May 23, 2017

Job and Price Data May Signal the End for Federal Stimulus

Government reports on Thursday suggested an acceleration in job growth in early August and hinted at pockets of pricing power in the sluggish economy. The data could ease concerns among some Federal Reserve officials that inflation has been too low and the job market too weak, drawing the central bank closer to tapering off its economic stimulus program.

While statistics on manufacturing were less encouraging, economists were little fazed and said they merely suggested that the improvement in factory activity was slower than anticipated.

“It looks like the weakness in employment last month was a fluke, and the breadth of gains” in the Consumer Price Index suggest that “there will be less pushback against tapering because of low inflation,” said Ryan Sweet, a senior economist at Moody’s Analytics. “A September taper is still on the table.”

The Fed has indicated that it wants to wind down its monthly purchase of $85 billion in Treasury and mortgage-backed securities, perhaps by September.

First-time applications for state unemployment benefits dropped 15,000 to a seasonally adjusted 320,000, the lowest level since October 2007, the Labor Department said. Economists had expected initial claims to come in at 335,000 last week.

The four-week moving average of new jobless claims, which irons out week-to-week volatility, fell to its lowest level since November 2007.

Carl Riccadonna, a senior economist at Deutsche Bank Securities, said the drop in new jobless claims to prerecession levels was consistent with a pickup in the pace of hiring, if not in August, then at some time in the next couple of months.

“The critical component is going to be the August jobs report,” he said. “If that comes in at least where it was in July, then this is going to keep the Fed on track to initiate tapering at the September meeting” of the Fed’s policy makers.

Employers added 162,000 jobs to their payrolls last month, with the unemployment rate dropping to 7.4 percent.

In another report, the Labor Department said its Consumer Price Index rose 0.2 percent last month, in line with economists’ expectations, as the cost of goods and services including tobacco, apparel and food increased.

The C.P.I. gained 0.5 percent in June. In the 12 months through July, the C.P.I. advanced 2 percent, the largest annualized increase since February, after rising 1.8 percent in June.

The rise in inflation to the Fed’s 2 percent target suggested that the downward drift in prices seen early in the year was over, which could comfort some central bank officials who have warned about the potential dangers of inflation running too low.

Even stripping out energy and food, the core rate of consumer prices still rose 0.2 percent for a third consecutive month. That took the increase over the last 12 months to 1.7 percent after core C.P.I. gained 1.6 percent in June.

The uptick in prices fits with the view of Ben S. Bernanke, the Fed chairman, who has said he considers the low inflation temporary.

James Bullard, the president of the Federal Reserve Bank of St. Louis, who has voiced concern that inflation was still too low, said he was encouraged by July’s rise in consumer prices.

“To the extent that you have got higher inflation numbers in this report, that would be bolstering the notion that inflation would be naturally moving back toward target,” Mr. Bullard told reporters in Louisville, Ky.

Last month, there were increases in the prices of gasoline, transportation and shelter. Medical care services recorded a second month of gains in July. Medical care, which makes up about 10 percent of the core C.P.I., was subdued in April and May.

The news on the factory sector was a bit downbeat, with the Fed reporting that manufacturing output slipped 0.1 percent last month, held down by a 1.7 percent fall in the production of motor vehicles and machinery. That, together with a drop in utilities production, left industrial output unchanged in July.

Separately, the Federal Reserve Bank of New York said its Empire State general business conditions index fell to 8.24 in August from 9.46 in July. A reading above zero indicates expansion. But details of the report were fairly encouraging, with strong gains in the labor market.

Article source: http://www.nytimes.com/2013/08/16/business/economy/job-and-price-data-may-signal-the-end-for-federal-stimulus.html?partner=rss&emc=rss

Inflation Shows Signs of Stability After Downward Drift

While inflation remains benign, the increase last month should help ease worries among some Fed officials that price pressures in the economy were too low.

