July 1, 2022

Employment and Retail Sales Record Recent Gains

The number of Americans seeking unemployment benefits dropped 12,000 last week to a seasonally adjusted 334,000, a decline that suggests steady job gains will endure.

The less volatile four-week average decreased 7,250 to 345,250, the Labor Department said on Thursday. Both figures are roughly 7,000 higher than a month ago, which were the lowest in five years.

Applications, a proxy for layoffs, have fallen 6.5 percent since January, suggesting that employers were cutting fewer jobs.

At the same time, hiring has been steady. Employers added 175,000 jobs in May, the department said last week. That nearly matched the monthly average for the previous year. The unemployment rate rose to 7.6 percent because more Americans were confident they could find work and began searching for a job.

Separately, the Commerce Department said that retail sales increased 0.6 percent last month, showing that consumers remained resilient despite higher taxes and could drive faster growth later this year.

“The retail sales result is a plus, no question,” said Jennifer Lee, an economist at BMO Capital Markets. “And the improving trend in jobless claims is supportive for future spending.”

About 4.5 million people received unemployment benefits in the week that ended May 25, the latest data available. That is 130,000 fewer than the previous week. The number of people receiving benefits fell 29 percent in the last year. Some of those recipients probably found jobs, but many probably used all the benefits available to them.

The economy grew at a solid annual rate of 2.4 percent in the first three months of the year. Consumer spending rose at the fastest pace in more than two years.

The Commerce Department also reported that businesses increased their stockpiles in April but their sales fell for a second straight month, constrained by a decline in orders to American factories.

Stockpiles rose 0.3 percent in April from March, after a decline of 0.1 percent in March from February.

Sales slipped 0.1 percent in April, after a sharp 1.2 percent drop in March. The figures represent the first back-to-back sales declines in nearly a year, although the weakness was concentrated in manufacturing.

More restocking bolsters economic growth because it means companies are ordering more manufactured goods. In April, retailers increased restocking 0.4 percent to lead all categories. Manufacturing and wholesale stockpiles grew 0.2 percent.

Article source: http://www.nytimes.com/2013/06/14/business/economy/employment-and-retail-sales-improved-in-may.html?partner=rss&emc=rss

In Portugal, More Cuts on Way to Ease Debt Crisis

Just weeks after European leaders tamped down a banking crisis in Cyprus, troubles in the euro zone have again reared their ugly head, this time in Portugal.

In an address to his beleaguered nation on Sunday, Prime Minister Pedro Passos Coelho warned that his government would be forced to cut spending more and that lives “will become more difficult” after a court on Friday struck down some of the austerity measures agreed to in exchange for a bailout package two years ago.

The renewed tension in Portugal raised the specter of further trouble elsewhere in the euro zone, where ailing members have struggled to rebuild economic growth after enduring wrenching spending cuts.

“The risks in the euro zone have increased markedly over the past six weeks or so,” wrote Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based consultancy that assesses risk on sovereign debt.

The flash point for the latest trouble took place on Friday, when Portugal’s Constitutional Court struck down four of nine contested austerity measures that the government introduced last year as part of a 2013 budget that included about 5 billion euros, or $6.5 billion, of tax increases and spending cuts. The ruling left the government short about 1.4 billion euros of expected revenue, or more than one-fifth of the 2013 austerity package.

Specifically, the court, which began reviewing the legality of the government’s austerity measures in January, ruled as unconstitutional and discriminatory the government’s plans to cut holiday bonuses for civil servants and pensions, as well as to reduce sick leave and unemployment benefits.

Since Greece’s bailout in 2010, spikes in the borrowing costs of troubled euro countries have spread from one country to another as investors have tried to anticipate possible problems elsewhere in the currency union.

With that contagion risk in mind, politicians in Spain wasted no time over the weekend trying to distance their country from the latest turmoil in Lisbon.

