There’s a term in chess called zugzwang, which describes the point in a game when it’s your turn to move but every move you could make would worsen your situation. That’s pretty much what the chessboard looked like for Federal Reserve chairman Ben Bernanke when he testified before Congress this morning. What everyone most wants to know is when the Fed is going to start tapering off its bond-buying program (called Quantitative Easing), which has flooded the banking system with money for the past five years and kept interest rates abnormally low. And that was something Bernanke couldn’t answer. In his testimony, the Fed chairman gave a carefully hedged commitment that the central bank would continue buying bonds – currently $85 billion a month – until the economy is stronger. And he repeated last December’s official statement that the Fed intends “to maintain highly accommodative monetary policy as long as needed to support continued progress toward maximum employment and price stability.” When asked at what point the bond-buying policy might change, Bernanke was more evasive, saying that the Fed might need a few more meetings to make that decision. Asked if it would be decided by Labor Day, he demurred. Bernanke’s hedging isn’t primarily a sign of indecisiveness. His real problem is that given current economic conditions, there aren’t any good moves he can make. The conventional wisdom – and the presumption behind the Fed’s current policy – is that the economy is steadily improving, even if progress is slow. And while easy money eventually leads to higher inflation, that threat could still be several years away. So ideally, the Fed’s stimulus could get the economy back to a normal rate of growth before inflation becomes a problem, at which point the Fed could taper off its bond buying little by little and gracefully exit the picture. (MORE: The Unspeakably Wonky Idea That Can Solve the Corporate Tax Debate) But what if the economy isn’t getting better, or is improving so sluggishly that it will take years to get back to normal?
(WASHINGTON) — Solid hiring helped lower unemployment rates in 40 U.S. states last month, the most since November. The declines show the job market is improving throughout most of the country. The Labor Department said Friday that unemployment rates increased in only three states: Louisiana, Tennessee and North Dakota. Rates were unchanged in seven states. California, New York and South Carolina all reported the largest unemployment rate declines in April. Each state’s rate fell by 0.4 percentage points. (MORE: U.S. Weekly Jobless Claims Jump to Highest Level in 6 Weeks) The report said 30 states added jobs in April, while 18 reported fewer jobs. Nationwide, employers added 165,000 jobs in April and the unemployment rate fell to a four-year low of 7.5 percent. The economy has added an average of 208,000 jobs a month since November. That’s up from only 138,000 a month in the previous six months. The housing recovery is creating jobs in many states. Texas has created 41,500 construction jobs in the past year. That’s helped the state be the nation’s leader in job growth over the past year and in April. The state added 33,100 jobs last month and 326,100 jobs over the past 12 months. Texas’ unemployment rate stayed at 6.4 percent in April compared with March, but has fallen from 7 percent a year ago. New York gained 25,300 jobs in April — second most among the states — and 111,600 jobs in the past year. The job gains in April helped pushed the state’s unemployment rate down to 7.8 percent from 8.2 percent in March. Some of the decline was also because people stopped looking for work. The government counts people as unemployed only if they are actively seeking jobs. Florida added 17,000 jobs in April and 119,100 in the past year. More than half of April’s job gains were in construction. The state has gained 15,500 construction positions in the past year. Jobs in trade, transportation and utilities have grown by more than 40,000 in the past year. (VIDEO: April Jobs Report:
(WASHINGTON) — The number of Americans seeking unemployment aid rose 32,000 last week to a seasonally adjusted 360,000, the most since late March. The jump comes after applications fell to a five-year low. The Labor Department said Thursday that the less volatile four-week average rose just 1,250 to 339,250, a level consistent with modest hiring. Weekly applications are a proxy for layoffs. The big increase could mean companies are cutting more jobs, possibly because of steep government spending cuts that kicked in March 1. Labor officials said there were no special circumstances that caused the spike. (MORE: US Jobless Aid Applications Fall to 5-year Low) Applications tend to fluctuate sharply from week to week and economists typically focus more on the four-week average. That remains 9 percent lower than it was six months ago. The job market has improved over the past six months. The economy has added an average of 208,000 jobs a month since November. That’s up from only 138,000 a month in the previous six months. Still, much of the job gains have come from fewer layoffs — not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years and have risen only modestly since then. Overall hiring remains far below pre-recession levels. The unemployment rate has also fallen to a four-year low, although it remains high at 7.5 percent. Companies may not be confident enough in the economic outlook to rapidly boost hiring. Some businesses may be concerned about the impact of the federal spending cuts and tax increases. An increase in Social Security taxes at the beginning of this year could slow consumer spending, which drives nearly two-thirds of economic activity. Still, consumers appear to be shrugging off the tax hikes, helped by cheaper gas and steady job gains. Consumer spending rose from January through March at the fastest rate in more than two years. And Americans boosted their spending at retailers in April, from cars and clothes to electronics and appliances. Some analysts raised their growth forecasts for
