Job seekers are reflected in a mirror on the ceiling as they line up to register for an employment fair sponsored by National Career Fairs in San Diego. Photo: Sam Hodgson/Bloomberg
Jump in Jobless Claims; Inflation Nudges Up
Super storm Sandy drove U.S. weekly jobless claims up to 439,000, while consumer prices rose slightly last month as higher rents and costlier food offset cheaper gas.
Separately, a reading on manufacturing in New York State showed that factory activity slowed in November for a fourth straight month.
Super storm Sandy drove the number of people seeking unemployment benefits up to a seasonally adjusted 439,000 last week, the highest level in 18 months.
The Labor Department said Thursday that weekly applications increased by 78,000 mostly because a large number of applications were filed in states damaged by the storm. People can claim unemployment benefits if their workplaces close and they don’t get paid.
The storm has affected the claims data for the past two weeks and may distort reports for another two weeks, the department has said.
The four-week average of applications, a less volatile number, increased to 383,750.
Sandy hit the East Coast on Oct. 29 and disrupted businesses from North Carolina to Maine. The storm also cut power to roughly 8 million homes and businesses. Some are still without power.
Before the storm distorted the figures, weekly applications had fluctuated between 360,000 and 390,000 since January. At the same time, employers have added an average of nearly 157,000 jobs a month. That’s barely enough to lower the unemployment rate, which was 7.9 percent in October.
There are some signs that the job market is improving. Employers added 171,000 jobs in October and hiring in August and September was stronger than first estimated. The economy has gained an average of 173,000 jobs a month since July. That’s up from an average of 67,000 a month in April through June.
The unemployment rate rose slightly in October from 7.8 percent in the previous month because more Americans began looking for work. That suggest some felt their chances of finding a job had improved. Not all of them found jobs, which pushed up the unemployment rate. The government only counts people as unemployed if they are actively searching for work.
The economy appears to have grown faster over the summer than first thought, based on a handful of positive September reports on inventory growth and trade released this month. Many economists now predict growth at an annual rate of roughly 3 percent in the July-September quarter, up from the initial estimate of 2 percent reported last month.
The government releases its second estimate for third-quarter growth on Nov. 29.
Still, many economists say the economy is growing in the current October-December quarter at a weak annual rate below 2 percent.
The storm combined with cautious consumers to lower retail sales in October. Consumers may also be holding back because of anxiety over big tax increases and spending cuts — known as the “fiscal cliff” — that will take effect in January unless Congress and the White House reach a budget deal by then. Many companies are likely to scale back hiring and investment, too, until the fiscal cliff debate is resolved.
Inflation Ticks Up as Rental Costs Rise
Meanwhile, rising food costs and higher rents offset a drop in gas prices last month, leaving consumer prices only slightly higher in October compared with the previous month.
The consumer price index rose a seasonally adjusted 0.1 percent in October, down from sharp gains of 0.6 percent in the previous two months, the Labor Department said Thursday. In the past year, prices increased 2.2 percent. That’s just above the U.S. Federal Reserve’s inflation target of 2 percent.
The cost of shelter, which includes rents, rose 0.3 percent, the most in more than four years. Clothes and airline fares also rose, while the price of new and used cars fell.
Food prices rose 0.2 percent, while gas fell 0.6 percent. Excluding the volatile food and gas categories, core prices increased 0.2 percent.
Modest inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.
Gas prices rose sharply over the summer and into September, but have since come down. The average price for a gallon of gas nationwide was $3.44 on Wednesday, about 35 cents below last month’s level.
Most economists forecast that food prices rose last month. This summer’s drought damaged corn, soybeans, and other crops. Corn and soybeans are used in animal feed, which means the price of meat and chicken could increase.
And corn is also used in many products found throughout the supermarket, from cereals to soft drinks to cosmetics.
Regional Manufacturing Slows
A gauge of manufacturing in New York State showed that activity slowed in November for a fourth straight month, the New York Federal Reserve said in a separate report.
The New York Fed’s “Empire State” general business conditions index came in at -5.22, from -6.16 the month before. Economists polled by Reuters had expected a reading of -6.70.
New orders rose to 3.08 from -8.97, the first positive reading for the forward-looking component index since June, while inventories were at -12.36 from -2.15.
Employment gauges showed a decline. The index for the number of employees fell to -14.61 from -1.08 and the average employee workweek index fell to -7.87 from -4.30.
The index of business conditions six months ahead came in at 12.88 in November from 19.42 in October.
The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.
The survey also asked how businesses were affected by super storm Sandy, which hit the U.S. Northeast in late October.
