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Consumer Sentiment Slumped in Early July

July 17, 2011 by Leave a Comment

Worries about stubbornly high unemployment pushed the Thomson Reuters/University of Michigan’s index of consumer sentiment to 63.8, the lowest level since March 2009, a report showed on Friday. Economists had expected the index to rise to 72.5, from 71.5 in June.

Separate data from the Federal Reserve showed that industrial production rose a modest 0.2 percent in June after two months of slight declines. Output was held back partly by supply disruptions in the auto industry related to the March 11 earthquake in Japan.

The reports were the latest in a series, including weak retail sales and employment, to suggest that an anticipated step-up in growth in the second half of the year might not be as strong as initially thought.

“We still expect an improvement in the second half, but the question is, How much can we grow?” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “Our view is the rebound is not going to be anything like in the prior cycles because we are growing at a lower potential rate right now.”

The Federal Reserve chairman, Ben S. Bernanke, said this week that the central bank was prepared to act if growth faltered further but made it clear that the Fed was not yet at that point.

The economy was hit by a combination of high commodity prices and bad weather, causing growth to slow sharply to a 1.9 percent annual rate in the first quarter after a brisk 3.1 percent in the final three months of 2010.

Disruptions to motor vehicle production and still-high gasoline prices are expected to have held growth to a rate of 1.5 to 2 percent in the second quarter. The government will release its initial second-quarter gross domestic product estimate on July 29.

Manufacturing in the second quarter posted its weakest rise since the recession ended in mid-2009. There are indications that manufacturing maintained its weak tone as the third quarter started.

The decline in consumer sentiment, which came even as gasoline prices dropped from a peak of more than $4 a gallon in May, does not bode well for consumer spending.

The debate in Washington over raising the country’s debt ceiling is adding to economic uncertainty.

Hard-pressed consumers could get a reprieve from declining commodity prices. Labor Department data showed that the Consumer Price Index fell 0.2 percent in June as gasoline prices tumbled 6.8 percent. Despite declines in the last two months, gas prices are up 35.6 percent over the previous 12 months.

The drop in consumer prices was the first in a year. Prices increased 0.2 percent in May.

Stripping out food and energy, however, the core index rose 0.3 percent after a similar gain in May. The rise in core inflation reflected a lagged pass-through from high commodity prices, and economists saw no threat of an upward spiral in price pressures.

In the 12 months to June, core inflation rose 1.6 percent after increasing 1.5 percent in May. This narrower measure of prices was pushed up by rises in housing, new vehicles, used trucks and apparel. Apparel prices recorded their biggest jump since March 1990, while the rise in used cars and trucks was the biggest in more than one and a half years. Fed officials would like to see core inflation closer to 2 percent.

Wage growth remained benign, with average hourly earnings flat in June. In the 12 months through June, average hourly earnings rose 1.9 percent. In addition, capacity use at factories was unchanged at 76.7 percent in June, pointing to slack in the economy.

Article source: http://feeds.nytimes.com/click.phdo?i=60af2fe4e0c9b1b7ef2fa7b0fed1aef0

Filed Under: Economy News Tagged With: , ,

You’re the Boss: This Week in Small Business: A Union for Owners

June 27, 2011 by Leave a Comment

Dashboard

What’s affecting me, my clients and other small-business owners this week.

The Fed: Bernanke Reins It In

In his second ever press conference, Federal Reserve Chairman Ben S. Bernanke reins in growth forecasts and says QE2 will run its course. Agustino Fontevecchia says that the Fed chairman is clueless. Seeking Alpha’s Jeff Miller explains the superpowers of Ben Bernanke. Bob McTeer is happy QE2 is over: “QE2 comes to a formal end this month and just in the nick of time, too, since it’s been flooding the markets with newly printed money, making hyperinflation and a collapse of the dollar inevitable.” But Mark Sunshine is concerned that our slower money supply is sending us back into recession, and Mark Thoma explains how this could happen. Want to vent? Here’s how you can have dinner with President Obama.

