unemployment rate

Split U.S. Economy in Data

March 15, 2013 by NewsMaker Leave a Comment

Despite a measure of caution on the part of consumers, new data on Friday suggested that the economy had underlying strength. Factories reported a healthy gain in output in February, and inflation remained under control, even though gasoline prices have been rising sharply.

Led by the automobile sector, industrial production jumped 0.7 percent in February, the biggest gain in three months, the Federal Reserve said. Economists had been expecting a 0.4 percent rise.

By contrast, the Thomson Reuters/University of Michigan’s preliminary reading for consumer sentiment in March showed a marked drop; the index fell to 71.8, from 77.6 in February. That was its lowest level since December 2011.

The split in the data underscores the wider crosscurrents buffeting the economy.

On one hand, the stock market is near record levels, big companies are reporting strong profits and the labor market seems to be finally gaining some steam, with better data last week and this week on unemployment. In particular, the addition of 236,000 new jobs in February spurred hopes that the economy was finally producing enough jobs to lower the unemployment rate, which has been stuck at just under 8 percent since last September.

In recent days, many economists have raised their estimates for growth in the first quarter in light of other signs, like the move by businesses to increase inventories that fell in the final quarter of 2012. The housing sector has also been strong — a trend that may get more confirmation next week, when new data on housing starts and home sales will be released.

Still, consumers are being hit by the restoration of full Social Security taxes, which went into effect in January, in addition to feeling the effects of federal spending cuts that began March 1. Many experts estimate that the federal budget cuts could cost the economy more than 700,000 jobs this year. In the Thomson Reuters/University of Michigan survey, consumers were more concerned about growth in the future, rating current economic conditions more positively.

Gasoline prices have also been rising, putting additional pressure on some consumers. Higher gas prices helped lift the Consumer Price Index 0.7 percent in February, although the less volatile core reading was up 0.2 percent, according to other data released Friday by the Labor Department.

The jump in taxes and gas prices is squeezing lower-income consumers in particular, said Steve Blitz, chief economist at ITG Investment Research. Big-ticket items like homes and cars continue to sell well, for example, but otherwise-strong retail sales data out earlier this week showed that spending at restaurants declined for the second month in a row. “People who can’t afford it aren’t going out as much to eat,” he said.

“I think we’ve got two economies,” said Mr. Blitz. “The industrial economy started to pick up at the end of last year, but it doesn’t grow in lock step with consumers.”

Factory production and hiring is being bolstered in part by a rebound in China, said Ian Shepherdson, chief economist for Pantheon Macroeconomic Advisors. The Chinese economy, the world’s second-largest, slowed last summer and fall but has gained momentum more recently.

While that is good news in the long run for the American economy and the job market, it affects companies much more than consumers. “Right now, consumers are feeling something up close and personal with higher gas prices and higher taxes,” he said.

Mr. Shepherdson expects the economy to grow by more than 2 percent in the first quarter but to slow substantially in the second and third quarters as the cuts in Washington take hold.

“There will be a hit from the austerity, but the timing and extent is difficult to determine,” he said. “If you impose an enormous fiscal tightening on an economy that isn’t growing too quickly, you have to have some adverse consequences.”

Article source: http://www.nytimes.com/2013/03/16/business/economy/consumer-inflation-jumps.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: consumer sentiment, last september, unemployment rate

Labor Data Fuels Market Rally

March 8, 2013 by NewsMaker Leave a Comment

Shares on Wall Street traded higher on Friday, with the Standard Poor’s 500-stock index on track for a sixth-straight day of gains after a much-stronger-than-expected payrolls report.

In midday trading, the S.P. 500 rose 0.3 percent, while the Dow climbed 0.4 percent and the Nasdaq composite index added 0.2 percent.

Data showed hiring increased in February, with payrolls jumping by 236,000, easily beating expectations for a gain of 160,000 jobs. The unemployment rate fell to 7.7 percent, the lowest since December 2008.

“Great report — there just isn’t anything that I can pull out negative at all about this report,” said Darrell Cronk, regional chief investment officer for Wells Fargo Private Bank in New York. “It is taking a little bit of this argument off the table that the Fed is doing all the heavy lifting in the economy. There is a trend building in the economic data that, while not off-the-charts-great, is definitely moving in the right direction.”