Esteban González Pons, a senior official of the governing Popular Party, told a gathering of the party on Sunday that “Spain is not in the situation of Portugal.” He added: “If Portugal is in worse shape than Spain, it is because they have not taken the necessary measures that we have taken in our country.”

In May 2011, Portugal became the third euro zone country, after Greece and Ireland, to negotiate an international bailout. Lisbon received 78 billion euros from the International Monetary Fund and European creditors in return for introducing spending cuts and tax increases. Since then, however, Portugal has failed to meet its promised budgetary goals. Its economy has instead continued to sink into one of Europe’s most severe and prolonged recessions, spurring labor strikes and huge street demonstrations.

But Mr. Passos Coelho, in his first public address since the court ruling on Friday, defended the track record of his nearly two-year-old government and pledged to do “everything to avoid a second bailout.” He ruled out, however, introducing tax increases.

The prime minister addressed the nation on Sunday after an emergency meeting of his cabinet on Saturday, as well as talks with the Portuguese president, Anibal Cavaco Silva.

Cyprus received a bailout of 10 billion euros from international creditors last month. It may need even more to save its banks, a top German policy maker said on Sunday.

“The situation in Cyprus has stabilized in the last few days,” Jens Weidmann, president of the Bundesbank, the German central bank, told Deutschlandfunk radio. “However, I wouldn’t rule out that the need for liquidity in Cyprus could increase.”

The crisis in Cyprus reflects how urgent it is for the euro zone to establish a means to shut down failed banks without burdening taxpayers or endangering the financial system, Mr. Weidmann said.

“There continues to be a problem with banks that may be too connected and too big to wind down without creating a danger for the financial system,” he said.

Jack Ewing contributed reporting from Frankfurt.

Article source: http://www.nytimes.com/2013/04/08/business/in-portugal-more-cuts-on-way-to-ease-debt-crisis.html?partner=rss&emc=rss

Unemployment Data Lifts Stocks

Wall Street was higher on Thursday as investors attempted to push the rally further after the latest economic data suggested a pickup in the labor market.

In afternoon trading the Standard Poor’s 500-stock index added 0.2 percent, the Dow Jones industrial average rose 0.3 percent, and the Nasdaq composite index was up 0.2 percent.

On Wednesday, the Dow surged to record levels for a second day, while the S.P. 500 closed 1.5 percent below its own record close.

A strengthening economy and loose monetary policy by central banks around the world have pushed Wall Street equity markets higher this year. While some expect the market will ease off its current lofty levels, so far dips have been short-lived as investors look for an opportunity to buy.

“It appears the positive feeling in this market has shifted a bit from waiting for a pullback to put money to work, to not missing a train that’s leaving the station,” said Art Hogan, managing director of Lazard Capital Markets in New York.

Data from the government on Thursday showed the number of Americans filing claims for unemployment benefits unexpectedly fell last week to a seasonally adjusted 340,000. It was the second straight week of declines.

“It’s certainly welcoming to the market and it’s once again supporting the thought that the economic recovery is strengthening,” said Andrew

Also on Thursday, several retailers, including Costco Wholesale and Limited Brands, announced better-than-expected sales for February. The data was a rebound from the previous month, when shoppers first felt the effect of a payroll tax increase.

Investor attention will remain on the labor market ahead of Friday’s nonfarm payroll report, which is expected to show that the economy added 160,000 jobs in February. While it has been a soft spot in the economic recovery, the labor market is seen as healing slowly.

Economists say job gains of at least 250,000 a month over a sustained period are needed to have a significant impact on the unemployment rate.

Among individual stocks, the network equipment maker Ciena jumped 15.5 percent after it reported a smaller quarterly loss.

Colgate-Palmolive rose 0.3 percent after it said it was planning a two-for-one stock split and would increase its dividend.

Dell said Carl C. Icahn has urged the company to pursue a leveraged recapitalization and pay a $9 per share dividend instead of going private. The Dell chief executive, Michael S. Dell, has already struck a $24.4 billion deal to take the company, the No. 3 maker of personal computers, private. Its shares were 0.6 percent lower.

