December 12, 2017

U.S. Sees Big Gains in Hiring as Jobless Rate Falls to 7.7%

The unemployment rate was 7.7 percent, the lowest since December 2008, compared with 7.9 percent in January. Economists had been expecting the economy to add 165,000 jobs in February, with no movement in the rate.

After peaking at 10 percent in October 2009, the unemployment rate fell steadily for three years but has been stuck at just below 8 percent since last September.

The latest unemployment report comes amid concerns that federal budget cuts set in motion by a Congressional impasse could increase the ranks of the jobless in the months ahead.

Those cuts went into effect March 1, so they are not reflected in the data for February. But pressure on government payrolls was evident, with the public sector losing 10,000 jobs last month. Private employers added 246,000 positions.

The pace of hiring represents an acceleration from the previous four months, when the economy added jobs at a monthly rate of 190,000.

While that represents an improvement over the rate of job creation last summer, it is still well below the level necessary to bring down the unemployment rate substantially or reduce the ranks of the long-term jobless.

The budget cuts in Washington are expected to reduce federal unemployment benefits by about 10 percent. State benefits, which cover the first 26 weeks of unemployment in most states, will not be affected by the federal budget squeeze.

Dan Haney has worked occasionally since he was laid off from his job as a customer service representative two years ago, but lately the hunt for work has proved fruitless, and he is concerned about what would happen if his unemployment benefits were reduced.

“At this point, I have to take what comes down the pike,” said Mr. Haney, who is 54 and lives in Philadelphia. “I’m on the computer every day looking for jobs.”

A high school graduate, Mr. Haney has some computer training but lacks a college degree, which has made finding a job all the more difficult.

“Some of these entry-level jobs say college is preferred,” Mr. Haney said. “Why do you need a college degree to answer a phone?”

Article source: http://www.nytimes.com/2013/03/09/business/economy/us-added-236000-jobs-in-february.html?partner=rss&emc=rss

Bucks Blog: The Gift Tax and Other Tax Worries

Leiha Macauley, a partner at Day Pitney, says one option for clients is to set up a trust that allows someone to put in cash now and exchange it for other assets in the future.Matthew Cavanaugh for The New York Times..Published 11-13-2010: Photo by Matthew Cavanaugh for The New York Times Leiha Macauley, a partner at Day Pitney, says one option for clients is to set up a trust that allows someone to put in cash now and exchange it for other assets in the future.

With the tax talks in Washington seemingly at an impasse, no one knows for sure what will happen to the now-generous gift tax exemption. But the tax lawyers and advisers Paul Sullivan spoke to for his Wealth Matters column this week said the wealthy have been scrambling in recent weeks to make gifts before the exemption — now at $5.12 million a person — expires at the end of the year.

Of course, all the worries about a drop in the gift tax exemption may be for naught. President Obama and House Republicans may agree at the last minute to keep the exemption where it is.

The gift tax may not be a concern for many Bucks readers. But is all the talk about taxes and the so-called fiscal cliff affecting your financial thinking? Are you worried about higher taxes in the new year and, if so, is that affecting your holiday shopping?

Tell us your thoughts in the comment section below.

Article source: http://bucks.blogs.nytimes.com/2012/12/14/the-gift-tax-and-other-tax-worries/?partner=rss&emc=rss

Fiscal Talks in Congress Seem to Reach Impasse

The proposal, loaded with Democratic priorities and short on detailed spending cuts, met strong Republican resistance. In exchange for locking in the $1.6 trillion in added revenues, President Obama embraced the goal of finding $400 billion in savings from Medicare and other social programs to be worked out next year, with no guarantees.

He did propose some upfront cuts in programs like farm price supports, but did not specify an amount or any details. And senior Republican aides familiar with the offer said those initial spending cuts might be outweighed by spending increases, including at least $50 billion in infrastructure spending, mortgage relief, an extension of unemployment insurance and a deferral of automatic cuts to physician reimbursements under Medicare.

“The Democrats have yet to get serious about real spending cuts,” Mr. Boehner said after the meeting. “No substantive progress has been made in the talks between the White House and the House over the last two weeks.”

Amy Brundage, a White House spokeswoman, said: “Right now, the only thing preventing us from reaching a deal that averts the fiscal cliff and avoids a tax hike on 98 percent of Americans is the refusal of Congressional Republicans to ask the very wealthiest individuals to pay higher tax rates. The president has already signed into law over $1 trillion in spending cuts and we remain willing to do tough things to compromise, and it’s time for Republicans in Washington to join the chorus of other voices — from the business community to middle-class Americans across the country — who support a balanced approach that asks more from the wealthiest Americans.”