The data helped add to earlier gains triggered by data from China. Exports in the world’s second-biggest economy soared 21.8 percent in February from a year ago, exceeding expectations and suggesting that global demand may also be on the mend. Imports fell 15.2 percent to 13-month lows.

The benchmark S.P. 500 has advanced 1.7 percent this week, its biggest weekly gain so far this year. The Dow Jones industrial average ended Thursday at a record high for a third-consecutive session.

But investors were mindful of the possibility of a pullback, as the last correction for the S.P. 500 was nearly a year ago — a 9.9 percent slide between April and the start of June.

McDonald’s gained 1.8 percent after the fast-food hamburger chain said that February sales at established restaurants fell just 1.5 percent, a little better than expected.

Pandora Media shares jumped 25.3 percent on stronger-than-expected quarterly results. The company also said in a surprise announcement that its chief executive, Joseph Kennedy, was stepping down.

SkullCandy shares tumbled 18.9 percent after the headphone maker reported higher-than-expected fourth-quarter revenue but said it expected to post a loss in the current quarter.

Article source: http://www.nytimes.com/2013/03/09/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: global demand, private bank, unemployment rate

Political Economy: Silver Lining for Spain in Italian Vote

March 3, 2013 by NewsMaker Leave a Comment

One knee-jerk reaction to the shocking Italian election was to worry about the spreading of panic to Spain. As Italian bond yields shot up last Tuesday, Madrid’s were dragged up in sympathy. These are the two troubled big beasts of the euro zone periphery, and an explosion in either of them could destroy the single currency.

But Spain probably will not catch the Italian flu. True, the risk of Madrid’s being thrown off its overhaul path has risen since the inconclusive Italian election. But Prime Minister Mariano Rajoy of Spain does not have to face the voters for nearly three years. What is more, the Italian vote may make euro zone policy makers less eager to embrace austerity and so give Spain a better chance of returning to economic growth.

Investors have already started having second thoughts. By Friday, the yield on 10-year Spanish bonds had fallen back to 5.1 percent from 5.4 percent, where they had been Tuesday. The spread between Spanish and Italian yields has shrunk to 0.3 percentage point. There is even a chance that Madrid could have lower borrowing costs than Rome in coming weeks, if the Italian political paralysis shows no sign of resolution.

There is, of course, no cause for schadenfreude in Madrid. The same factors that led to a stunning breakthrough in the Italian elections for Beppe Grillo, leader of the Five Star Movement protest party, could eventually play out in Spain, albeit in a different way. The traditional Spanish governing parties — Rajoy’s center-right Popular Party and the Socialists — are discredited by a mixture of recession, a 26 percent unemployment rate and allegations of corruption. Each has the support of about 25 percent in opinion polls, while the electorate’s trust in politicians has continued to plummet.

Spain does not have a Mr. Grillo. But it does have radical left and centrist parties, each with about 15 percent support, as well as strong nationalist movements in Catalonia and Basque Country. Unless there is an economic turnaround, nobody will have a majority in the next Parliament and the country could be harder to govern.

The good news is that there is no need for an election until late 2015. What is more, Mr. Rajoy — for all his faults as a poor communicator and slow decision maker — is a dogged reformer. Even the latest corruption allegations do not seem to have diverted him from his path.

It is still too early to talk about economic recovery. The Spanish gross domestic product shrank 1.4 percent last year and the European Commission says it will fall a similar amount this year. But the overhaul efforts are beginning to have an effect. This is most visible in the labor market, where unit labor costs fell another 3.6 percent last year.

Less expensive labor has encouraged car companies to increase production in Spain and offshore call centers to repatriate their operations from places like Latin America and Morocco. The current account deficit, which was 10 percent of gross domestic product in 2008, was virtually wiped out last year.

The overhauling of the banking system is also positive. Mr. Rajoy and his predecessor denied the problems for too long. But busted banks are well on the way to being recapitalized. Dud real estate assets are being shifted into a so-called bad bank. One can quibble about the financial engineering that has been used to keep this bank, a highly leveraged vehicle, off the government’s balance sheet and it may yet return to bite it.

But the economy is no longer plagued by zombie banks diverting their limited funding to zombie property companies. The challenge now is to get credit flowing to healthy parts of the economy.