Article source: http://www.nytimes.com/2013/03/08/business/economy/daily-stock-market-activity.html?partner=rss&emc=rss

Stocks Retain Most of Their Gains

Stocks gave up some of their gains on Wall Street on Thursday following a rally in the previous session.

The advance on Wednesday was spurred by a deal by lawmakers in Washington to avert automatic budget cuts and tax increases that were due to kick in this year.

The broad-based Standard Poor’s 500-stock index ended down 0.2 percent. The Dow Jones industrial average also lost 0.2 percent, and the Nasdaq composite index fell 0.4 percent.

In earlier trading, the indexes had been slightly positive. But they pulled back after the minutes of the last Federal Reserve meeting showed that officials spoke about ending a new round of asset purchases by the middle of 2013, less than a year after the start of its latest effort to drive down unemployment.

An industry report showed that private-sector employers added 215,000 jobs in December, well above economists’ expectations for a gain of 133,000 jobs, according to a Reuters survey.

“The underlying economy has momentum, and the employment data confirms that,” said John Brady, managing director at R.J. O’Brien Associates in Chicago. “The political issues in Washington counter the momentum we’re seeing in the economy, but you might see still equities grind higher today on this.”

A separate report showed the number of Americans filing new claims for unemployment benefits rose last week, but the data was distorted by year-end holidays.

Wall Street began the new year Wednesday with its best performance in more than a year, sparked by a last-minute deal in Washington to avert automatic massive tax increases and spending cuts that, in a worst-case scenario, would have hurt the nation’s economic growth.

Costco Wholesale reported a better-than-expected 9 percent rise in December sales at stores open at least a year, mainly helped by an additional sales day in the reporting period. Costco shares were up 1 percent.

Family Dollar Stores reported a lower-than-expected quarterly profit as its emphasis on selling more everyday items like cigarettes and soft drinks put pressure on margins. The stock fell 13 percent.

Major European shares were mostly down modestly, although the FTSE 100 in London rose 0.3 percent.

Article source: http://www.nytimes.com/2013/01/04/business/daily-stock-market-activity.html?partner=rss&emc=rss

Senate Leaders Racing to Beat Fiscal Deadline

As part of the last-minute negotiations, the lawmakers were haggling over unemployment benefits, cuts in Medicare payments to doctors, taxes on large inheritances and how to limit the impact of the alternative minimum tax, a parallel income tax system that is intended to ensure the rich pay a fair share but that is increasingly encroaching on the middle class.

President Obama said that if talks between the Senate leaders broke down, he wanted the Senate to schedule an up-or-down vote on a narrower measure that would extend only the middle-class tax breaks and unemployment benefits. The Senate majority leader, Harry Reid of Nevada, said he would schedule such a vote on Monday absent a deal.

If Congress is unable to act before the new year, Washington will effectively usher in a series of automatic tax increases and a program of drastic spending cuts that economists say could pitch the country back into recession.

The president and lawmakers put those spending cuts in place this year as draconian incentives that would force them to confront the nation’s growing debt. Now, lawmakers are trying to keep them from happening, though it seemed most likely on Saturday that the cuts, known as sequestration, would be left for the next Congress, to be sworn in this week.

“We just can’t afford a politically self-inflicted wound to our economy,” Mr. Obama said Saturday in his weekly address. “The housing market is healing, but that could stall if folks are seeing smaller paychecks. The unemployment rate is the lowest it’s been since 2008, but already families and businesses are starting to hold back because of the dysfunction they see in Washington.”

The fear of another painful economic slowdown appears to have accelerated deal-making on Capitol Hill with just 48 hours left before the so-called fiscal cliff arrives. Weeks of public sniping between Mr. Reid, the Democratic leader, and Senator Mitch McConnell of Kentucky, the Republican leader, ebbed on Friday evening with pledges of cooperation and optimism from both.

