chairman of the U.S. Federal Reserve Ben Bernanke offered no new stimulus for the American economy Friday (Aug. 26), disappointing analysts and economists who had been hoping for measures to counter a slowing in growth.

In a speech during the bank’s annual meeting in the resort of Jackson Hole, Wyoming, Bernanke did hint that Congress may need to act to stimulate hiring and growth, according to CBC.com.

Congress, however, has been focused on reducing the national budget deficits and less occupied with new spending to try to energize the economy. A plan lawmakers passed this month means annual deficits are expected to be reduced by $3.3 trillion US over the next decade through spending cuts.

Bernanke left open the possibility of future action by the Fed, saying it “is prepared to employ its tools as appropriate to promote a stronger economic recovery.”

He announced its monetary policy committee will expand its meeting in September from one day to two in order to study and discuss options to for additional monetary stimulus.

The Fed chairman said record low interest rates will promote growth over time but that the weak economy requires further help in the short run.

His speech followed the release of a government report that the economy grew at an annual rate of just 1% this spring and 0.7% for the first six months of the year. The report predicted only slightly healthier expansion in the second half.

Bernanke said he’s optimistic that the job market and the economy will return to full health in the long run.

 

Poll: Optimism Improves on Economy, Obama

Americans are growing more optimistic about the U.S. economy, a sentiment that is benefiting President Barack Obama despite public disenchantment with his handling of rising gasoline prices and swollen government budget deficits.

An Associated Press-GfK poll shows that more than 2 out of 5 people believe the U.S. economy will get better, while a third think it will stay the same and nearly a fourth think it will get worse, a rebound from last month’s more pessimistic attitude. And, for the first time since the 100-day mark of his presidency, slightly more than half approve of Obama’s stewardship of the economy.

Both findings represent a boost for Obama, though he still must overcome ill will over government red ink and the price of gas at the pump, now hovering around $4 a gallon.

But the public’s brighter economic outlook also could signal a boost to the current recovery, which relies to a great degree on consumer behavior. A public that is confident about economic performance is more likely to spend more and accelerate the economy’s resurgence.

The poll was conducted May 5-9 in the aftermath of the U.S. commando raid that killed Osama bin Laden, the al-Qaida leader behind the Sept. 11, 2001, terrorist attacks. The spike in public esteem for Obama as a result of that successful clandestine mission may have helped Obama’s standing on issues other than national security.

The poll coincides with renewed attention in Washington to the nation’s growing debt and the federal government’s long-term budget deficits, so any positive signs from the public could help Obama push his policy proposals. A bipartisan team of lawmakers is working with Vice President Joe Biden to identify spending cuts. Meanwhile, lawmakers also are discussing major structural changes to the tax system and to the government’s mammoth benefits programs of Medicare, Medicaid and Social Security.

The results of the AP-GfK poll stood out because other surveys taken after bin Laden’s death, while showing a spike in support for the president, continued to indicate dissatisfaction by a majority for his handling of the economy. Still, like the AP-GfK poll, other surveys also found American attitudes about the state of the nation improving.

Forty-five percent of those polled in the AP-GfK survey said the country was now moving in the right direction, an increase of 10 percentage points from five weeks ago. And attitudes about life in general remained positive, with 4 out of 5 respondents saying they were happy or somewhat happy with their circumstances.

“Once you hit bottom the only one way to go is up,” said John Bair, 23, a photographer and filmmaker from Pittsburgh. “Everybody that I come in contact with seems to be on the upswing. I consider that a pretty good thing.”

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