The Data: Housing Still in the Basement

Oil prices tumble and new unemployment claims rise. Russell Investments’ state-of-the-economy dashboard has been updated. Vehicle traffic declined in April compared with the previous year. Commercial real estate prices are at a post-bubble low. Existing home sales and the Architecture Billing Index also fell. And Calculated Risk isn’t surprised: “Of course many qualified buyers bought last year — using the ill-considered home-buyer tax credit — and that pulled demand forward. The housing market is still paying the price for that policy mistake.” But housing starts (PDF) increased. First-quarter gross domestic product was revised up and durable goods orders improved.

The Economy: Deficit Reform Draws Closer?

A deficit reform bill gets closer, and then talks break down. Jonathan Bernstein advises us not to panic about the current budget negotiations. The president shows that he really does care about future generations. The Treasury secretary calls for tax increases. I’m calling for a special tax on the Harry Potter industry. A political writer says that corporate tax cuts don’t stimulate job growth. Looking at the top and bottom five states in terms of job growth, Brian Pittelko says, “nationally, the economy is expanding, but not every state is feeling that change.” Small-business lending shows signs of life. Andrew Sullivan says that a growing housing gap could be good news for the construction industry. Greece’s prime minister wins a vote of confidence. Bill Gross says our budget situation is worse than Greece’s. Fortune’s Nin-Hai Tseng reports that demand for loans is dropping at all banks, but the slowdown in small-business lending is hurting local banks.

Starting Up: You Say It’s Your Birthday

A person begs for financing for his iPhone start-up. A new company stores social media posts for background checks, and another venture has come up with an ultrasound alternative to N.F.C. A heavily hyped start-up fails to live up to its hype. A lawyer explains how to introduce a start-up and avoid landing in jail. Small-business coach Andy Hayes explains how much sacrifice it takes to start a small business: “I wish I could tell you how many of your children’s birthdays you’ll miss. I wish I could warn you about how much over-consumption of caffeine you’ll have, and how many nights you won’t sleep because you’re worried about paying your mortgage. I’d love to say that you’ll be breaking even within a year, or that in six years you’ll cash out as a millionaire.” New research from the small-business insurer Hiscox finds that 15 percent of start-ups were started as a result of layoffs. The venture capital industry laments the lack of public offerings.

Marketing: Be a Better Blogger

A blogger offers seven ways to revitalize your blog, including: “Use link clusters. This is where your analytics software comes in. When checking your figures, look out for posts which have attracted lots of traffic via a particular keyword (say, ‘social media tips’). Then, go back in your posts archive and edit previous posts so that they include a text link for ‘social media tips’ which links back to your original high-performing post.” Todd Wasserman reviews five creative location-based campaigns. A social customer-relations management newcomer, Nimble, releases a company-wide product. Geez, I guess advertising really can work.

Management: A Union for Small-Business Owners

Here’s how Facebook would work in real life. A poll of 625 women found that 75 percent of them would not marry a man who was unemployed. A fed-up entrepreneur starts a union for small-business owners. Diana Ransom explains why this week’s court victory for Wal-Mart is also a victory for small business. A working mom explains what it’s like to be a working mom: “Each and every day, I recognize the enormous responsibility that rests upon my shoulders to support my family. But I also recognize that nothing is as important as my mental health.” Sarah Needleman reports that a third of American workers are ready to quit. Russell Roberts says technology does not destroy jobs. Anita Woolley and Thomas Malone write in the Harvard Business Review that women make a team smarter.

Success Strategies: Go Overseas, Young Man

A customer relations guru, Paul Greenberg, says United Airlines could learn a lot from Marriott. A disgruntled customer writes a great letter to an airline. A few experts weigh in on whether franchising makes sense. A small-business owner, Norm Goldenberg, reflects on a half century spent in the pest control and lawn care industries. A new survey finds that nearly a quarter of American small and midsize companies are doing business overseas. Some believe that the National Football League lockout will hurt small businesses. Here are the five deadly sins of bad meetings.