On Saturday, though, that sentiment was put to the test as 98 senators waited for word whether their leaders had come up with a proposal that might pass muster with members of both parties. The first votes in the Senate, if needed, are scheduled for Sunday afternoon.

“It’s a little like playing Russian roulette with the economy,” said Senator Mark Warner, Democrat of Virginia. “The consequences could be enormous.”

Members of Congress were mostly absent from the Capitol on Saturday, after two days of Senate votes on other matters and a day before both chambers were to reconvene. However, senior aides were working on proposals in their offices or at their homes.

Speaker John A. Boehner stopped by the Capitol briefly to see his chief of staff on Saturday afternoon. Mr. McConnell spent much of the day in his office.

Aides to Mr. Reid were expecting to receive offers from Mr. McConnell’s staff, but no progress was reported by midday. Even if the talks took a positive turn, Senate aides said, no announcement was expected before the leaders briefed their caucuses on Sunday.

The chief sticking point among lawmakers and the president continued to be how to set tax rates for the next decade and beyond. With the Bush-era tax cuts expiring, Mr. Obama and Democrats have said they want tax rates to rise on income over $250,000 a year, while Republicans want a higher threshold, perhaps at $400,000.

Democrats and Republicans are also divided on the tax on inherited estates, which currently hits inheritances over $5 million at 35 percent. On Jan. 1, it is scheduled to rise to 55 percent beginning with inheritances exceeding $1 million.

The political drama in Washington over the weekend was given greater urgency by the fear that the economic gains of the past two years could be lost if no deal is reached.

Some of the consequences of Congressional inaction would be felt almost at once on Tuesday, in employee paychecks, doctors’ offices and financial markets. Analysts said the effect would be cumulative, building over time.

An early barometer would probably be the financial markets, where skittish investors, as they have during previous Congressional cliffhangers, could send the stock market lower on fears of another prolonged period of economic distress.

In 2011, the political battles over whether to raise the nation’s borrowing limit prompted Standard Poor’s to downgrade its rating of American debt, suggesting a higher risk of default. The Dow Jones industrial average fell 635 points in a volatile day of trading after the downgrade.

This month, traders have again nervously watched the political maneuvering in Washington, and the markets have jumped or dropped at tidbits of news from the negotiations. Two weeks ago, Ben S. Bernanke, the chairman of the Federal Reserve Board, predicted that if lawmakers failed to reach a deal, “the economy will, I think, go off the cliff.”

Immediately — regardless of whether a deal is reached — every working American’s taxes will go up because neither party is fighting to extend a Social Security payroll tax cut that has been in place for two years.

Robert Pear and Jennifer Steinhauer contributed reporting.

Article source: http://www.nytimes.com/2012/12/30/us/politics/president-obama-urges-last-minute-tax-deal.html?partner=rss&emc=rss

Fiscal Cutoff Gradually Morphs Into a Horizon

Until late last week, most observers had expected the president and Congressional Republicans to come up with at least a short-term compromise before the year-end deadline. But the failure of Speaker John A. Boehner to win support for tax increases on the wealthiest Americans from fellow House Republicans has forced many economic observers to reconsider what might happen if political leaders remain deadlocked into 2013.

Wall Street is still betting on a quick deal, but that confidence is misplaced, said Julia Coronado, chief North American economist at BNP Paribas. “Markets have been incredibly complacent about this,” she said. If a compromise cannot be found by Jan. 1, she said, “the markets will take that hard.”

Some hits — like a two percentage point increase in payroll taxes and the end of unemployment benefits for more than two million jobless Americans — would be felt right away. But other effects, like tens of billions in automatic spending cuts, to include both military and other programs, would be spread out between now and the end of the 2013 fiscal year in September. These could quickly be reversed if a compromise is found.

Similarly, the expiration of Bush-era tax cuts on Jan. 1 would not have a major impact on consumers if Congress quickly agreed to extend them for all but the wealthiest Americans in early 2013, as is widely expected.