“Inflation is carving out a bottom. We are likely to see inflation tick up slightly in the second half of this year,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The modest acceleration is welcome news for the Fed.”

The Labor Department said on Tuesday its Consumer Price Index increased 0.5 percent, the largest gain since February, after nudging up 0.1 percent in May.

A 6.3 percent surge in gasoline prices accounted for about two thirds of the increase.

In the 12 months through June, the CPI advanced 1.8 percent, an acceleration from the 1.4 percent logged in the period through May and the largest increase since February.

Stripping out energy and food, consumer prices increased 0.2 percent for a second straight month.

That took the increase over the past 12 months to 1.6 percent, the smallest rise since June 2011. The core CPI had gained 1.7 percent in May.

Although both inflation measures remain below the Federal Reserve’s 2 percent target, the report showed signs of fading disinflation pressures, with medical care costs increasing after being subdued for the past two months.

Prices for new motor vehicles, apparel and household furnishings also rose.

The signs of stabilization offered by the monthly core measure fit in with Fed Chairman Ben Bernanke’s assessment that a downward drift in the inflation rate was temporary.

Bernanke said last month the central bank would likely later this year start cutting back the $85 billion in bonds it is purchasing each month to keep borrowing costs low. Economists expect the Fed to begin reducing the amount in September.

“The lack of further slowing in core inflation on a monthly basis in the last two months helps keep Fed tapering on track,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

BETTER GROWTH PROSPECTS

While the year-on-year core CPI rate could slip further in coming months, it should reverse course as economic growth accelerates over the last half of the year, economists said.

They expect a drop in unemployment to boost wage growth.

That optimism about the economy’s prospects was bolstered by a separate report from the Fed showing output at the nation’s factories, mines and utilities rose 0.3 percent in June after a flat reading in May.

The increase reflected a 0.3 percent rise in manufacturing output. Economists said it suggested some pickup in economic activity at the end of the second quarter. Growth in the April-June period is forecast at an annual pace of between 0.5 percent and 1.0 percent, far below the first-quarter’s 1.8 percent rate.

“If manufacturing growth is on the verge of accelerating into the second half of the year, this, along with solid gains in housing, should support growth in the second half of 2013,” said John Ryding, chief economist at RDQ Economics in New York.

Another report on Tuesday showed confidence among single-family home builders soared to a 7-1/2 year high in July, amid expectations of stronger sales and buyer traffic.

U.S. financial markets were little moved by the data as investors awaited testimony Bernanke is set to deliver to Congress on the economy on Wednesday.

Tepid growth has kept a lid on inflation pressures, but some pockets of pricing power are starting to emerge.

Last month, owners’ equivalent rent, which accounts for about a third of the core CPI, increased 0.2 percent after a similar gain in May. Apparel prices recorded their largest increase in nearly two years, while new motor vehicle prices rose after being flat in May.

Medical care services rose 0.4 percent, the largest increase in a year. Medical care, which makes up about 10 percent of the core CPI, had been subdued in April and May. The cost of medical care commodities rebounded 0.5 percent, reversing the prior month’s decline, as the price of prescription drugs increased.

Tame medical care costs have been one of the key contributors to the low inflation rate over the past months.

Economists cite a host of reasons for the lack of pressure on health care costs, ranging from the expiration of patents on several popular prescription drugs to government spending cuts that have cut payments to doctors and hospitals for Medicare.

“We think the impact of these transitions has started to fade away and we expect that drug price inflation may start to pick up over the months ahead,” said Ryan Wang, a U.S. economist at HSBC in New York.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)

Article source: http://www.nytimes.com/reuters/2013/07/16/business/16reuters-usa-economy.html?partner=rss&emc=rss

Economix Blog: The Rise of Part-Time Work

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

One of the more unsettling trends in this recovery has been the rise of part-time work.

We are nowhere near recovering the jobs lost in the recession, and the track record looks even worse when you consider that so many of the jobs lost were full time, whereas so many of those gained have been part time.

