November 21, 2017

Soft Jobs Data Not Expected to Deter Fed

The Labor Department’s snapshot of the job market in August had several discouraging details underneath a relatively mundane headline number, which showed the economy added an estimated 169,000 jobs. Perhaps the most striking was a plunge in the share of Americans who are either working or looking for work, which fell to its lowest level since 1978.

“If you had a more optimistic view of the economy, which I think the Fed does, this should give you some pause,” said Joshua Shapiro, chief United States economist at MFR. “It’s been a real struggle here in the labor market.”

At the same time, earlier estimates of job growth in July and June were revised sharply downward, and hiring over the summer months was largely driven by low-wage sectors like retail, food services and health care.

Still, economists said they believed that Fed governors would find enough bright spots in this report to justify scaling back their monthly purchases of long-term Treasury bonds and mortgage-backed securities — measures that help push down long-term interest rates — after their next meeting on Sept. 17 and 18.

“There’s just barely enough in that report and in other forward-looking indicators we’ve seen to give Fed governors the confidence they need on the 18th to taper,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.

“For the record, I don’t think they should, given the risks posed by Syria and the impending fiscal chaos in Washington,” he said, noting the expected Congressional battles over the debt limit and spending measures. “The costs of delaying until some of those factors are sorted out is not very great. But the Fed has given no indication it’s thinking that way.”

Investors seemed to agree, with bond yields dipping slightly after the jobs report came out. As for stocks, after a topsy-turvy day, the Standard Poor’s 500-stock index and the Dow Jones industrial average both closed about where they began on Friday. In Friday trading, the Dow closed down 14.98 points, or 0.1 percent, at 14,992. The S. P. 500 edged up 0.09 points, or 0.01 percent, closing at 1,655.17. The Nasdaq climbed a slight 1.23 points, or 0.03 percent, to finish at 3,660.01. The price on a 10-year Treasury note rose 16/32, to
96 9/32, with the yield falling to 2.93 from 3.00 on Thursday. The number of payroll jobs added in August was just shy of the average pace of hiring over the last year, and the unemployment rate edged down to 7.3 percent from 7.4 percent. Unemployment, however, fell for the “wrong reasons,” Mr. Shapiro said: because people dropped out of the labor force and so were no longer counted as unemployed, and not because more unemployed people found jobs.

The jobless rate is now edging close to the 7 percent level that the Federal Reserve chairman, Ben S. Bernanke, had identified as the Fed’s target for ending its asset purchases altogether around the middle of next year. For several months, Fed governors have been saying that the Fed expected to begin reducing the monthly purchases “later this year,” which has been widely interpreted to point toward beginning the shift as early as September.

Charles L. Evans, president of the Federal Reserve Bank of Chicago and one of the more vocal proponents of highly accommodative monetary policy, used this phrasing in a speech on Friday, suggesting he was open-minded about the “exact pattern of the reduction in purchases that we eventually take.”

The Fed’s more hawkish members have been more explicit about their desired policy moves. Esther L. George, president of the Federal Reserve Bank of Kansas City and a leading critic of the asset purchases, said on Friday that the Fed should cut its bond buying to $70 billion a month in September, from the current $85 billion a month, split between Treasuries and mortgage bonds. “It is time to begin a gradual — and predictable — normalization of policy,” she said.

Some economists suggested that Fed governors could react to the latest economic data by tapering their bond purchases slowly over a longer period of time and perhaps in conjunction with other measures that would underscore the central bank’s commitment to helping the economy heal. For example, the Fed could announce that it is extending the period that it holds short-term interest rates near zero.

Binyamin Appelbaum contributed reporting.

This article has been revised to reflect the following correction:

Correction: September 6, 2013

An earlier version of this article referred incorrectly to members of the Federal Open Market Committee. Some members are presidents of regional Federal Reserve banks; they are not all members of the Board of Governors.

Article source: http://www.nytimes.com/2013/09/07/business/economy/us-economy-adds-169000-jobs-as-unemployment-rate-falls.html?partner=rss&emc=rss

After Adding Some Jobs, U.S. Economy Still Uncertain

The government also revised its estimates upward for the previous two months, suggesting that job growth in July and August had been better than originally reported. Although the numbers staved off the bleakest forecasts for now, the Labor Department’s monthly snapshot highlighted the challenges for President Obama as he continues to press a balky Congress to pass his jobs bill.