In New York City, 100 percent of firms reported some reduction in activity due to the storm, with 70 percent citing loss of power and communication as a major factor.
However, only 21 percent of firms in upstate New York reported a loss of activity.
Jump in Jobless Claims; Inflation Nudges Up
By Michelle Jamrisko and Shobhana Chandra - Nov 15, 2012
More Americans than forecast submitted claims for unemployment insurance last week as superstorm Sandy wreaked havoc on the job market.
Applications for jobless benefits surged by 78,000 to 439,000 in the week ended Nov. 10, the most since April 2011, the Labor Department said today in Washington. Several states said the increase was due to the storm that hit the Northeastern part of the U.S. in late October, a Labor Department spokesman said as the data were released to the press.
The extent of the damage means it may take weeks for the underlying trend in firings to again become clear. Before the storm, the labor market was gaining momentum even as year-end domestic fiscal policy uncertainties raised concern among businesses.
“At least a few state labor offices were shut in the prior week so it’s almost as if you have two weeks of claims in one,” saidRyan Wang, an economist at HSBC Securities USA Inc. inNew York. “You have a double whammy this week, where people were filing claims they were unable to previously and individuals unable to work for the storm were filing additional claims.”
Stock-index futures dropped after the report, erasing earlier gains. The contract on the Standard & Poor’s 500 Index maturing in December fell 0.1 percent to 1,351.80 at 8:59 a.m. in New York.
Sandy struck the Northeast region, including New York andNew Jersey, as it came ashore Oct. 29, and those who lost their jobs because the storm shuttered businesses may keep filing claims in coming weeks.
The Labor Department spokesman did not name the affected states, citing agency policy not to single out any one area. Today’s report showed a loss of electricity prevented New York offices from taking claims two weeks ago.
In addition, since Monday was a government holiday, three states and territories — Hawaii, Oregon and Puerto Rico – didn’t report claims data, causing the Labor Department to estimate their totals, the spokesman said. Two others, California and Virginia, provided their own estimates.
Claims were projected to rise to 375,000 from the prior week, according to the median estimate of 49 economists surveyed by Bloomberg. Projections ranged from 340,000 to 475,000. The prior week’s reading was revised up to 361,000 from an originally reported 355,000.
“When you’re trying to forecast a lot of the economic data, frankly, around a natural disaster like that, it’s like throwing at a dartboard,” said Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York, who projected a rise of 385,000. “We knew they would go up, but it was hard to say how much.”
The consumer price index rose 0.1 percent in October, the smallest gain in three months, Labor Department figures also showed today. The so-called core measure, which excludes more volatile food and energy costs, increased 0.2 percent.
Manufacturing in the New York region contracted for a fourth straight month in November as superstorm Sandy knocked out electrical power and limited activity, a report from the Federal Reserve Bank of New York showed.
The bank’s general economic index was minus 5.2 this month after minus 6.2 in October. The median forecast of 55 economists in a Bloomberg survey called for minus 8. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.
While pushing up claims, the storm may bolster homebuilders and other housing repair companies. Sandy’s damage could spur a sales boost similar to the one provided by Hurricane Irene, which added about $360 million in sales last year, executives at Home Depot Inc. (HD)said on a Nov. 13 earnings call.
“The property damage, as we understand it, related to Irene was about $16 billion; the property damage for Sandy is about $20 billion, so it would suggest possibly higher sales, but it’s impossible for us to know right now,” said Carol Tom, the Atlanta-based company’s chief financial officer.
A less-volatile measure of claims, the four-week moving average, rose to 383,750 from 372,000, today’s report showed.
The number of people continuing to collect jobless benefits climbed by 171,000 to 3.33 million in the week ended Nov. 3, the most in more than four years. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 33,300 to 2.12 million in the week ended Oct. 27.
The unemployment rate among people eligible for benefits rose to 2.6 percent in the week ended Nov. 3 from 2.5 percent. Thirty-four states and territories reported an increase in claims, while 19 reported a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates.
The payroll report released Nov. 2 wasn’t affected by Sandy. Businesses in the U.S. hired 184,000 workers in October, the most since February, indicating they see enough demand to expand even in the face of the tax increases and spending cuts slated for January unless Congress acts.
Still, changes to headcount show the labor market hasn’t been able to gain traction in 2012. Gains in total payrolls so far this year have averaged 157,000 a month, little changed from the 153,000 average for 2011.
A separate survey of households showed the jobless rate rose to 7.9 percent from 7.8 percent in September as 578,000 people joined the workforce is search of a job, swamping the 410,000 gain in employment.