Other probable changes, like a jump in taxes on capital gains and dividends, would most likely be felt over a broader period rather than as an immediate blow to the economy.

In the meantime, more observers are contemplating what the impact will be if Washington ignores the year-end deadline and waits until January or February to act.

“It’s still possible they will work something out by the end of the year, but the probability seems reasonably high that we may go into January with no agreement,” said Dean Maki, chief United States economist at Barclays Capital. “But the longer this goes on, the more nervous I get about first-quarter growth. If negotiations were to linger into March, then the first quarter could be much weaker.”

If the impasse lasted even longer and the full force of more than $500 billion in tax increases and spending cuts hit the economy, the Congressional Budget Office predicts the country would slip into recession in the first half of 2013, with unemployment rising to 9.1 percent by the fourth quarter of 2013. But for all the pessimism recently, most observers still think a compromise will be reached, even if it takes a few more weeks.

Negotiations are set to resume in the coming days, following a break for Christmas, although hopes for a so-called grand bargain have faded. Instead, President Obama is pushing for a scaled-back plan that would extend the Bush-era tax cuts on incomes below $250,000, while suspending the automatic spending cuts and extending unemployment benefits.

Michelle Meyer, senior United States economist at Bank of America Merrill Lynch, said there is a 40 percent chance of what she calls a “bungee-jump over the fiscal cliff,” with Congress failing to act until after Jan. 1 but eventually averting the full package of tax increases and spending cuts by mid-January. If that were to happen, she predicts a steep sell-off on Wall Street, which would quickly force political leaders to compromise.

Over all, Ms. Meyer estimates that the economy will grow by just 1 percent in the first quarter of 2013, well below the 3.1 percent pace recorded in the third quarter of 2012.

What’s worrisome, she added, is that consumer anxiety about the fiscal impasse has begun to mount, catching up with business leaders who have been warning of economic danger since summer. “What’s been missing in this recovery has been confidence,” she said. “We’d see a healthy recovery if it weren’t for this uncertainty and the potential shock from Washington.”

Indeed, the economy has been showing signs of life recently. Unemployment in November sank to 7.7 percent, a four-year low. Consumer spending has been picking up, and the housing market has continued to recover in many parts of the country. Overseas worries like slowing growth in China and recession in Europe have also faded.

Those trends have encouraged some observers, like Steve Blitz, chief economist at ITG Investment Research. He estimates that the economy will grow by nearly 2.5 percent in the first quarter if Washington comes up with even a modest compromise. In the absence of a deal, the pace of growth would be more like 1 percent, he said.

“I don’t think that not having a deal going into the new year is all that critical,” Mr. Blitz said. “It doesn’t mean you will immediately go into a recession.”

Article source: http://www.nytimes.com/2012/12/26/business/economy/fiscal-cliff-deadline-effects-economy.html?partner=rss&emc=rss

Applications for Jobless Claims Fall 11%

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

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

Much of the decline occurred this fall. Applications had fluctuated sharply over the first nine months of 2011, falling as low as 375,000 and rising as high as 478,000. By early September, they were at 432,000 — only 5,000 below where they began the year.

Since then, applications have declined steadily. That has pushed the four-week average, which smoothes fluctuations, to 373,250 — the lowest level since June 2008.

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

ADP, which processes payroll data, said private employers added 325,000 jobs last month.

Service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.

The trade group of purchasing managers said its index of nonmanufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 — the lowest in nearly two years — but well below last year’s high of 59.7 recorded in February. Any reading above 50 indicates expansion.

An increase in new orders and stronger imports drove last month’s modest expansion. But a gauge of hiring showed many service firms were hesitant to add workers.

Small businesses remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business said the proportion of those firms that expect to add workers was slightly off from the three-year high hit last month.

Economists are predicting that overall hiring increased in December and will strengthen this year.

John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.