Around the States: Go East, Californians

A Chamber of Commerce study identifies state-level economic development strategies that are working. The Greater Austin Chamber of Commerce is introducing an effort to create a downtown work space that could serve as a home base for entrepreneurs and early stage start-ups. A Silicon Valley doctor is making a big impact on the way health care is delivered. The United States Conference of Mayors predicts 3.5 percent growth in the second half of the year and that New York’s economy will be the 13th largest (PDF) in the world. California small businesses rise up against a proposed Internet tax while many companies are leaving the state.

Technology: Putting a Fork in RIM?

A popular mobile application invades Chicago. The F.B.I. seizes a few servers, causing sites to go down. Verizon Wireless will join its competitors ATT and T-Mobile next month in eliminating the option for customers to consume unlimited data on their mobile phones without paying additional fees. Microsoft is introducing Office 365 on June 28. Box.net and Google Docs join forces against it. Google goes after Skype. Uh-oh: RIM begins “cost-optimizing” its employees, and John Biggs says RIM is done. People are spending more time with their mobile apps than on the Internet. New research says that small- and medium-sized business technology spending is trending up. A hardcore laptop is introduced. Robert Scoble predicts that Android tables will make huge gains this year. Internet addresses are now whatever you want. The Internet reunites a long-lost camera with its owner. A girl tries to solve global warming.

Red Tape Update: A New Twist in Health Care

The Chamber of Commerce goes after President Obama’s regulations. A tax holiday proposal may not offer much to celebrate. The I.R.S. increases (PDF) the mileage rate through year end. Ezra Klein says that Medicare is much more efficient than we think. Number crunchers find a health care twist that could let several million middle-class people get nearly free insurance. The House G.O.P. nears a patent reform bill.

The Week Ahead: Lots of Consumer Data

Monday’s data will include personal spending and income. Tuesday and Friday will bring two sets of consumer confidence numbers. Friday will reveal this past month’s vehicle sales. And did you know Thursday is the 58th anniversary of the Corvette?

This Week’s Bests

Advice for Getting Market Share Marketer Walter Dailey shares a few lessons. For example: “Seek Out Your ‘Average Customer.’ Every business has an average customer – a person that consistently spends around the same amount and appears at your doorstep like clockwork. In order for you to grow, you must market to people that represent this particular customer. Why? You’re most likely to already have the infrastructure and know-how to be successful with this kind of customer. Growing your share will be a matter of duplicating your existing success, rather than reinventing the wheel in order to cater to an atypical client.”

Reason to Barter Barbara Taylor explains why she loves barter: “While my husband and I feel lucky to still be in business (I, too, am Staying Alive), we have had to regroup and find new ways to bolster our bottom line, which is how I came to have not one or two but three barter arrangements in place at my firm.”

Spin on the World Economy Simon Hunt thinks the United States may have much to gain from a world recession: “Within a decade, the U.S.A. could supplant China as the manufacturing hub of the world … big changes will be needed in Washington for this historic development to occur. The changes will not just be on the fiscal side, but the need to offer businesses the right incentives to produce in the U.S.A. rather than abroad, the permitting procedures to allow the development of the country’s resources, including oil (the U.S.A. could become self-contained), making government less intrusive in households and businesses and so on.”

This Week’s Question What economic metric do you watch for your business?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://feeds.nytimes.com/click.phdo?i=bb357eef507e3fd8677bd36bf6c12344

Filed Under: Small Business Tagged With: , ,

Economix: Hour by Hour, a Measure of Economic Stress

June 8, 2011 by Leave a Comment

An idled home construction site in Riverside, Calif., in 2009.David McNew/Getty ImagesAn idled home construction site in Riverside, Calif., in 2009.

Ben S. Bernanke, the Federal Reserve chairman, highlighted a relatively obscure measure of economic health, “aggregate hours of production workers,” to make the important point that our economy is not very healthy at all.

