US Jobless claims decreasing

States are finally reporting appropriate base levels of jobless claims. This is an indicator for investors and our economy of firms starting to hire more people. The past two months have been preventing and helping the deteriorating economy. Firms still may be hiring but payrolls have been decreasing every month since November 2007. The White House expects that the economy will add an average of 95,000 jobs a month. This is an encouraging report which gives investors and people looking for work good news.

China’s Central Bank Hits Brake on Hot Economy

During the recession most countries are trying to energize their economies, but China is doing the opposite. The Chinese central bank announced Friday that they are reducing lending to companies and individuals by requiring commercial banks to increase the amount of money they put in reserves. This is the second time in a month that China's central bank increased the required reserves for the commercial banks. The Chinese predict that they will have a growth of 10% this year due to a revival of exports, strong consumer spending and investment in infrastructure. China is walking a thin line by trying to control their inflation because it is risking global growth, sending countries back into recessions. China's success comes because of their low producer costs, government infrastructure investment, and a half-trillion dollar stimulus plan. Families are buying cars, houses and other large price items at an alarming rate because the government told banks to lend to everyone giving companies and families extra spending money.

Bernanke’s How-To on Rate Increase Lacks a When

This article focuses on Ben Bernanke, chairman of the Federal Reserve's plan to scale back the amount of aid it has given to offset the economy. It explains that "the Federal Reserve has eased borrowing by lowering short-term interest rates to nearly zero and built up a $2.2 trillion balance sheet by scooping up assets like mortgage-backed securities and even vast sums of Treasury Bonds and notes". Although Bernanke did provide "how, as the recovery proceeds, to gradually shrink the balance sheet, which along with a vast array of assets also includes $1.1 trillion that banks are holding with the Fed," he has yet to produce a timetable for these policies. As well as raising the interest rate on reserves, Mr. Bernanke discussed three other options for draining reserves. The first involves reverse repurchase agreements, the second involves term deposits similar to certificates of deposit, a third option involves redeeming or selling securities. All these strategies carry some risk, this may be why Bernanke seems to want to avoid the question of when these programs will end.

Handshake Case in Sweden

Sweden’s unemployment agency was found guilty of discrimination against a man’s religion. A Stockholm court ordered the Public Employment Service to pay $6,700 in damages to an immigrant who lost his jobless benefits when he was kicked out of the program. Citing his faith, the Muslim man was expelled from a job training program when he refused to shake hands with a woman when he was interviewing for an internship. The agency said his behavior was part of the reason he didn’t get the position and he was excluded from the program.

IMF Says India Can Raise Rates Gradually as ‘Conditions Ripe

The Indian economy is prepared to raise their interest rates as they identify themselves as one of the first countries to recover the from the economic recession. They look to a contractionary monetary policy that will assist the country recover from a 13-month high inflation rate and they are looking to be able to increase their reserves for investments. The Indian Central Bank has raised the reserve requirement to 5.75, indicating the steady recovery of the economy. Unfortunately it is difficult to compare this to the American economy because India's total economy is worth $1.2 trillion while our deficit alone exceeds that by $500 billion. However these are encouraging signs that the global economy is recovering and moving in a positive direction.

An Opportunity Wasted

For President Barack Obama and the United States economy, “The problems are obvious. How to deal with them is not.” A year ago, economist forecast sizable budget deficits to offset the downward shift in private demands throughout the recession. At that point, once the economy stabilized, switch the national focus to deficit reduction and prevent interest rates from choking off the first steps of economic recovery. However, unexpectedly poor performance over the past year has forced the president and his economic team to face the country’s bleak economic outlook. The president’s budget stretches could ultimately prove to be a costly failure in the end. The American Government logically can only support a floundering economy as long as people believe the United States will make good on it’s agreements and not default (as may be the case with Greece in the EU). How much is too much for a country that seems to know no boundaries?