The government is also pressing ahead with new overhauls. The most important are measures to deter early retirement and make pensions more affordable; the creation of a single market within Spain by getting rid of the barriers between the country’s 17 regions that gum up trade; and a crackdown on duplication between different levels of government.

The country’s Achilles’ heel is the poor state of its public finances. The deficit has fallen, but it was still 6.7 percent of gross domestic product last year. The European Commission says the deficit will be about the same this year before rising to 7.2 percent next year, as the supposedly temporary tax increases wear off. Debt, meanwhile, is forecast to reach 101 percent of gross domestic product by the end of next year.

The government itself is more optimistic than this. Even so, it faces a challenge in reconciling the need to put its finances on a sustainable footing with the need to get its economy growing. This is where the Italian election might help.

Spain’s European partners may be so worried that austerity might fuel populism elsewhere in the euro zone that they may cut Madrid extra slack in achieving its budget targets.

At present, Spain is supposed to cut its deficit below 3 percent of gross domestic product next year. That is impossible. It is hoping to negotiate a deal allowing the deficit to drop to, say, 4.7 percent next year and 3.4 percent the year afterward, with a figure of less than 3 percent being achieved only in 2016.

Even to get to that point, the bulk of the temporary tax increases would have to be made permanent and there would have to be some further belt-tightening. But at least the hope of growth would not be stamped out.

Provided Madrid sticks with its ambitious program of structural overhauls, its partners should agree to such a path. Spain would then see a silver lining to the Italian cloud.

Hugo Dixon is editor at large of Reuters News.

Article source: http://www.nytimes.com/2013/03/04/business/global/04iht-dixon04.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: opinion polls, political paralysis, unemployment rate

Economic Data Points To a Steady Fed Policy

February 21, 2013 by NewsMaker Leave a Comment

The Fed is currently buying $85 billion in bonds a month and has said it would keep up purchases until the labor market outlook improves substantially, although officials are increasingly divided over the wisdom of that course.

“The economy is in a holding pattern. It’s not going to strengthen sufficiently to justify an end of the current program,” said Millan Mulraine, senior economist at TD Securities.

Initial claims for state unemployment benefits increased 20,000 last week to a seasonally adjusted 362,000, unwinding the bulk of the previous week’s decline, the Labor Department said.

A second report from the department showed that consumer prices were flat for a second consecutive month in January as gasoline prices fell and the cost of food held steady.

In the 12 months through January, consumer prices rose 1.6 percent, the smallest gain since July, suggesting there was little inflation pressure to worry the Fed.

News on the manufacturing sector, which has supported the economy’s recovery from the 2007-9 recession, was downbeat.

The Philadelphia Fed’s business activity index dropped to minus 12.5 in February, the lowest level since June. The index, which measures factory activity in the mid-Atlantic region, had fallen to minus 5.8 in January. A reading below zero indicates contraction in the region’s manufacturing sector. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.

The American economy braked sharply in the fourth quarter, but grew at a 2.2 percent clip for the full year. Output is being hampered by lackluster demand as employment struggles to gain traction.

Job growth has been far less than the at least 250,000 a month over a sustained period that economists say is needed to significantly reduce the ranks of unemployed. The unemployment rate rose 0.1 percentage point to 7.9 percent in January.

Last week’s data on initial jobless claims covered the survey period for the government’s closely watched monthly tally of nonfarm jobs. Jobless claims were up 27,000 between the January and February survey periods.

However, the increase probably does not suggest any material change in the pace of job growth given that claims have been very volatile since January because of difficulties smoothing the data for seasonal fluctuations.

Despite the weak factory and jobs data, there is reason for optimism about the economy. The housing market recovery is gaining momentum. A report from the National Association of Realtors showed existing home sales rose 0.4 percent last month, pushing the supply of homes on the market to a 13-year low. The median home price rose 12.3 percent from a year ago.

Although consumer prices excluding food and energy rose 0.3 percent — the largest gain since May 2011 — most of that reflected outsize increases in apparel and education costs.

“January is a tough month because you get a lot of price hikes at the start of the new year and the seasonals have a hard time sort of adjusting,” said Omair Sharif, an economist at RBS. “I don’t expect the core C.P.I. to maintain that pace of increase in the near-term.”

The Conference Board said its index of leading economic indicators rose 0.2 percent in January to 94.1, after an 0.5 percent increase in December.