Economists surveyed by The Associated Press project that the economy will generate an average of 175,000 jobs a month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

In November, the unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

The pickup in hiring reflected some modest improvement in the economy. Growth will probably top 3 percent at an annual rate in the final three months of last year, economists expect. That would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, many economists forecast that growth may slow to roughly 2 percent this year. Europe could fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012.

Article source: http://feeds.nytimes.com/click.phdo?i=f9bea53357b7ff1a697517a8dd0e2c80

High & Low Finance: U.S. Manufacturing Is a Bright Spot for the Economy

When the Labor Department reports December employment numbers on Friday, it is expected that manufacturing companies will have added jobs in two consecutive years. Until last year, there had not been a single year when manufacturing employment rose since 1997.

And this week the Institute for Supply Management, which has been surveying American manufacturers since 1948, reported that its employment index for December was 55.1, the highest reading since June. Any number above 50 indicates that more companies say they are hiring than say they are reducing employment.

There were new signs Thursday that the overall jobs climate was improving, as the Labor Department reported that new claims for unemployment benefits fell last week and a payroll company’s report showed strong growth in private-sector jobs in December.

As stores have filled with inexpensive imports from China and other Asian countries, the perception has risen that the United States no longer makes much of anything. Certainly there has been a long decline in manufacturing employment, which peaked in 1979 at 19.6 million workers. Now even with hiring over the last two years, the figure is 11.8 million, a decline of 40 percent from the high.

But those numbers obscure the fact that the United States remains a manufacturing power, albeit one that has been forced to specialize in higher-value items because its labor costs are far above those in Asia. The value of American manufactured exports over a 12-month period peaked at $1.095 trillion in the summer of 2008, just before the credit crisis caused world trade volumes to plunge. At the low, the 12-month figure fell below $800 billion, but it has since climbed back to $1.074 trillion. Those figures are not adjusted for inflation.

In total exports, including manufactured goods as well as other commodities like agricultural products, the United States ranked second in the world in 2010, behind China but just ahead of Germany. For the first 10 months of 2011, Germany is slightly ahead of the United States.

The United States is particularly strong in machinery, chemicals and transportation equipment, which together make up nearly half of the exports. Exports of computers and electronic products are growing, but are well below their precrisis levels. Production of cheaper computers and parts shifted to Asia long ago.

Just how long the rise in manufactured exports can last depends, in part, on the health of other economies. The euro zone no longer takes as large a share of American exports as it once did, but it is still a major customer. A recession there this year, as has been widely forecast, would hurt all major exporters, including the United States.

Similarly, the strong exports provide a stark reminder of how vulnerable this country could be to protectionist trade wars. The Doha round of world trade talks, which was supposed to result in the lowering of more trade barriers, has stalled. And last month China imposed punitive duties on imports of American large cars and sport utility vehicles, which total about $4 billion a year.

That move was seen as retaliation for United States requests that the World Trade Organization rule that Chinese subsidies for its solar and poultry industries violated international law. The Chinese denounced those requests as protectionist.

The American government denies that, of course. “Part of a foundation of a rules-based system is dispute settlement,” said Ron Kirk, the United States trade representative, in an interview with Reuters after the Chinese announced the new tariffs. “That’s what we think is so important about the W.T.O. How China reacts to that is up to China. But I just cannot buy into the argument that our standing and protecting the rights of our exporters and workers is somehow igniting a trade war or being protectionist.”

Since employment in the United States hit its recent low, in February 2010, the economy has added 2.4 million jobs through November, of which 302,000 were in manufacturing. With government payrolls shrinking, and financial services jobs also lower, manufacturing employment has played an important role in keeping the economy growing. It also is helping that construction employment appears to have hit bottom. In the first 11 months of 2011, it is up a small amount.

To be sure, the gains in manufacturing employment and exports have come after sharp declines during the recession and credit crisis. There are still 6 percent fewer manufacturing jobs than there were when President Obama took office at the beginning of 2009, and it seems very unlikely that he will be the first president since Bill Clinton, in his first term, to preside over growing manufacturing employment during a four-year term.