The unemployment rate for September was unchanged from August at 9.1 percent. And while the number of new jobs exceeded consensus forecasts, it was barely enough to accommodate population growth, much less help those who have been out of work for an extended period.

More than two years after the recovery officially began, there are still 14 million people searching for work, a little less than half of them for six months or longer.

September’s employment numbers were “no disaster,” said Joshua Shapiro, chief United States economist at MFR. But, he added, “it’s certainly not off to the races, and in absolute terms it is still very, very weak.”

While the private sector added 137,000 jobs in September, that included about 45,000 Verizon workers who had been on strike during August and returned to work by September. The public sector was the weakest link, with the largest losses in public education.

With the economy trying to build off a precarious foundation, some recent indicators actually paint a slightly better picture. Auto sales rose close to 10 percent in September to their highest level in five months, and sales at chain stores also increased last month, led by luxury purchases.

Consumer confidence has lately come off of its lows. And the government reported net gains of 127,000 and 57,000 jobs in July and August, respectively, an increase from the originally released numbers.

But the housing market is still teetering and economists have grown increasingly concerned about a ballooning European debt crisis that could send ripples across the Atlantic.

The focus of political attention remains job growth. In a news conference on Thursday, the president urged Congress to act to prevent weaker growth and more job losses. “There are too many people hurting in this country for us to do nothing,” Mr. Obama said. “And the economy is just too fragile for us to let politics get in the way of action.”

Some economists worried that the September jobs report was not galvanizing enough for the president’s agenda. “Policy is running out of ammunition and the willingness here, particularly with today’s number, may be even less to do anything dramatic,” said Torsten Slok, chief international economist at Deutsche Bank.

“The optimists could argue that now we don’t need any more support because we have at least some evidence that the economy is not falling apart completely, so waiting for things to organically improve is the most likely scenario.”

Large-scale job losses might offer Mr. Obama help in pressuring Congress on his jobs bill. Strong growth in employment would help counter criticism from Republican presidential candidates. But the so-so results merely added to his dilemma.

On Capitol Hill, Republicans swiftly seized on the report to criticize the administration.

“Across the country, millions of people remain out of work and uncertainty from Washington continues to freeze capital and prevent businesses small and large from hiring,” said Representative Eric Cantor of Virginia, the House majority leader.

He added, “Unfortunately, the policies being promoted by this administration are serving as a roadblock to growth. Constant threats of tax increases and excessive regulations send the wrong signal to our entrepreneurs, investors and small business people.”

Representative Michele Bachmann of Minnesota said in a statement from her presidential campaign, “The president is offering only bad medicine — higher taxes, more  spending, more dubious ‘green jobs’ boondoggles and more tactical blame-gaming.”

Advocates for President Obama’s jobs bill said the aid was desperately needed to alleviate the suffering of the unemployed. The average length of unemployment rose to 40.5 weeks in September. Including those who are working part-time because they cannot find full-time employment and those who are too discouraged to look for work anymore, the total unemployment rate rose to 16.5 percent.

Jennifer Steinhauer and Michael Shear contributed reporting from Washington.

Article source: http://www.nytimes.com/2011/10/08/business/economy/us-adds-103000-jobs-rate-steady-at-9-1.html?partner=rss&emc=rss

Sales of New Homes in U.S. Fell Again in July

The housing market is showing little sign of recovery, with sales of new homes in the United States down again in July, according to the latest government data.

Sales of new homes reached an annual rate of 298,000 in July, down from a rate in June that was revised to 300,000 from 312,000, the Census Bureau report said. The July figures fell short of analysts’ expectations for a rate of 310,000.

The median sales price of a new home was $222,000 in July, also down from the previous month. The stock of new homes for sale at the end of July was 165,000, the lowest this year, and would last slightly more than six months at the current sales rate.

For months, most indicators of the housing market have been suggesting bleak conditions. The number of permits issued to builders of single-family houses has also been declining.

Patrick Newport, United States economist for IHS Global Insight, said that his firm has forecast new-home sales will fall to a record low this year, 319,000 compared with 321,000 in 2010.

“It has gotten worse for builders,” said Mr. Newport. “They are stuck in a market where they cannot sell new homes.”

In addition, demand for new homes is stagnant despite record low mortgage interest rates, and competition from foreclosures continues to cloud the sector, said Joshua Shapiro, chief United States economist at MFR Inc.