Ever since the recovery began in 2009, a weak housing market has held back the U.S. economy. The first rebound in home prices was lackluster and after only a year was followed by another dip. But the recent upturn in home prices looks like the real thing. One clear sign of a turning point: In March, homeownership hit a 17-year low, while the 12-month gain in home prices was the biggest in seven years. Those two extremes suggest that the market has hit bottom. The people who are least well financed have been squeezed out, while demand is growing among people who can afford to pay higher home prices. If that trend continues – and there are good reasons to believe it will – a substantial burden will be lifted from the U.S. economy. The great surprise since the recession ended has been the weakness of the economic rebound, which has been particularly clear in the housing market. After falling 31% from 2006 to 2009, home prices rose almost 5% over the following year. But that recovery faltered, and during the next 20 months prices fell to a new low. Then the current recovery began, and barring another recession, all the evidence indicates that it will be sustainable: In the first quarter, home prices were higher (compared with a year earlier) in 133 of 150 metropolitan areas, according to the National Association of Realtors. On a national basis, the median home price gained 11.3%, the biggest yearly gain since 2005. (MORE: The Housing Mirage) The glut of homes for sale has diminished, down almost 17% compared with the previous year. In addition, the number of foreclosures in April (including bank repossessions and scheduled auctions) was 23% lower than a year earlier. Mortgage applications were up 7% in the most recent week, helped by low mortgage rates. Refinancings, which typically improve homeowners’ finances, have been generally rising in recent months and reached their highest level since December. And a Fannie Mae survey of consumer expectations for housing found that a majority of those surveyed in
(WASHINGTON) — The number of Americans who applied for unemployment benefits fell by 4,000 last week to a seasonally adjusted 323,000, a five-year low. Layoffs have returned to pre-recession levels, a trend that could lead to more hiring. The Labor Department said Thursday that the less volatile four-week average dropped 6,250 to 336,750. That the fewest since November 2007, one month before the Great Recession began. Applications are a proxy for layoffs. Weekly applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy. The last time weekly applications were lower was in January 2008, when they were 321,000. Economists were largely encouraged by the decline. “This is a very positive trend and we should embrace it,” Jennifer Lee, an economist at BMO Capital Markets, said in an email to clients. The job market has also improved over the past six months. Net job gains have averaged of 208,000 a month from November through April. That’s up from only 138,000 a month in the previous six months. Much of the job growth has come from fewer layoffs — not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years, though they have risen moderately since then. Overall hiring remains far below pre-recession levels and unemployment remains high at 7.5 percent. For hiring to increase enough to rapidly lower the unemployment rate, companies must gain more confidence in the economy. But some have held off adding new workers in recent months, possibly because of concerns about the impact of federal spending cuts and tax increases. And an increase in Social Security taxes could slow consumer spending, which drives nearly two-thirds of economic activity. The Federal Reserve said last week that the federal government’s policy changes are “restraining economic growth.” But Dean Maki, an economist at Barclays Capital, pointed out that the decline in unemployment aidapplications suggests companies are not too worried about the fiscal drag. He notes they are responding to the government’s actions by reducing hiring and