Federal Reserve Chairman Ben S. Bernanke and his policy- making colleagues last month had a detailed discussion about whether the central bank should link its policy of holding the main interest rate at zero to numerical measurements of unemployment and inflation, an approach that participants “generally favored” over the current approach of specifying a calendar date through which rates will remain low, minutes of their October meeting released yesterday showed.
To contact the reporters on this story: Michelle Jamrisko in Washington firstname.lastname@example.org; Shobhana Chandra in Washington at email@example.com
To contact the editor responsible for this story: Christopher Wellisz at firstname.lastname@example.org
Census: U.S. Poverty Rate Spikes, Nearly 50 Million Americans Affected
WASHINGTON (CBSDC/AP) – As President Barack Obama is set to begin his second term, new statistics on America’s poverty rate indicate that nearly 50 million Americans, more than 16 percent of the population, are struggling to survive.
New figures released by the Census Bureau this week found a spike in poverty numbers last year, going from 49 million in 2010 to 49.7 million last year. The numbers may come as a surprise to Congress, which estimated in September that the poverty rate would drop to 46.2 million. One of the most startling findings showed that almost 20 percent of American children continue to live in poverty.
The Associated Press reports that the new figures are based on an updated formula devised by the Census Bureau to help give the government a better understanding for how to use safety-net programs.
The numbers found that Hispanics and people living in urban areas had a higher chance of struggling to make it financially. Poverty among full-time and part-time workers also saw a jump from its 2010 numbers.
Based on the formula implemented by the Census Bureau, California tops the list as the sate most likely to bring about poverty. The top five is rounded out by the District of Columbia, Arizona, Florida and Georgia.
“We’re seeing a very slow recovery, with increases in poverty among workers due to more new jobs which are low-wage,” Timothy Smeeding, a University of Wisconsin-Madison economist who specializes in poverty, told The Associated Press. “As a whole, the safety net is holding many people up, while California is struggling more because it’s relatively harder there to qualify for food stamps and other benefits.”
Adults in the age groups of 18 to 64 and 65 and older saw spikes in their poverty rates. Hispanics and Asians saw greater spikes than white people, according to the statistics. Black people saw a slight decrease in poverty, but still have a rate of 25.7 percent.
YOU MAY ALSO ENJOY
Major Hurdles Remain To End Veteran Homelessness
Homeless Rate Drops 8 Percent in Va.
Euro zone falls into second recession since 2009
By Robin Emmott and Michelle Martin
BRUSSELS/BERLIN | Thu Nov 15, 2012 9:46am EST
(Reuters) – The euro zone debt crisis dragged the bloc into its second recession since 2009 in the third quarter despite modest growth in Germany and France, data showed on Thursday.
The French and German economies both managed 0.2 percent growth in the July-to-September period but their resilience could not save the 17-nation bloc from contraction as the likes of The Netherlands, Spain, Italyand Austria shrank.
Economic output in the euro zone fell 0.1 percent in the quarter, following a 0.2 percent drop in the second quarter.
Those two quarters of contraction put the euro zone’s 9.4 trillion euro ($12 trillion) economy back into recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.
A rebound in Europe is still far off. The debt crisis that began in Greece in late 2009 is still reverberating around the globe and holding back a lasting recovery.
Analysts said even the euro zone’s top two economies were likely to succumb in the final three months of the year.
“That was the last good number Germany for the time being,” said Joerg Kraemer, chief economist at Commerzbank. “I don’t expect the German economy to return to decent growth rates until the middle of next year.
Most economists expect Germany to contract in the fourth quarter for the first time since the end of 2011. And where Germany goes, France is likely to follow.
“We expect the French economy to contract again in the final quarter of this year,” said Joost Beaumont of ABN Amro.
For all of 2012, the European Commission sees the euro zone contracting 0.4 percent, while growing just 0.1 percent in 2013. Business surveys point to difficult times ahead and the public’s backlash to austerity policies is growing.
A Reuters poll of more than 70 economists predicted the bloc’s new recession will extend until the end of the year and 2013 promises little better than stagnation, in line with what the Commission is forecasting.
Conducted before Thursday’s data were released, the consensus was for a 2012 contraction of 0.5 percent and just 0.1 percent growth next year.
Millions of workers went on strike across Europe on Wednesday to protest the government spending cuts they say are driving the region into a deeper malaise but which Germany and the Commission say are crucial to healing the wounds of a decade-long, credit-fuelled boom.
“We are now getting into a double dip recession which is entirely self-made,” said Paul De Grauwe, an economist with the London School of Economics. “It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else,” he said.