Article source: http://www.nytimes.com/2013/02/22/business/economy/claims-for-jobless-benefits-rise.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: cost of food, state unemployment benefits, unemployment rate

Business and Labor Unite to Try to Alter Immigration Laws

February 8, 2013 by NewsMaker Leave a Comment

These oft-feuding groups agree on the need to enact a way for the 11 million immigrants illegally in the United States to gain citizenship. And they are also nearing common ground on a critical issue — the number of guest workers allowed into the country — that has deeply divided business and labor for years and helped to sink President George W. Bush’s push for an immigration overhaul in 2007.

In redefining what constitutes a guest worker and in revamping the method to determine how many should be allowed in, business and labor groups are sketching out new proposals that are distinct departures from earlier legislative approaches.

The issue has long been one of contention, with businesses like hotels and farmers saying they need a large supply of seasonal workers while unions complain that these workers are often exploited. To try to resolve their differences, they are discussing what they call a “data-driven system” that would determine how many “provisional workers” would be let in each year to work on farms, summer resorts and elsewhere.

One proposal labor is pushing would have Congress establish a panel that would use economic, industry and regional data (like unemployment rates) to determine how many provisional workers should be allowed in annually to work in industries, like farming, that have seasonal surges in their demand for laborers. But business groups say they worry that such a panel would be unwieldy and act too slowly to meet employers’ needs.

Under the proposals, the number of provisional workers permitted might increase when America’s unemployment rate was low and then shrink if the rate was high. In addition, many of these provisional visa holders, after working successfully in the United States for several years, might be given permanent residency that could lead to citizenship.

In another important step forward, many labor unions have joined with the Chamber of Commerce and other business groups in embracing E-Verify, a federal electronic system that uses Social Security numbers and other data to verify that newly hired workers are in the country legally. Union leaders have frequently denounced E-Verify as error-prone, a continuing concern. They said it often declared that immigrants with valid papers were not authorized to work.

When President Bush pushed for an immigration overhaul in 2007, many unions — long detesting the guest-worker program — helped to persuade the Senate to phase out that program within five years. Once that phaseout was approved, many business groups grew far less enthusiastic about the immigration effort. That encouraged many Republicans — already uneasy about what they viewed as “amnesty” — to vote against the plan.

Maria Elena Durazo, the chairwoman of the A.F.L.-C.I.O.’s immigration committee, said labor’s opposition to the guest-worker program was longstanding. “Guest workers have no rights and no voice and no possibility of ever becoming legalized,” she said. “If they protest about wages or unsafe conditions, they risk getting deported.”

Many businesses have complaints with the current guest-worker program, disliking the frequent requirement to place advertisements to determine whether American workers are available before they can bring in guest workers.

“You have to go through four government agencies and often hire a lawyer and an agent,” said Shawn McBurney, senior vice president of governmental affairs at the American Hotel and Lodging Association. “It’s unbelievably complicated, cumbersome and expensive.”

Labor unions have urged business to embrace a plan pushed by Ray Marshall, labor secretary under President Jimmy Carter. He suggests creating a commission of experts who would use economic data to determine, for instance, whether 20,000 or 40,000 immigrants should be granted provisional visas to do seasonal work nationwide at shellfish plants, restaurants or apple orchards.

Article source: http://www.nytimes.com/2013/02/08/business/business-and-labor-unite-to-try-to-alter-immigration-laws.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: regional data, seasonal workers, unemployment rate

A Canadian Campus Focused on Tech and Enterprise

February 3, 2013 by NewsMaker Leave a Comment

BlackBerry, the company formerly called Research in Motion, grew out of a student project there, and for years the school served as a reliable pipeline of stellar engineering talent straight into the nearby offices of the smartphone maker. In 2007, when BlackBerrys still defined smartphones, about 400 students were on paid internships with the company, positions that more often than not led to full-time jobs.

But after years of being a first-choice destination for University of Waterloo graduates and interns, BlackBerry is now a last resort. In its place, American technology giants including Google, Apple, Facebook and Microsoft have more than filled the hiring void.

Increasingly, graduates are following the lead of Mike Lazaridis, who nearly 30 years ago helped found BlackBerry, and creating start-ups of their own like Pebble, the smartwatch company founded by a University of Waterloo grad, and BufferBox, a parcel delivery system recently acquired by Google.