Federal Reserve chairman Ben Bernanke doesn’t get much respect. PIMCO’s Bill Gross, who oversees some of the country’s biggest bond portfolios, has warned that Bernanke risks rousing inflationary dragons. NYU professor Nouriel Roubini, who correctly anticipated the 2008 financial crisis, has argued that Bernanke’s policies are failing to help the economy and are instead fueling a stock market bubble that will end in a financial crisis. Even experts who are sympathetic have been cutting at times. New York Times columnist Paul Krugman has acknowledged that the Fed chairman is a fine economist. But his long-running disputes with Bernanke – known in some quarters as the Battle of the Beards – have included charges that Bernanke was assimilated by the Fed Borg, a reference to Star Trek’s collective alien intelligence that overwhelms individuality and personal will. Renowned investor and business magnate Warren Buffett has described Bernanke as “a gutsy guy,” but he has also criticized the Fed’s policies as brutal toward retirees, who depend on interest payments from their investments. Indeed, Bernanke himself acknowledged as much in a 2011 press conference: ”We are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people. They have costs for savers. We have complaints from banks that their net interest margins are affected by low interest rates. Pension funds will be affected if low interest rates for a protracted period require them to make larger contributions. So we are aware of those concerns, and we take them very seriously. I think the response is, though, that there is a greater good here, which is the health and recovery of the U.S. economy.” (MORE: How Silicon Valley is Hollowing out the Economy) It’s understandable that a public official would feel obliged to do whatever is best for the country at any given moment. If the lack of sound long-term fiscal policies is holding back growth, then up to a point the Fed can justify pumping large quantities of money into the banking system as additional stimulus. But there is a limit. In the long run, excessive money creation may engender
(WASHINGTON) — U.S. employers posted fewer job openings in March compared with February and slowed overall hiring, underscoring a weak month of job growth. The Labor Department said Tuesday that job openings fell 1.4 percent to a seasonally adjusted 3.8 million jobs. Total hiring declined 4.3 percent to 4.3 million. The unemployed faced heavy competition in March. There were 3.1 unemployed people, on average, for each job opening. That’s above the ratio of 2 to 1 that is typical in a healthy economy. (MORE: U.S. Jobless Claims Fall to 5-year Low of 324,000) On Friday the government reported that employers added just 138,000 net jobs in March, well below February’s 332,000. Tuesday’s report shows that the slowdown occurred because gross hiring fell and layoffs increased. Job growth picked up in April. The economy added 165,000 net jobs and the unemployment rate fell to 7.5 percent from 7.6 percent in March. April’s gain, along with sharp upward revisions to the totals for February and March, suggests that the job market is improving steadily. Employers have now added an average of 208,000 jobs per month from November through April. That’s much higher than the average of 138,000 in the previous six months. Half of the decline in March’s job postings was because governments at all levels advertised fewer positions. Most occurred at the federal level, which was affected by across-the-board spending cuts that began on March 1. The federal government reduced job openings by 30 percent in March compared with February. (VIDEO: April Jobs Report: No Spring Slump for Unemployment) Construction firms, manufacturers, and health care providers also advertised fewer positions. Retailers, hotels and restaurants, and entertainment firms were the only major industries to post more job openings in March compared with the previous month. Layoffs rose for the second straight month to 1.69 million, after falling in January to the lowest level since records began 12 years ago. Despite the increase, layoffs are still running below pre-recession levels. Companies have posted more jobs but are slow to fill them. Many employers
In recent years, the U.S. economy has performed like a once dominant, but now aging ballplayer. It shows flashes of greatness, but the risk of injury looms large. Last winter, for instance, the job market started the year with a bang, adding roughly 275,000 jobs per month. But sometime last spring, it pulled up lame — at one point the three-month average of job gains stalled to 108,000, possibly not even enough to keep up with population growth. But if this month’s jobs report is any indication, the economy is managing to avoid the disabled list this year, despite the risks from higher taxes, lower government spending, and economic weakness around the globe. The Labor Department announced this morning that the U.S. economy added 165,000 new jobs and that the unemployment rate fell slightly to 7.5%. More important, the previous two months of employment gains were revised upwards: February job growth was estimated to be 332,000 rather than 268,000, and March job growth was revised from 88,000 to 138,000. In other words, there are 279,000 more jobs in the economy this month that we had previously thought. (MORE: New Hope for Underwater Homeowners) The report showed strength in other ways as well. Average hourly earnings rose last month by four cents to $23.87, which brings the increase so far this year to 1.9%, more than enough to keep pace with inflation. On the other hand the average length of the work week decreased by 0.2 hours, indicating that while employers have hired more, this may be eating into the hours of the already employed. The politically inclined will surely be parsing today’s report for effects of the so-called “sequester” as well as the various tax increases that have gone into effect this year. Conservatives will likely point out that there isn’t much evidence in this month’s numbers that government cuts are worsening the employment picture, as government employment remained steady. That being said, most of the sequester is taking the form of furloughs rather than outright job cuts, and the effects