China Overtakes Germany as Top Exporter

This article goes along with what we discussed in class last week concerning China as the world's lead exporter. One thing that is important to consider is the economic downturn that many of Germany's largest export zones faced over the last year (U.S. and E.U.), while China didn't face as harsh of an exporting climate due to its size and breadth of trading. Germany's exports are on the upswing given the increase in investment and consumer spending in recent months. Whether or not Germany will be the top exporter in the future is unclear, but exports will still remain the "engine of the German economy".

Reduced Inventories Reveal Pessimitic Firms

In the month of December, companies reduced their inventories by 0.8% however sales increased 0.8% in the same month. The reduction of inventories shows that companies may still be hesitant to buy in that the economy is on the rebound. Retailers are waiting to fully trust the economy again to keep their stocks at full capacity

For Students at Risk, Early College Proves a Draw

Early-college schools are growing in popularity across the nation. These types of schools are allowing high school students to earn their high-school diploma and up to two years of college credit in five years, free! Traditionally targeting affluent and overachieving students but now some are targeting students whose parents do not have college degrees. More importantly, most serve a low-income student body that is largely black or Latino. These programs help students with the remedial work that many low-income and first-generation students tend to lack. Two views of support are one, to prevent senior slump, and two, to align high school with college. Evidence shows that students get better grades in their college courses since participating in the program.

The Conference Board Consumer Confidence Index® Increases Moderately

The Conference Board Consumer Confidence Index increased from December. It rose from 53.6 to 55.9 in January. "Consumers' assessment of present-day conditions was, on the whole, more positive than last month." 9% of people interviewed thought that business conditions were good, up from 7.5%. Consumers viewed the labor market as overall better this month with 4.3% stating that jobs were plentiful, up from 3.1%. "The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 20.9 percent from 21.2 percent, while those anticipating conditions will worsen increased to 12.7 percent from 11.8 percent." People expecting fewer jobs decreased to 18.9 percent from 20.6 percent. While those expecting more jobs to become available in the months ahead declined to 15.5 percent from 16.4 percent. The proportion of consumers anticipating a decrease in their incomes declined to 16.2 percent from 18.4 percent.

US Existing Home Sales Plunge More Than Expected

According to CNBC.com the sale of houses has dropped more than the analysts originally thought they would. "The National Association of Realtors said existing home sales fell 16.7 percent to an annual rate of 5.45 million units in December. Analysts had expected a 5.90 million unit pace." The housing market was recovering from a long slump, but the recent drop has analysts worried that the brief recovering has faltered. The housing markets are up 4.9% in 2009 compared to 2008. In the southern states, the nation's largest housing market, sales fell 16.3%.

Southland panel rejects funds for ethanol fueling stations

This article talks about how the members of the Southern California Assn. of Government denied an $11 million dollar federal stimulus to set up 55 ethanol gas stations. The council denied the stimulus for various reasons. One of which being that the transportation of corn from the Midwest to Southern California harms the environment. This stimulus could have created 221 jobs and reduced the need for 700 million gallons of petroleum. If this stimulus was approved it could have created a fair amount of jobs and reduced the United States foreign dependency on oil exporting countries.

A very European crisis: The sorry state of Greece’s public finances is a test not only for the country’s policymakers but also for Europe’s

This article examines the state of Greece in the European Union. It states that this decline was inevitable, if not by Greece than one of the other weaker members of the E.U. The European Commission who is supporting the Greek government's plan to cut deficit by 3 percent has said that they will be closely watching the distribution of these funds "to ensure that it (Greece) keeps its promises."
It continues to explain that the government says it will present a plan for pension reform and a bolder package of budget cuts soon. However, investors have been cautious when investing in Greece.
If these programs fail Greece will most likely have to be bailed out. Which brings other problems since there is a "no bail-out" clause in the E.U. One remedy would be for Greece to arrange a bridging loan from another euro-zone country in good credit, such as Germany. However there are also problems with this, since the euro area has no mechanism to help a member that cannot fund itself in capital markets.