Beneath the outward shows of frustration and rancor, Democrats said a deal could still be reached before hundreds of billions of dollars in automatic tax increases and spending cuts go into effect, threatening the fragile economy. Senator Charles E. Schumer, Democrat of New York, pointed to conservative Republicans who have suggested that the House quickly pass Democratic legislation in the Senate extending the expiring tax cuts for income below $250,000.

“All you have to do is just listen to what’s happening out there and you realize there is progress,” he said.

But publicly, the leaders of neither side were giving an inch. And Republican aides said the details of the White House proposal pointed to a re-elected president who believes he can bully Congress.

“They took a step backward, moving away from consensus and significantly closer to the cliff,” said Senator Mitch McConnell of Kentucky, the Republican leader.

The president’s proposal does stick to the broad framework of the deal Mr. Boehner wants: an upfront deficit-reduction “down payment” that would serve to cancel the automatic tax increases and spending cuts while still signaling seriousness on the deficit, followed by a second stage in which Congress would work next year on overhauling the tax code and social programs to secure more deficit reduction.

But the details show how far the president is ready to push House Republicans. The upfront tax increases in the proposal go beyond what Senate Democrats were able to pass earlier this year. Tax rates would go up for higher-income earners, as in the Senate bill, but Mr. Obama wants their dividends to be taxed as ordinary income, something the Senate did not approve. He also wants the estate tax to be levied at 45 percent on inheritances over $3.5 million, a step several Democratic senators balked at. The Senate bill made no changes to the estate tax, which currently taxes inheritances over $5 million at 35 percent. On Jan. 1, the estate tax is scheduled to rise to 55 percent beginning with inheritances exceeding $1 million.

Administration negotiators also want the initial stage to include an extension of the payroll tax cut or an equivalent policy aimed at working-class families, an extension of a business tax credit for investments, and the extension of a number of other expiring business tax credits, like the one on research and development.

To ensure that there are no more crises like the debt ceiling impasse last year, Mr. Geithner proposed permanently ending Congressional purview over the federal borrowing limit, Republican aides said. He said that Congress could be allowed to pass a resolution blocking an increase in the debt limit, but that the president would be able to veto that resolution. Congress could block a higher borrowing limit only if two-thirds of lawmakers overrode the veto.

In total, Mr. Geithner presented the package as a $4 trillion reduction in future deficits, but that too was disputed. The figure includes cuts to domestic programs agreed to last year that the White House put at $1.2 trillion but that Republicans say is about $300 billion less. And it counts savings from ending the wars in Iraq and Afghanistan, even though no one has proposed maintaining war spending over the next decade at the current rate.

“Listen, this is not a game,” Mr. Boehner said. “Jobs are on the line. The American economy is on the line. And this is a moment for adult leadership.”

Senate Democratic leaders left their meeting with Mr. Geithner ecstatic. If the Republicans want additional spending cuts in that down payment, the onus is on them to put them on the table, said Senator Harry Reid of Nevada, the Democratic leader.

Article source: http://www.nytimes.com/2012/11/30/us/politics/fiscal-talks-in-congress-seem-to-reach-impasse.html?partner=rss&emc=rss

I.M.F. Chief Urges Europe to Beef Up Bailout Funds

Angela Merkel, the German chancellor, said in Berlin it was “high time to work on the new Greece program” after talks between bondholders and authorities in Athens bogged down over the weekend.

Jan Kees de Jager, the Dutch finance minister, told parties charged with working out a deal on Greek debt to speed up negotiations or face the prospect of bruising financial consequences.

“Our goal is a sustainable debt,” said Mr. de Jager, arriving at a meeting of finance ministers in Brussels. “It has our preference if it’s voluntary, but it’s not a precondition for us,” he said.

The Cypriot finance minister, Charilaos Stavrakis, warned that “we cannot keep it open forever,” referring to the question of what interest rate to charge for new Greek debt.

The comments suggest that patience among leaders may be wearing thin as bondholders and Greek officials wrangle over the interest rate for new bonds that would be part of a deal reducing Greek debt by around €100 billion, or $130 billion.

Private sector bondholders are seeking yields of nearly 4 percent, but Greece, as well as Germany and the I.M.F., argue that a yield closer to 3 percent is necessary to give the restructuring a serious hope of success. With the talks at an impasse, the pressure is now mounting on finance ministers to push for a solution.