Because of that, the consequences of the recent layoffs of 5,000 employees at BlackBerry are nearly invisible here in the company’s home city or its immediate neighbor, Kitchener.

The local unemployment rate of 6.2 percent in December was stable from a year earlier and well below the national rate of 7.1 percent. Out on the main street in a cafe and whiskey bar called Death Valley’s Little Brother that appears to have been dropped in from a fashionable part of Brooklyn, seats are scarce despite prices that could make a New Yorker wince.

Google’s logo on a former leather tannery in Kitchener, a relic from the region’s past as Canada’s shoemaking capital, provides a vivid illustration of the way that, when a company starts to slip, the best talent goes elsewhere. BlackBerry aims to reverse its fortunes with radically new smartphones and equally innovative software that runs them. It introduced the phones to the public last week to strong reviews.

Steven Woods, the director of engineering for Google in Kitchener, said that the search engine company established an operation here about eight years ago and expanded into the tannery building in 2011 as part of a broad plan to absorb foreign talent and sensibilities.

Most of the company’s other new operations were put in major metropolitan centers, including New York, London and Tokyo.

“Waterloo is different,” Mr. Woods said, sitting in a scaled-down version of Google’s Silicon Valley office, down to a gourmet, no-charge cafeteria. “It’s got this amazing university which has long been one of our top three recruiting universities for Google as a whole, worldwide,” said Mr. Woods, who earned a doctorate at Waterloo.

“Waterloo grads do well at Google, they do very well.”

The University of Waterloo did not achieve its exalted status by being venerable. It received its first students, who were initially taught in temporary buildings plopped into a corn field north of town, only in 1957.

Nor did it buy its way to the top. Its alumni, particularly Mr. Lazaridis, the former co-chief executive and current vice chairman of BlackBerry, have been generous, with $121 million in personal donations to date. Mr. Lazaridis, who also donated $150 million to establish an independent school of theoretical physics in Waterloo, developed what became Research in Motion’s first product while still an undergraduate student, and dropped out weeks before finishing his studies to found the company in 1984.

But like most universities in Canada, Waterloo is a public institution with relatively low tuition subsidized by Canadian taxpayers. In 2011, the federal and provincial governments provided $243 million, or 42 percent, of its operating budget. Its endowment is only $261 million, a fraction of the $16.5 billion Stanford holds or the $10.3 billion of the Massachusetts Institute of Technology, two of America’s top engineering universities.

Different approaches, rather than money, have instead enabled it to attract prominent faculty members from around the world as well as Canada’s top engineering and computer science students.

Article source: http://www.nytimes.com/2013/02/04/technology/a-canadian-campus-focused-on-tech-and-enterprise.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: facebook, leather tannery, unemployment rate

Claims for Jobless Benefits Drop

January 17, 2013 by NewsMaker Leave a Comment

WASHINGTON — The number of Americans filing new claims for unemployment benefits tumbled to a five-year low last week, while housing starts surged, the government said Thursday in a pair of new economic reports.

Initial claims for state unemployment benefits fell 37,000 to a seasonally adjusted 335,000, the lowest level since January 2008 and the largest weekly drop since February 2010, the Labor Department said.

The previous week’s figure was revised to show 1,000 more applications than previously reported.

While last week’s decline ended four consecutive weeks of increases, it is probably not the start of a new trend or a sign of a significant shift in labor market conditions, as claims tend to be volatile around this time of the year because of large swings in the model used by the department to iron out seasonal fluctuations.

A Labor Department analyst said the model had expected a large increase in claims last week, but the actual number of filings only showed a modest increase, leading to a big decline in the seasonally adjusted figure.

The four-week moving average for new claims, a better measure of labor market trends, fell 6,750 to 359,250, suggesting some improvement in underlying labor market conditions.

The claims data covered the week used for January’s nonfarm payrolls survey, to be released early next month. Job growth measured by the survey has been gradual, with employers adding 155,000 new positions in December. The unemployment rate held steady at 7.8 percent last month.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid increased 87,000 to 3.21 million in the week ended Jan. 5. The four-week average of the so-called continuing claims was the lowest since July 2008.

In a separate report, the Commerce Department said Thursday that groundbreaking to build new homes surged 12.1 percent last month to a 954,000-unit annual rate.