During George W. Bush’s two terms, the number of manufacturing jobs fell by 17 percent in the first four years and by 12 percent in the following four years. The number declined by 1 percent in Mr. Clinton’s second term.

The Institute for Supply Management survey of manufacturers has shown more companies planning to hire than to fire in every month since October 2009. That string of 27 months is the longest such string since 1972, but remains well behind the longest one, 36 months, which ended in December 1966.

Over all, that survey has indicated that a plurality of companies has believed business is getting better for 29 consecutive months, and December’s reading of 53.9 was the strongest since June.

This summer, one widely watched part of the I.S.M. survey showed that a small plurality of companies reported new orders were falling, a fact that helped to stimulate talk of a double-dip recession. But the latest reading, of 57.6, indicates widespread strength in new orders.

In an economy where there is widespread concern over consumer spending, and in which government spending and payrolls are under heavy pressure, manufacturing has become a bright spot. It is not enough to produce a strong rebound, and it remains vulnerable to weakness overseas. But it has helped to keep a weak economic recovery from turning into a new recession.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=581034500cf32a949cf21f99b3f77d43

Economix Blog: Casey B. Mulligan: With Unemployment Insurance, Is 99 Weeks the Magic Number?


Casey B. Mulligan is an economics professor at the University of Chicago.

A possible compromise between Democrats who want to leave the unemployment compensation system unchanged and Republicans who want to return to pre-recession benefit formulas might be to adopt a benefit formula from some of the previous recessions.

Today’s Economist

Perspectives from expert contributors.

At the end of 2011, Congress allowed unemployment beneficiaries to continue to collect under both the emergency and extended programs, which permit the unemployed to receive benefits for up to 99 weeks of unemployment.

Some economists believe that unemployment insurance stimulates spending because unemployed people are thought to spend most, if not all, of the money they have on hand. Some economists also suggest that unemployment insurance prolongs unemployment because an unemployed person has to give up his benefits as soon as he finds and starts a new job or returns to working at his previous job. Either way, some people cannot find work, and unemployment benefits help cushion their blow.

The ideal amount of time to permit the unemployed to collect benefits is a trade-off between the insurance the program provides and the unintended work disincentives it creates. For now, our government has decided that 99 weeks is the ideal time (92 in many states, and a bit less in others).

The maximum duration of benefits was much less in previous recessions. I examined the 12 episodes since 1960 when Congress increased the amount of time the unemployed could receive benefits, together with the most recent month with unemployment data (November 2011).

U.S. Department of Labor

The vertical axis in the scatter diagram measures the maximum amount of time that the unemployed could receive benefits for each of the 12 law changes. The most recent law change was December 2009, when regular state and federal emergency and extended benefits could last up to 92 weeks (for comparability across recessions, here I ignore the few states that add seven additional weeks of extended benefits, bringing the total to 99).

We reached 92 weeks in a couple of steps. In July 2008, benefits began to last 52 weeks. Later that year, the maximum benefit duration was lengthened to 72 weeks.

In the 50 years before December 2008, the maximum benefit period was 72 weeks during the 1992 recession. Benefits lasted up to 65 weeks in the 2001-2 and 1975 recessions.

The horizontal axis graphs the unemployment rate at the time that unemployment insurance legislation was changed. Since 1960, only in the 1982 recession did the unemployment rate get so high. Nevertheless, unemployment benefits in that recession lasted at most 55 weeks – about three-fifths of the time that unemployment benefits last today.

Since the December 2009 law change, the unemployment rate has fallen, although nowhere near back to normal. With the recession officially ended almost three years ago, today’s unemployment rate is still similar to that in 1975 – one of the more severe recessions of the past. Still, when the unemployment rate was almost 9 percent in spring 1975, Congress decided to limit unemployment benefits to 65 weeks.