At stake is the need to pare Greek debt to levels where the country can conclude a bailout with the European Union and the I.M.F. that would give it the cash it needs to repay loans coming due in March and, officials hope, allow Athens to finance its needs through 2013. Without such a package, Greece could be faced with a chaotic default that further destabilizes the rest of the euro zone.

Reinforcing the need for a deal, Mrs. Merkel said she wanted agreement “soon enough that no new bridge loan whatsoever will be needed” for Greece.

With pressure building, the euro strengthened to an almost three-week high against the dollar after the French finance minister, François Baroin, said in Paris that negotiations over Greek debt were making “tangible progress.” Olli Rehn, the E.U. commissioner for economic and monetary affairs, said he was optimistic that such progress could be transformed into an agreement “in the course of this week.”

Evangelos Venizelos, the Greek finance minister, said as he arrived in Brussels that Greece was ready to complete a private-sector debt swap “on time.”

Even as ministers prodded financiers to do their part to ease the crisis in the euro zone, the I.M.F. pressed European governments to bolster the bailout funds available for euro zone countries so that the region’s problems can be contained.

“We need a larger fire wall,” Christine Lagarde, managing director of the International Monetary Fund, said at a conference in Berlin.

Governments should add “substantial real resources to what is currently available,” she said. She suggested that the €440 billion European Financial Stability Facility, a temporary bailout fund established in 2010, could be rolled into a €500 billion permanent fund, the European Stability Mechanism, that officials hope to introduce by the middle of this year.

Ms. Lagarde called on European leaders to complement the “fiscal compact” they agreed to last month with some form of financial risk-sharing. She mentioned bonds backed by debt securities issued by the euro zone or a debt-redemption fund as possible options.

E.U. ministers are trying to decide whether to allow majority decisions, instead of unanimity, for using the fund. Ms. Lagarde suggested simply “identifying a clear and credible timetable” for making the new fund operational “would help greatly.”

Mrs. Merkel said Germany was willing to speed up payments to the European Stability Mechanism from a schedule envisioned as five years. “We are willing to make capital payments together and would like to speak with others whether they are also willing,” she said. “I see this as taking priority.”

Article source: http://feeds.nytimes.com/click.phdo?i=7c394878aef5de3e4e76a8874494edde

Bucks Blog: Wednesday Reading: Three Million Could Lose Jobless Benefits

December 21

Wednesday Reading: Three Million Could Lose Jobless Benefits

Three million people could lose jobless benefits in impasse, Amazon.com makes the Fire less balky, good news and bad for older runners and other consumer-focused news from The New York Times.

Article source: http://feeds.nytimes.com/click.phdo?i=b2dd5b3a995250c3bf66f14fd07c68bb

Out of Debt-Limit Fight, a Bit of Stability on Spending

While provisions to raise the debt limit and create a Congressional deficit reduction committee drew most of the attention in the legislation that allowed the government to narrowly avert a default, House and Senate leaders also used the measure to establish federal spending limits for the next two years.

Lawmakers are still likely to clash over just how the money is parceled out to various agencies and the Pentagon. But members of both parties say the bipartisan compromise on overall spending makes it unlikely that an impasse will push Congress back to the brink of closing the government in a repeat of the April showdown that ended just hours before federal money ran out. The current fiscal year ends Sept. 30.

“It substantially reduces the risk of a shutdown fight,” said Representative Chris Van Hollen of Maryland, the senior Democrat on the Budget Committee, who added that the prospect of spending certainty helped him sell the debt limit agreement to his fellow Democrats.

In the debt limit bill, Congress allotted $1.043 trillion for spending on federal agencies and national security in 2012, an amount that does not include money for so-called mandatory programs like Medicare.

That level is $7 billion less than current spending, but $24 billion more than would be allowed under the budget drafted by Representative Paul D. Ryan, Republican of Wisconsin, and passed by House Republicans earlier this year. The ceiling rises to $1.047 trillion in the 2013 fiscal year, potentially saving Congress from another politically charged spending fight before the midterm elections in November 2012.

With the Congressional appropriations process in a shambles in recent years and the government running for months at a time on stopgap bills, leaders of both parties say the agreement could restore some order.

“It is imperative that the Congress complete these must-pass bills in a timely manner to avoid the harmful, destabilizing effects caused by a delayed and drawn-out appropriations process,” said Representative Harold Rogers, Republican of Kentucky and chairman of the House Appropriations Committee.