It was the fastest pace since June 2008, supporting the view that housing is poised to provide a substantial boost to the United States economy. But data for housing starts can be volatile and is sometimes subject to large revisions. The government revised downward its estimate for November housing starts, for example, to a 851,000-unit rate from the originally reported 861,000.

Some of the strength in December’s reading for housing starts came from a 20.3 percent surge in multiunit construction; that component is especially volatile.

Permits for future home construction edged higher to a 903,000-unit rate, the quickest since July 2008. Groundbreaking for single-family homes, the largest segment of the market, climbed 8.1 percent last month to a 616,000-unit pace.

Article source: http://www.nytimes.com/2013/01/18/business/economy/claims-for-jobless-benefits-drop.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: consecutive weeks, housing starts, unemployment rate

Jobless Claims Rise Slightly

January 10, 2013 by NewsMaker Leave a Comment

Other data suggested that the economy remained on a steady growth path, with sales at wholesalers rising by the most in more than 18 months in November, keeping inventories balanced.

Initial claims for state jobless benefits increased 4,000 to a seasonally adjusted 371,000. The prior week’s figure was revised to show 5,000 fewer applications than previously reported.

“Jobless claims data continue to suggest steady but modest U.S. employment gains,” said Robert Kavcic, a senior economist at BMO Capital Markets.

The four-week moving average for new claims, a better measure of labor market trends, increased 6,750 to 365,750, still at a level consistent with steady job gains.

The labor market has been gradually improving, with job gains last year averaging 153,000 a month, little changed from 2011. The unemployment rate ended the year at 7.8 percent.

A separate report from the Commerce Department showed that sales at wholesalers rebounded 2.3 percent in November, the largest gain since March 2011, after falling 0.9 percent in October.

Wholesale inventories rose 0.6 percent after advancing 0.3 percent in October.

Article source: http://www.nytimes.com/2013/01/11/business/economy/jobless-benefits-claims-rise.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: bmo capital markets, labor market trends, unemployment rate

Jobs Report Becomes Latest Fodder in Fiscal Debate

December 8, 2012 by NewsMaker Leave a Comment

Mr. Boehner, meeting with reporters, declined to rule out a rise in the top income tax rate below the level President Obama wants, only to reiterate later that his opposition to tax rate increases remained unchanged. That suggested a possibility that although he opposes higher tax rates, they could still end up in a final package, given enough compromise by the White House on spending.

“There are a lot of things that are possible to put the revenue that the president seeks on the table,” Mr. Boehner said when asked about an increase in the top tax rate short of the 39.6 percent level of the Clinton era. “But none of it’s going to be possible if the president insists on his position, insists on ‘my way or the highway.’ ”

Mr. Boehner later released a statement saying: “As I’ve said many, many, many times: I oppose tax rate increases because tax rate increases cost American jobs. That has not changed, and will not change.”

Publicly neither side indicated progress toward a deal ahead of the end-of-the-month deadline for averting a series of automatic tax increases and spending cuts. But talks continued. Representative Nancy Pelosi of California, the House Democratic leader, met with Mr. Obama at the White House for private consultations.

Mr. Boehner put the onus on the president to make the next move. “This isn’t a progress report, because there’s no progress to report,” he told reporters outside his suite of offices in the Capitol. “The White House has wasted another week.”

The jobs report gave both sides a new talking point to press for compromise. The Labor Department on Friday said the economy added 146,000 jobs last month, and the unemployment rate fell to 7.7 percent from 7.9 percent in October. Those numbers were unexpectedly bright, given the impact of Hurricane Sandy and business fears about the potential fiscal crisis next month.

Mr. Boehner continued to say that his opposition to allowing the top two rates to rise from 33 percent and 35 percent to 36 percent and 39.6 percent stems from fears of the impact on small businesses that pay ordinary income tax rates, not the corporate tax rate. About 97 percent of small businesses do not turn enough profit to be affected, but Republicans note that more than half of small-business income — from the most profitable businesses, partnerships and limited liability corporations — would be hit by the increases.

“The risk the president wants us to take with increases of tax rates will hit many small businesses that create 50 to 70 percent of the jobs in our country,” Mr. Boehner said. “That’s the whole issue.”

Ms. Pelosi countered that after 33 straight months of gains in private-sector jobs, employment was now threatened by Republican refusal to pass Senate legislation extending Bush-era tax cuts for 98 percent of American households — but not the top 2 percent.