The name pretty much explains the statistic: It measures the total number of hours that Americans are paid to work in production jobs, which make up 80 percent of all jobs.

Why not take the measure of all jobs? Well, the Bureau of Labor Statistics has done just that since 2006, and the numbers show a similar decline, but it has tracked production hours since 1964, allowing comparisons with other recessions.

The comparisons, as Mr. Bernanke noted Tuesday, are not good.

Paid hours “fell, remarkably, by nearly 10 percent from the beginning of the recent recession through October 2009,” he said. Moreover, after two years of renewed growth, paid hours remain about 6.5 percent below the prerecession peak.

“For comparison,” Mr. Bernanke continued, “the maximum decline in aggregate hours worked during the deep 1981-82 recession was less than 6 percent.”

No other recession since 1964 has produced a comparable decline in hours worked.

Bureau of Labor StatisticsIndex of aggregate weekly hours, production and nonsupervisory employees, total private industries. (2002=100; shaded areas indicate United States recessions.)

The hours-worked data also highlights a shortcoming of the work-force statistics that garner more public attention, in particular the unemployment rate.

Those statistics basically treat all jobs as equal. But some people are working part-time or a few hours less each week or their employer has stopped authorizing overtime. They have a job but they are working fewer hours and making less money.

A recent article by Steven Kroll, an economist for the Bureau of Labor Statistics, charts the distinction.

In some parts of the labor market, like professional and business services, job cuts almost entirely explain the decline in hours worked. In that area, 9.9 percent of employees lost their jobs, while the number of hours worked fell 10.1 percent.

In other areas, however, job losses significantly understate the decline in paid work. Construction jobs fell 21.5 percent; hours worked fell 24.5 percent. Manufacturing jobs fell 17.3 percent, while the number of hours worked fell 20.3 percent.

The data, Mr. Kroll wrote, “illustrates employers’ tendency to cut payroll employment rather than hours.” In other words, American companies generally choose to lay off one person rather than reducing two people to half-time work.

Because this is Germany week in the blogosphere, I’ll just close by noting that the plentiful body of research noting that German companies generally do the opposite, with the result that a deeper recession produced fewer job losses in that country.

Article source: http://feeds.nytimes.com/click.phdo?i=5932ea724ccb8439502f9fc28d5f68bf

Filed Under: Economy News Tagged With: , ,

Battered Dollar’s Decline May Be Starting to Reverse

May 17, 2011 by Leave a Comment

For the better part of the past decade, and particularly in the past few months, the U.S. dollar has been the weakling of the foreign exchange world. It lost value not just against almost every other global currency, including the euro, pound and yen, but even against the Romanian new leu and the Latvian lats.

Fueled largely by the Federal Reserve’s policy of printing dollars to help spur a healthy economic recovery that remains stubbornly elusive, the dollar earlier this month fell close to a 40-year low against a basket of other currencies.

Now, however, betting against the dollar may no longer be such a safe strategy — not necessarily because of any sudden macroeconomic shifts but because of a sense that the dollar sell-off may have finally gone too far. Since May 4, the U.S. currency has risen 4 percent against the euro and 2 percent against the pound, and has rallied against the Romanian and Latvian currencies as well.

The dollar’s bounce, while too brief to constitute a trend, has not been driven by any noticeable improvement in the economic fundamentals of the United States. Indeed, the faint but nonetheless real risk that Congress will fail to reach agreement on raising the legal ceiling on U.S. government borrowing only underscores the still parlous state of the U.S. economy.

At the same time, U.S. unemployment remains stubbornly high, at 9 percent, and there is a strong belief among big money investors that the Obama administration, as well as the Federal Reserve chairman, Ben S. Bernanke, tacitly welcome a cheaper dollar to spur exports and encourage U.S. manufacturers to hire more aggressively.

“The U.S. economy is still facing headwinds — from weak housing to reductions in government spending,” said Ray Attrill, a currency strategist for BNP Paribas in New York. “For those reasons we think the export sector is where policy makers are looking for growth.”