Still, obstacles remain. Congress has not passed even one of the 12 spending bills due by Oct. 1. While the new agreement is expected to accelerate consideration of spending measures, the shortage of time means the House and the Senate will probably have to again enact temporary stopgap measures to give lawmakers a chance to assemble the bills and bring them to the floor.

At the same time, some conservative activists are pressing House Republicans to insist on lower overall spending totals, noting that the debt limit legislation established ceilings but does not require that all the money be spent.

In an internal survey released last week, the conservative House Republican Study Committee asked its members to weigh in with their views on the new spending levels and how conservatives can use the coming spending deadline as leverage to continue to push for cuts.

But Mr. Rogers and House Republican leaders like Representative Eric Cantor of Virginia, the majority leader, are advocating that Republicans abide by the new agreement and not try to force lower spending.

“While all of us would like to have seen a lower discretionary appropriations ceiling for the upcoming fiscal year, the debt limit agreement did set a level of spending that is a real cut from the current year level,” Mr. Cantor said in a recent memorandum to his colleagues. “I believe it is in our interest to enact into law full-year appropriations bills at this new lower level.”

The Republican leadership would also like to focus most of its firepower on the new deficit reduction committee created under the debt limit deal and its efforts to find $1.2 trillion or more in savings over the next decade — a process with the potential for a bigger budgetary impact than another protracted tussle over just a few billion dollars in annual spending. The spending fights are taking a definite toll on the public’s view of Congress, according to recent polls.

Mr. Van Hollen and other Democrats noted that a push for cuts below the newly established levels would make Republicans look as though they were reneging, since the leadership negotiated the spending agreement and it was backed by most House Republicans as part of the legislation to break the debt limit impasse.

Even with the agreement on the so-called top-line dollar figure, Democrats and some Republicans say the spending restraints will force difficult choices since real spending would be reduced for agencies that have already absorbed a first round of cuts in the spending deal struck last April.

Aides have already begun trying to identify programs that can be trimmed back, and they predict that the House and Senate will face tough negotiations over spending on individual programs.

Efforts to add contentious policy provisions to the spending measures are also expected to set off partisan disputes. House Republicans have shown a determination to try to use the spending measures to block implementation of the new health care law, limit regulatory efforts by the Environmental Protection Agency and other agencies, and impose other restrictions on the Obama administration. While those fights could be messy, top lawmakers and aides do no expect them to prompt a government shutdown.

Article source: http://feeds.nytimes.com/click.phdo?i=2d55f47d909572f27c71e0abc33de8f1

Japan Buys Dollars to Weaken the Surging Yen

TOKYO — Japan said Thursday that it had intervened in the foreign exchange market, selling yen and buying dollars in a bid to reverse a punishing spike in the value of the Japanese currency.

Japan has been desperate to bulwark its fragile recovery from the March earthquake and tsunami. But even as companies have raced to repair damaged factories and resume production, they have been hit by a surge in the yen that threatens their business overseas.

A strong yen hurts Japan’s export-led economy by making its cars and electronics more expensive overseas, and by eroding the value of overseas earnings when converted into yen.

But the Japanese currency, long considered a safe haven, rose as investors wary of the debt impasse in the United States fled to other currencies. Against the dollar, the yen has surged about 11 percent in the last year, and 4 percent in the last month.

The rise has accelerated an upward trend in the yen that was already squeezing Japanese exporters’ profits. Toyota, Honda and Nissan all recently blamed their sharply lower earnings in the latest quarter in part on the strong yen.

Still, the effect of moves to manipulate foreign exchange markets, especially by a single country, has often been short-lived. Japan acted alone in the intervention on Thursday morning, though Tokyo is in touch with other countries over the maneuver, Yoshihiko Noda, its finance minister, told reporters. He also said he hoped that the Bank of Japan would take steps to support the government’s move.

The Bank of Japan, which has had a sometimes troubled relationship with the government, appeared to support the intervention. The central bank said Thursday morning it would end its regular policy meeting a day early, a sign it could announce additional policy to support the government’s bid to weaken the yen.

In a note to clients, Masaaki Kanno, an economist at JPMorgan Securities, said he expected the bank to announce a further easing of Japan’s monetary policy by extending an asset purchase program that would increase the bank’s reserves, increasing liquidity and helping to dilute the value of the yen.