These comparisons may suggest that continuing or terminating emergency and extended unemployment benefits are not the only policy choices. The programs could be continued but perhaps with a lesser duration, such as 52 or 65 weeks as in previous severe recessions.

Article source: http://feeds.nytimes.com/click.phdo?i=8108571acc35a3a43236d39367bca844

House Republican Leaders Agree to Extend Tax Cut Temporarily

Under a deal reached between House and Senate leaders, the House will now approve as early as Friday the two-month extension of a payroll tax holiday and unemployment benefits approved by the Senate last Saturday, and the Senate will appoint members of a House-Senate conference committee to negotiate legislation to extend both benefits through 2012.

House Republicans — who rejected an almost identical deal on Tuesday — collapsed under the political rubble that has accumulated over the week, much of it from their own party, worried that the blockade would do serious damage to their appeal to voters.

The House speaker, John A. Boehner, determined to put the issue behind his party, announced the decision over the phone to members on Thursday, and did not permit the usual back and forth that is common on such calls, enraging many of them.

After his conversation with lawmakers, the speaker conceded to reporters that it might not have been “politically the smartest thing in the world” for House Republicans to put themselves between a tax cut and the 160 million American workers who would benefit from it, and to allow President Obama and Congressional Democrats to seize the momentum on the issue.

The agreement ended a partisan fight that threatened to keep Congress and Mr. Obama in town through Christmas and was just the latest of the bitter struggles over fiscal policy involving House conservatives, the president and the Democratic-controlled Senate.

Under the deal, the employee’s share of the Social Security payroll tax will stay at the current level, 4.2 percent of wages, through Feb. 29. In the absence of Congressional action, it would revert to the usual 6.2 percent next month. The government will also continue paying unemployment insurance benefits under current policy through February. Without Congressional action, many of the long-term unemployed would begin losing benefits next month.

In addition, under the agreement, Medicare will continue paying doctors at current rates for two months, averting a 27 percent cut that would otherwise occur on Jan. 1.

The new deal makes minor adjustments to make it easier for small businesses to cope with the tax changes and prevents manipulation of an employee’s pay should the tax cut extension fail to go beyond two months.

The House, which is in pro forma session, could seal the deal Friday unless a member raises an objection on the floor; the Senate would then do the same. If an objection occurs, Mr. Boehner will summon the full House back next week for a formal vote, he said.

Mr. Obama, who has reaped political benefits from the standoff, welcomed the outcome.

“This is good news, just in time for the holidays,” he said in a statement. “This is the right thing to do to strengthen our families, grow our economy, and create new jobs. This is real money that will make a real difference in people’s lives. ”

In the end, the agreement seemed a clear victory for Mr. Obama and the Democrats — at least for now. They managed to change the narrative from one about Mr. Obama making a concession — he agreed to a provision in the bill to speed the approval process for an oil pipeline — to one about stonewalling House Republicans, who have spent much of the year holding the upper hand of divided government.

Democrats have been quick to exploit the issue. The Democratic Congressional Campaign Committee this week unleashed automated phone calls, some of which were recorded by the Democratic strategist James Carville, in the districts of 20 targeted House Republicans.

The onslaught will continue. “This is a defining moment,” said the head of the committee, Representative Steve Israel, Democrat of New York. “This by itself doesn’t necessarily alter the political landscape, but the chronic chaos and repeated extremism will help us win back the House.”

The push to find a quick resolution was touched off Thursday by Senator Mitch McConnell of Kentucky, the Republican leader, who had negotiated the two-month extension. After a few days of silence, he called on the House to accept a temporary continuation of the tax cut, and to extend unemployment pay, as long as Senate Democrats committed to quickly opening negotiations over a yearlong agreement.

Robert Pear contributed reporting.

This article has been revised to reflect the following correction:

Correction: December 22, 2011

Because of an editing error, an earlier version of this article misstated the amount of the average tax break for a family making $50,000 a year. The break amounts to $40 each paycheck; not $40 a week.

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