Compared with December 2007, when the recession officially began, there are 5.8 million fewer Americans working full time. In that same period, there has been an increase of 2.8 million working part time. Part-time workers — defined as people who usually work fewer than 35 hours a week — are still a minority of the work force, but their share is growing.

Source: Bureau of Labor Statistics, via Haver Analytics. Source: Bureau of Labor Statistics, via Haver Analytics.

When the recession began, 16.9 percent of those working usually worked part time. That share rose sharply in 2008 and 2009 and has not fallen much since then. Today the share of workers with part-time jobs is 19.2 percent.

This would not be so troubling if people were electing to work fewer hours. But that is not the case.

Basically all of the growth in part-time workers has been among people reluctantly working few hours because of either slack business conditions or an inability to find a full-time job. Together these people are considered to be working part time “for economic reasons.” Their numbers have grown by 3.4 million since the downturn began.

The number of people working part time “for noneconomic reasons,” on the other hand, has fallen by 639,000 since the recession began.

Source: Bureau of Labor Statistics, via Haver Analytics. Source: Bureau of Labor Statistics, via Haver Analytics.

These trends are part of the reason that many people believe the standard unemployment rate of 7.7 percent understates the extent of underemployment. If you include both part-time workers who want full-time work and people who have stopped looking for jobs but still want to work, the unemployment rate is actually 14.3 percent.

It’s not clear what’s behind the growth in part-time work. It probably has to do mostly with companies’ not having as much need for labor today as they did when the economy was strong. The Affordable Care Act also has incentives for employers to keep their count of full-time workers below 50, but that has probably affected only a few companies at the margin at this point.

Article source: http://economix.blogs.nytimes.com/2013/03/08/the-rise-of-part-time-work/?partner=rss&emc=rss

I.H.T Special Report: Smart Cities: Raising the I.Q. of City Services

The ability to manage a crisis better by predicting emergency needs and deploying resources accordingly is already a reality for Rio de Janeiro, which earlier this year set up an Intelligent Operations Center using computer programs that rely on algorithms developed by I.B.M. And more cities are expected to follow suit soon.

“We now have a hub for information on anything that has an impact on the city’s day-to-day life,” said Carlos Roberto Osorio, Rio’s secretary for conservation and public services. “With this system, the information is treated quickly and the response is much faster. So the city becomes more intelligent, it becomes more agile and at the end of the day it becomes a safer city for our citizens.”

Guruduth Banavar, vice president and chief technology officer of the global public sector unit at I.B.M., said computer algorithms helped to analyze complicated data that the human brain alone cannot sort through. “These algorithms, collectively called analytics, can use past historical and current data in a given situation to predict the most likely scenario that will develop and suggest the best way to react to the current event,” he said.

“Analytics is about using information to decide how to best react to current events and how to best plan for what is likely to happen in the future.”

Mr. Osorio said that Rio’s center had helped cut the city’s response time to emergencies by 30 percent, on average. “We have now become much more reliable in term of preventing events,” he said. “With this system we can mitigate the impact before it happens. This means the level of stress in the city and the level of risk to our citizens are greatly diminished.”

He said the cost of starting the center was 25 million real, or about $14 million.

Analytics can help cities move from uncertainty — or knowing events may occur but having no further knowledge to act on — to risk quantification, which in turn allows for the development of business continuity plans and other contingency planning, and action, said David McCloskey, a partner in Deloitte Analytics.

“The next step for analytics to help cities respond to a crisis is to build capabilities that provide effective risk mitigation,” Mr. McCloskey said. For example, using system modelling to develop programs that could read information from sensors to tell when electricity transmission networks are threatened by wildfires and then close off or reroute power, or using predictive analytics from sifting voluminous crime reports to improve police visibility in problem areas.

Deloitte has developed a smartphone application called Bamboo that harnesses analytics to aid in the effective functioning and continuance of operations after a crisis occurs. The program is mainly aimed at corporations, but it could also be used at the municipal level, Mr. McCloskey said.