Article source: http://feeds.nytimes.com/click.phdo?i=c1926900b9d1ba403c627069ba84a5fd

On All Levels of the Economy, Concern About the Impasse

Some economists say the effects of lowering the federal government’s credit rating to AA from AAA can be measured in the billions of dollars in increased borrowing costs for the government, and in the billions more that consumers, corporations, states and municipalities will have to pay for their credit. It could also erode consumer and business confidence, slowing even further the economy and job creation.

The prospect of a downgrade by one of the credit rating agencies once seemed almost unimaginable. But the impasse in Washington over the government’s deficit and $14.3 trillion debt limit has led some global financial players to expect the change.

A downgrade on debt issued by the United States would have less severe consequences than a default, which takes places when a government fails to pay its creditors. Many Wall Street bankers on Tuesday said they still believed a default would be avoided because its consequences for the markets and economy could be catastrophic. They were less certain, however, what the cumulative effect might be of a downgrade.

The view among many on Wall Street on Tuesday was that long-term Treasury yields could edge up by 0.10 percentage points, to 0.70 percentage points. That would eventually increase the amount of interest the United States pays on its debt by as much as tens of billions of dollars each year. The government now pays $250 billion a year on interest costs to service its debt.

The size of the increase depends on how long the stalemate in Washington continues, Terry Belton, the global head of fixed-income strategy at JPMorgan Chase, said in a conference call with reporters on Tuesday.

On the high end, the government’s interest payments could climb an additional $100 billion a year, Mr. Belton said. “That is a huge number, representing a long-term permanent increase in U.S. borrowing costs.”

Rates would also increase on some markets priced off Treasuries, including mortgages, credit cards and student and auto loans, analysts warned.

For a typical consumer with a $200,000 mortgage, the increase in yields could translate into an increase of $200 to $400 a year in their loan payments, according to Citigroup analysts.

Treasuries are also widely held as collateral in the huge repurchase markets that are used by banks around the world to raise overnight loans, and in clearing houses for financial derivatives. If Treasuries decline in value, participants could be asked to put up more collateral, which could cause selling across a broad swath of the markets.

Mohamed El-Erian, the chief economist at the investment firm Pimco, said he believed lawmakers would reach an agreement to raise the debt ceiling and avert a default on the country’s debt, but that the nation’s rating would remain vulnerable.

“A downgrade would mean a weaker dollar, somewhat higher interest rates and a further blow to the already fragile national economic confidence,” Mr. El-Erian said. “This translates into weaker growth and even greater headwinds when it comes to job creation, which is absolutely critical at this stage.”

Standard Poor’s, one of the three major ratings agencies, has said that just raising the debt ceiling would not be enough. Without a “credible” plan by Congress for at least $4 trillion in savings, the agency has warned, the United States’ credit rating might still be downgraded.

Analysts and economists pointed to that stance this week when they expressed growing concerns about a downgrade. On Monday, some of the country’s largest state pension funds sent a letter to President Obama and Congress, warning that “the fallout will be felt all across America” and that economic growth “will stall for years to come.”

Standard Poor’s has warned that if the United States is downgraded, many other sectors and institutions could be as well, which would cause them to face higher borrowing costs. Among those it put on a negative credit watch in mid-July were some bond issues by Fannie Mae and Freddie Mac, a few insurance companies, 604 structured finance transactions that totaled $373 billion when issued and some municipal debt backed by the United States.

It was unclear whether the borrowing costs for these entities would climb much higher. Some investors said they did not give much weight to the difference between a triple-A and a double-A.

But in the broader economy, if money that might have gone to new purchases or increased investment were instead diverted to higher interest payments, the result could be slower economic growth and a higher jobless rate for the remainder of the year, analysts warn.

Macroeconomic Advisers said the country’s gross domestic product could slow in the second half of this year to 2.6 percent from a forecasted 3.2 percent, and that the jobless rate could end the year at 9.6 percent, above the 9.2 percent expected.

Joel Prakken, chairman of Macroeconomic Advisers, said any change in interest rates would probably be small and not felt for several years. “The real story is whether the uncertainty will cause consumers and companies to stop spending,” he said.

On that front, some analysts noted that corporations stopped spending long before the debt-limit debate hit the news.

“Companies clearly have had record cash on the books for a year and a half now,” said Alec Young, an equity strategist at Standard Poor’s Equity Research. “Yes, they’re not spending the money, they’re not hiring, but is it because of this issue?”

Eric Dash and Mary Williams Walsh contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=f0b291b862a0fe8d76f89c722d1735b0