But analysts also see another, more technical reason behind the dollar’s decline — a decline that may well be ending. Ever since the global financial crisis began to ease in 2009, the appeal of investing in higher-yielding currencies and commodities all over the world has created what, in trader parlance, is called a risk-on, risk-off dynamic.

Investors tend to sell their safer holdings, like Treasury bonds, when they feel more bullish. Since 90 percent of the world’s hedge funds are based in dollars, those changes in sentiment can have a depressing effect on the U.S. currency. Reserve-rich central banks in emerging markets have also been selling dollars and buying euros to rebalance their reserve portfolios, said Mr. Attrill, citing recent data from the International Monetary Fund.

“Everything has been strengthening against the dollar — this is something that has not happened in the past,” said Stephen L. Jen, an independent currency strategist and former economist for the International Monetary Fund.

But that momentum now appears to have swung too far to one side — particularly as Europe’s own debt problems return to the limelight. Mr. Jen sees the rise of the euro, from $1.19 to a high of $1.49 over the past year, as overdone, especially amid festering problems in Greece and other weak euro zone economies. The euro is already back down to $1.42.

“With its sovereign debt issue and the growth differential in the euro zone,” Mr. Jen said, the euro is “just too expensive.” Other analysts have begun to say enough already, too.

In part, that is because much of the recent weakness in the dollar was driven by the perception that the European Central Bank, and to a lesser extent, the Bank of England, were more likely to raise interest rates to keep inflation under control than was the Federal Reserve, which remains committed to keeping short-term interest rates near zero. With rates likely to be higher in Europe than in the United States, traders moved their money out of U.S. government bills and bonds to gain greater returns abroad.

But the stronger the euro got, the more likely it became that its rise would begin to bite. As the euro rose to nearly $1.50, the strength of the currency started to raise doubts about whether the mighty German export machine, which gained competitive strength when the euro was weaker, could continue to perform so successfully around the world.

Article source: http://feeds.nytimes.com/click.phdo?i=cf56282afb7da54eeafc3fbfad23e561

Filed Under: Business News Tagged With: , ,

Economix: Making the Cut for Bernanke’s News Conference

April 27, 2011 by Leave a Comment

Readers of my column this week — which suggests questions for reporters to ask of Ben Bernanke, the Federal Reserve chairman, during his groundbreaking news conference on Wednesday — may wonder why I can’t simply ask the questions myself. There’s a simple answer: I’m not invited.

It is not personal. It’s that the Fed has decided to limit each news organization to one invitation. There is no question that The Times’s spot rightly goes to Binyamin Appelbaum, the lead Fed reporter.

I understand the Fed’s decision to limit invitations in this way. Seats at this news conference are in high demand, and the room should not be dominated by just a few newspapers and television stations. In a similar way, the White House limits news organizations to one reserved seat in the front rows of its briefing room.

But I still think the Fed’s policy is a mistake if it continues indefinitely. The universe of journalists who cover the Fed regularly — who spend the most time reporting on it and can probably ask the toughest questions — is fairly small. They tend to be concentrated at a handful of newspapers, wire services and Web sites.

The White House permits reporters to attend its briefings even if they already have a colleague there. These additional reporters simply sit further back in the room if a seat is available. In the future, it seems the Fed should follow a similar policy. Each news organization would be guaranteed only one invitation. But organizations could request a second, and the decisions would be based partly on how closely the organization covers the Fed and on the organization’s audience size.

Such a policy would prevent the Fed from having to make artificial distinctions during the multimedia age. Should CNBC and NBC get separate invitations? And should Bloomberg television and Bloomberg news service? If so, why would The Wall Street Journal and wsj.com (which often runs videos) get only one between them?

A more open policy would also prevent anyone from being able to accuse the Fed of minimizing the number of detailed questions that Mr. Bernanke might face.

Article source: http://feeds.nytimes.com/click.phdo?i=0e00174ecd26d821b0fcf8bd4038371d

Filed Under: Economy News Tagged With: , ,
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