“The only obstacle standing in the way of middle-income tax relief are Republicans’ unwillingness to ask the top 2 percent to pay their fair share,” she said.

Senior House Republican aides say they will not move an inch more toward Mr. Obama unless he spells out immediate spending cuts for 2013. Even if Republicans agreed to the president’s request on higher tax rates for the rich, a deal would still be about $42 billion short of the $110 billion “down payment” Republican leaders need to pass legislation canceling next year’s across-the-board spending cuts.

“It would be an embarrassment to move further when the president is moving the opposite way,” a senior Republican leadership aide said.

Meanwhile, cracks emerged in the pressure campaign the White House is trying to assemble. A coalition of philanthropies refused publicly on Friday to join White House-organized efforts to raise the heat on Republicans in a show of moxie that portends poorly for any effort next year to tackle one of the largest tax benefits for the rich, the charitable deduction.

The coalition, the Alliance for Charitable Reform, said in a statement that it “refuses to go along with the White House’s request for charities to insert themselves into the debate over tax rates.”

“Our priority is to preserve and protect the charitable deduction,” it said. “Throughout his first term, President Obama has proposed reducing itemized deductions, including the charitable deduction, in multiple budgets and other spending proposals, and never voiced concern over the impact of his plan on the charitable sector.”

Alison Hawkins, a spokeswoman for the alliance, said White House officials had asked nonprofits to publicly oppose a Republican proposal to cap tax deductions at $25,000 instead of raising rates, and instead to press for higher upper-income tax rates to save government programs that partner with charities. Administration officials wanted charitable organizations to write letters to the editor and opinion articles and mount social media campaigns to amplify Mr. Obama’s message.

Such a public unmasking of a White House request is highly unusual, but charities have been at odds with the president on taxes ever since his first year in office, when he proposed capping tax deductions at 28 percent. Taxpayers in the 35-percent tax bracket are currently allowed to deduct 35 percent of charitable giving from their taxes, a policy the White House maintains is unfair to middle-class taxpayers in a lower bracket.

The 28-percent bracket was part of the president’s deficit-reduction offer last month.

Article source: http://www.nytimes.com/2012/12/08/us/politics/jobs-report-becomes-latest-fodder-in-fiscal-debate.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: boehner, nancy pelosi, unemployment rate

Consumer Spending Reported Down 0.2% in October

December 1, 2012 by NewsMaker Leave a Comment

The Commerce Department said Friday that consumer spending dropped 0.2 percent in October. It was the weakest figure since May, and it compared with a 0.8 percent spending increase in September. Income had risen 0.4 percent in September.

Work interruptions caused by the storm reduced wages and salaries in October by about $18 billion at an annual rate, the government said. The storm affected 24 states, with the most severe damage in New York and New Jersey.

Consumers may also be scaling back on spending because of fears about the automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration fail to strike a budget deal by then.

“The upshot is that although both incomes and spending will probably bounce back in November, the underlying trend is weak,” said Paul Dales, senior United States economist at Capital Economics.

The spending figures suggested that the economy was growing more slowly in the October-December quarter than it did in the July-September quarter. Consumer spending drives nearly 70 percent of economic activity.

Mr. Dales predicted that domestic economic growth would slip from the 2.7 percent annual rate in the July-September quarter to 1 percent in the October-December period. That is too low to cut the unemployment rate, now at 7.9 percent.

Income and spending gains would have been meager even after discounting the effects of the storm. Income would have risen 0.1 percent. Spending would have been essentially flat, Mr. Dales said.

After-tax income adjusted for inflation fell 0.1 percent in October. And spending, when adjusted for inflation, dropped 0.3 percent — the biggest such decline in three years. The saving rate edged up slightly to 3.4 percent of after-tax income in October, compared with 3.3 percent in September.

Many economists say growth will rebound once rebuilding begins in the Northeast. And if President Obama and Congress can reach a budget deal, some economists, including the Federal Reserve chairman, Ben S. Bernanke, are predicting a strong year for the economy.

Article source: http://www.nytimes.com/2012/12/01/business/economy/consumers-cut-spending-in-october.html?partner=rss&emc=rss

Filed Under: Business News Tagged With: consumer spending, economy, unemployment rate