SHARP DUTCH CONTRACTION
The Commission says the euro zone’s economies will be much healthier overall next year than in 2009, which was the nadir of bloated budgets when Greece’s fiscal deficit reached a record 15.6 percent of GDP and Ireland was not far off at 13.9 percent.
The threat of a euro zone break up has also diminished after the European Central Bank promised to buy euro zone government bonds in potentially unlimited amounts, should a country first seek help from the bloc’s permanent rescue fund.
There have been fledgling signs the Italian economy is improving. Consumer confidence has risen and the pace at which industrial output has fallen is slowing.
Nonetheless, the country’s “acquired growth” at the end of the third quarter stood at -2.0 percent, meaning that if GDP is flat in the final three months of the year, the economy will have shrunk by two percent over the year as a whole.
Spain, which has kept the euro zone on tenterhooks over a decision on whether or not to seek help from the euro zone rescue fund, is also in recession. It contracted 0.3 percent in the third quarter.
The Dutch economy shrank much more sharply than expected, by 1.1 percent on a quarterly basis, the biggest drop in the quarter of any euro zone country. Austria’s economy contracted 0.1 percent. Tiny Cyprus shrank 0.5 percent.
Figures out earlier this week showed the Portuguese economy shrank 0.8 percent quarter-on-quarter while Greece tumbled further, casting doubt on whether Athens and its lenders can come up with a credible plan to put its finances back on track.
EU policymakers seem aware that government spending cuts cannot keep up at the current pace, particularly after shocking suicides in Spain by people who had their homes repossessed.
Spain’s Economy Minister Luis De Guindos has repeatedly called for EU-mandated budget cuts to take into account the euro zone’s recession, while Greece has been given two more years to make the cuts demanded of it.
“The last couple of days have created a new momentum for a change in policy, because up until this week, social tension was not part of the equation,” said Steen Jakobsen, chief economist at Saxobank. “It seems like the tone has shifted dramatically.”
(Writing by Robin Emmott and Mike Peacock. Additional reporting by Daniel Flynn in Paris and John O’Donnell, Ben Deighton and Robert-Jan Bartunek in Brussels. Editing by Jeremy Gaunt.)
Market Selloff After Obama’s Re-election No Accident, Recession Coming
By Charles Biderman
Ever since Obama won eight days ago, stock prices are down about 4% as this is being recorded. So stocks peaked September 14—two months before the election—when the Federal Reserve announced the current version of quantitative easing, and stocks held up pretty much right through an election day rally.
But now that the election is over stocks are dropping with no bottom in sight. This is no accident given investors’ fears of higher taxes and continued big spending, including higher taxes on capital gains, which inevitably will tank the economy. In fact, I believe we are headed for a recession.
It is important to remember that on election day, $19.3 trillion was the market value of all U.S. stocks. That $19.3 trillion was not that far below the all time peak reached in 2007 but was also more than double the $9 trillion stock market capitalization at the March 2009 low.
To me, that is a major reason why Obama won the election. Romney lost not because the real economy is doing anything good, but because lots of people who voted for Obama incorrectly assumed that the high stock prices were a strong indicator that the economy was on the road to recovery.
They also ignored, or in many cases, didn’t understand, that higher stock prices were actually the result of Fed manipulation. They also believed the highly suspect data from the BLS and other government agencies that the economy was improving.
But now the election is over and stocks are dropping as reality is setting in.
Everything I read and hear says to me and many other investors that the Obama administration is totally committed to raising income tax rates and maintaining virtually all current government spending.
To me that guarantees that next year after-tax income will decline in the U.S. by at least 2% if all the current tax increases happen.
And, declining after-tax income is my definition of a recession.
The realization by Wall Street that higher taxes are inevitable next year is forcing tax oriented year-end selling of lots of assets, including stocks. Ironically that will boost income tax collections early in 2013, but capital gains tax collections will certainly crater later in the year.
By the way, I don’t care what GDP does. GDP is a joke. All that really matters is income. And that is why we at TrimTabs track after tax income in real-time as best we can as soon as it is available from the U.S. Treasury.
I firmly believe if the Obama Administration gets away with raising taxes and not cutting spending it will crash stocks through next year. Lower stocks combined with declining take home pay will create a social mood that will not be perceived as pleasant.
In fact, that could be why Marc Faber said he wants a tank to deal with what is coming, not just guns.
Sooner or later the developed world will come to understand that governments are ineffective at providing services and if governments are not stopped they will bankrupt us.
Charles Biderman is president and CEO of TrimTabs Investment Research and portfolio manager of TrimTabs Float Shrink ETF.