“This suggests that prices will continue to edge lower at the bottom end of the market even as demand for these homes picks up a bit,” Mr. Shapiro said.

The sales rate in July came close to the record low of 281,000 in February, and the level of inventories in recent months this year has been the lowest recorded since December 1967, he wrote in a research note.

“We are just bouncing along the bottom,” Mr. Shapiro said in a telephone interview. “There is no indication out there that anything is improving. It is bouncing along at historic lows at this point.”

Economists say that it would take a turnaround in the American job market for some of the vitality to return to the housing sector.

“We need job growth but in conjunction with that, housing prices have got to stop dropping,” Mr. Newport said.

Still, one analyst said that the market was showing the potential to recover in the years ahead despite weakness in the monthly data. The analyst, Russell Price, a senior economist with Ameriprise Financial, noted that median and average prices were higher in July on a year-over-year basis.

“Generally we are forming a base in the housing sector this year,” he said. “On aggregate, I think that conditions are solidifying at historically low levels. We are unlikely to go any further down.

“As the economy does recover, and you get less competition from foreclosure sales, the market is poised for a relatively solid rebound in the years ahead,” Mr. Price said.

Article source: http://feeds.nytimes.com/click.phdo?i=9937fa1f695cf2425f5eca3e2ec3c4dd

Stocks Fall Again on Consumer Data

As voting on the debt ceiling moved to the Senate on Tuesday, Wall Street took another step back.

Stock traders were focusing on American consumer spending and income as economists try to gauge the strength of the economy’s ability to bounce back after last week’s disappointing G.D.P report.

In early trading, the Standard Poor’s 500-stock index was down 8.47 points, or 0.66 percent. The Dow Jones industrial average was off 68.64 points, or 0.57 percent, and the Nasdaq index fell 5.56 points, or 0.20 percent.

New data showed that nominal personal income inched up by 0.1 percent in June and personal spending fell 0.2 percent. Wage and salary income, central to the ability of consumers to open their wallets, was unchanged in June from 0.2 percent in May, its smallest rise this year.

“With consumers still facing serious headwinds from a deteriorating housing sector, considerable debt burdens, and high costs for food and energy, the income generated by labor market recovery is absolutely critical,” said Joshua Shapiro, the chief United States economist for MFR, in a research note. “Without significant improvement in the labor market, consumer spending and hence overall real G.D.P. growth will prove disappointing in coming quarters.”

While negotiations on lifting the nation’s borrowing limit have loomed over the markets for weeks, any resolution of the debt ceiling with a Senate vote on Tuesday would still not guarantee the country would retain its sterling credit rating. And the uncertainty is compounded by the nation’s economic challenges, which are also likely to continue to press upon investors.

The broader market as measured by the S.P. index is down more than 4 percent over the last six consecutive days of declines, as of Monday’s close, and the Dow marked seven consecutive trading days of declines that also brought that index down more than 4 percent.

“The challenges that we are facing economically are that the hits just keep coming,” Lawrence Creatura, portfolio manager at Federated Investors, said. “We do have somewhat of a resolution to our budgetary impasse but that does not overwhelm the fact that economically speaking that the data continues to deteriorate.”

Already, some investors were bracing for Friday, when the Labor Department releases its national report on jobs, with estimates that the economy will add 85,000 nonfarm payrolls for its July tally, according to a Bloomberg survey, compared with the 18,000 tacked on to payrolls in June.

“This is a single-variable economy,” said Mr. Creatura. “And that dominant statistic is the jobs data. That is the number that matters, the single number that matters.”

Still, one bright spot might be the corporate sector. Equities have benefitted so far this year because of record profits.

“Repairing our balance sheets as a corporation and as a nation; that process of repair and healing is occurring,” said Mr. Creatura. “The nature of it is that it is slow, and we are all impatient for a full return to a robust economy, but it takes time.”

Early on Tuesday, the benchmark 10-year Treasury was at 2.72 percent, compared with 2.75 percent late on Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=c157c541ecdda8760016846fecd35e05

Markets Turn Up Sharply After Release of Retail Data

In the United States, an indicator of consumer purchasing from the Department of Commerce showed that overall retail sales in May declined by 0.2 percent, a smaller decline than the 0.5 percent fall that had been forecast by analysts surveyed by Bloomberg. The figure was a reversal of the 0.3 percent rise in April, and it was the first monthly decline after 10 consecutive increases.