Eric Wood, an analyst at Pike Research, a market research and consulting firm on clean energy technology, said “smart cities” are those that are able to shift from being just reactive to being proactive, based on the use of better information. Such cities use the data to make their operations more efficient but also to improve their responsiveness to emergencies and critical incidents.

Article source: http://www.nytimes.com/2011/09/30/business/global/raising-the-iq-of-city-services.html?partner=rss&emc=rss

Backlog of Cases Gives a Reprieve on Foreclosures

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.

“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.”

When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.

But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.

New foreclosure cases and repossessions are down nationally by about a third since last fall, LPS said. In New York, foreclosure filings are down 85 percent since September, according to the New York State Unified Court System.

Mark Stopa, a St. Petersburg, Fla., specialist in foreclosure defense, has 1,275 clients, up from 350 a year ago. About 75 clients have won modifications, dismissals or sold their properties for less than they owed. All the other cases are pending.

“Banks aren’t even trying to win,” said Mr. Stopa, who charges his clients an annual fee of $1,500.

J. Thomas McGrady, the chief judge of Florida’s Sixth Circuit, which includes St. Petersburg, agreed. “We’re here to do what we’re asked to do. But you’ve got to ask. And the banks aren’t asking,” he said.

A spokesman for Bank of America said, “Any suggestion that we have a strategy to delay foreclosures is baseless.” A Wells Fargo spokeswoman blamed changes in state laws governing foreclosure for any slowdown. A GMAC spokeswoman said it was following “regulatory and investor expectations.” JPMorgan Chase declined to comment. Servicers said some of the decline in foreclosures could be traced to an improved economy.

There are many reasons that foreclosure, which has been slowing ever since the housing bubble burst, has been further delayed in many states.

The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts.

Lenders, who service loans they own as well as those owned by investors, tried to circumvent the time-intensive process by using “robo-signers” who mass-produced documents, many of which made inaccurate claims. When the bad practices were discovered last fall, the lenders were forced to revisit hundreds of thousands of cases.

Over the last two years, most defaulting homeowners were people who had lost their jobs. Housing analysts say these homeowners are more likely to hire a lawyer and fight repossession than borrowers who had subprime loans that swelled beyond their ability to pay.

Judges these days are also more inclined to scrutinize requests for eviction rather than automatically approve them. The so-called foreclosure mills — law firms that handled many of the suits for the banks — are in retreat under law enforcement pressure. And some analysts suggest that banks are reluctant to take too many houses onto their books at any one moment for fear of flooding a shaky market.

Article source: http://feeds.nytimes.com/click.phdo?i=47abcd045a950881698cb24dc00f85a1

Economix: Rent vs. Buy, a Longer List

My column this week revisits the question of whether to buy a home or rent one. In the newspaper, we included a chart showing average rent ratios — the purchase price of a house divided by the annual rent of a similar house — for several metropolitan areas. Here, we include a longer list.

As a rule of thumb, when the ratio is below 15, people should lean toward buying a home. When it’s above 20, they should lean toward renting. When it’s in between, the decision should be based almost entirely on stage of life: Are you ready to settle into a home for at least five years, if not more. As I note in the column, your stage of life should often dictate your decision even when ratios are below 15 or above 20.

For the following metro areas, Moody’s Analytics, which provided us with the data, had numbers going back to 1986:

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For the following metro areas, the data goes back to only 1990:

A comparison that includes the 1980s is a better one, because the 1980s was a decade when real estate boomed in many places while the 1990s was a decade in which some places, like California and New England, experienced a bust. The ideal long-term comparison includes both bull and bear markets.

For this reason, I would expect the 1990-2000 average, which appears with the charts in the newspaper, to be lower than the long-term average. We went with 1990-2000 so we could include areas for which the data begins in 1990.

Article source: http://feeds.nytimes.com/click.phdo?i=4f41440d3455571bb18e2ced434f06bb