When gasoline sales are excluded, retail sales fell by 0.3 percent, according to the government figures, also the first time this year that figure turned negative.

“The recent trajectory of consumer spending excluding the gasoline category is cause for concern,” said Joshua Shapiro, the chief United States economist for MFR Inc. “With higher gas prices eating into the income available for discretionary spending, the consumer faces stiff headwinds. This underscores how absolutely key it is that the labor market continue to improve.”

Analysts suggested that the markets on Tuesday were propelled partly on economic data from China that pointed to an increase in industrial output and a rise in consumer prices that was in line with forecasts.

Keith B. Hembre, the chief economist and chief investment strategist at First American Funds, said the data from China was “not a big downside surprise” and led to stronger market sentiment in Asia and Europe that was passed on to the United States.

“It is a pretty powerful relief rally,” he said.

The Dow Jones industrial average closed up 123.14 points, or 1.03 percent, to 12,076.11. The Standard Poor’s 500-stock index rose 16.04 points, or 1.26 percent, to 1,287.87. The Nasdaq composite index average climbed 39.03 points, or 1.48 percent, to 2,678.72.

The stock market in the United States had risen slightly on Monday after six weeks of losses partly fueled by concerns over the pace of the global and domestic economic recovery, and concerns over euro zone sovereign debt challenges.

Another issue that has been lingering in the markets has been the protracted political wrangling over the national debt ceiling in the United States. Moody’s Investors Service said earlier this month that it might downgrade the United States credit rating if lawmakers did not raise the ceiling “in coming weeks.”

On Tuesday, the chairman of the Federal Reserve, Ben S. Bernanke, warned about the consequences of a continued delay, saying even a short suspension of payments on principal or interest on the Treasury’s debt obligations could cause severe disruptions in financial markets.

“In debating critical fiscal issues, we should avoid unnecessary actions or threats that risk shaking the confidence of investors in the ability and willingness of the U.S. government to pay its bills,” Mr. Bernanke said in a speech in Washington.

He also said that interest rates soar as investors lose confidence, as seen in a number of countries recently.

“Although historical experience and economic theory do not show the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory is moving us ever closer to that point,” he said.

Still, the stock market had little discernible reaction to the remarks and surged throughout the day.

Among the leading shares was the Best Buy Company, which rose more than 4 percent after reporting net earnings of $136 million, or $0.35 a diluted share, for its fiscal first quarter ended May 28. That compared with $155 million, or $0.36 a diluted share, for the same period in 2010.

On the Dow, Caterpillar was up 2.79 percent, Home Depot rose more than 4 percent and Intel rose more than 2 percent. “The markets have been in a corrective stage, and I think we have reached levels now that perhaps we can see some renewed interest in terms of valuations,” said Peter Cardillo, the chief market economist for Avalon Partners.

Mr. Cardillo said the United States data was “not that bad,” reflecting the impact on consumer prices from higher gasoline prices and the situation in Japan.

“None of them suggest that we are headed for a double-dip recession,” Mr. Cardillo added.

Another economist noted that the retail sales data and other reports Tuesday painted a “disappointing picture” of the domestic economy.

Steven Ricchiuto, the chief economist for Mizuho Securities USA, cited a National Federation of Independent Business consumer confidence index and a government report that said wholesale prices rose in May.

“Small business optimism continues to remain in recession territory with no sign of firming, while consumers continue to consolidate spending even after energy prices have eased,” he said in a research note

The Producer Price Index, which reflects commodity prices for manufacturers, rose 0.2 percent in May, according to seasonally adjusted figures provided by the Bureau of Labor Statistics. The increase was slightly higher than the 0.1 percent rise forecast by analysts, and it came in below the 0.8 percent rise in April.

The May increase in the finished goods index was attributed mostly to prices for finished energy goods, which rose 1.5 percent, the eighth consecutive monthly advance. The food component of the index declined 1.4 percent.

The core index for finished goods, which excludes the volatile energy and food components, also rose 0.2 percent, in line with forecasts and slightly less than 0.3 percent rise in April, the government figures showed. It was the sixth consecutive rise in the core producer prices index.

Gasoline prices moved up 2.7 percent in May, the statistics showed.

When calculated on a year-over-year basis, the total finished goods index was 7.3 percent higher in May.

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