Falling Flat: More evidence that America is Experiencing a Jobless Recovery

I just thought this was an interesting article to show how the US economy may be experiencing a recovery which is not reflected in a recovery of the job market. I think this may validate reports on how certain jobs will never return, even when the economy does recover. Nonetheless, all is not loss as it is during this time that the economy will produce other new jobs and become more efficient.

Jobs and Wages Tax Cut Should be Part of a New Jobs Package

This article, by Josh Bivens, talks about a new jobs bill that President Obama said to the senate there was a need for in his State of the Union Address. He proposes that the answer is imposing a temporary job creating tax credit as part of a complete job stimulus package. He calls it the JWTC for short and is for small businesses. The projections for it is that it will create about 1 million new jobs over the next year.

Why Politics Gets Stuck In The Middle

The article discusses how political competition isn't always as beneficial as economic competition. For example, the quest for voter approval helps explain some recent developments in domestic politics such as a stall in the health care reform. People can also be ignorant or misinformed about what is going on in politics which can also lead to a less efficient political system.

EU Backs Greek Deficit Plan; Papandreou Offers Cuts

This article raises a question of whether one single monetary policy can be applied to multiple countries some of which do not have a stable economy. One of such economies that threaten the economic well-being of the entire Union is Greece (Spain and Portugal are also having some difficulties but not as extreme as Greece).

It is interesting to find out how problems of such small nation’s economy can have such a loud echo within the financial world. Other EU members are very concerned and are urging Greece to seek financial aid from IMF, however, Greece believes they could rely on the package from the EU and the Economic and Monetary Union.

Signs of Hope as Jobless Rate Dips

This article talks about the good signs that are coming out of the economy right now such as average weekly earnings and the jobless rate that fell to 9.7% from 10% in December. However, there is still many industries that are shedding jobs in large numbers. I think that this article shows that things are beginning to look much better but are moving slowly.

Paying for the Olympics: The Toughest Course

With the upcoming Winter Olympics in Vancouver, the United States Olympic Committee has been very busy organizing the US teams. The USOC is a nonprofit group and relies heavily on sponsors. In 2009, Home Depot, General Motors, and Bank of America stopped sponsoring which lost the organization almost $15 Million a year. Much of the USOC's money comes from financing from the International Olympic Committee. Then after losing its bid for the 2016 Olympics in Chicago, they removed the CEO. The US does not predict to be in running for an olympics for 10 more years so they are relying heavily on the IOC for financing. The IOC is beginning to find the US "self-interested and greedy" and want to cut back on financing.

Are markets and developing countries to dependent on government action?

Here’s an interesting article in The Economist outlining the ongoing “Stimulating Debate” in the United States. The article highlights the idea that despite better-than-expected economic data that poured in during February the facts may be more than a little deceiving. The economic push seems to be largely fueled by heavy government spending (Bailouts & Stimulus Packages) and the central banks. However, “both cannot co-exist for long; either the recovery will not last or, if it does, the stimulus will be taken away.” The US economy is walking a very fine line. Do they reduce the stimulus package today and risk sending the economy back into recession or let the stimulus work and risk damaging long-term growth? An interesting question that shall plague America in the coming year. 

Is Greece's Debt Trashing the Euro?

Even those who support Greece's socialist government are expected to go on strike next week to fight the country's new government who plans to cut public wages and pension payments which make up 51% of its budget. If investors don't buy 53 billion euros of government debt this year, Greece may have to get bailout from the European Union or the International Monetary Fund. Greece is in trouble because over the past decade, they took full advantage of a strong euro and low interest rates which led consumers and the government into debt. The euro is now down 5% against the dollar this year. Greece, Spain and Portugal are just recently feeling the worst damages caused by the recession that many countries have been dealing with over the past few years.

Group of 7 Vows To Keep Cash Flowing

On Saturday the G-7's meeting in the Canadian Arctic was concluded. The seven largest economies decided to stay with the fiscal stimulus plan despite the huge debts of some European governments. Britain’s chancellor of the Exchequer had said "We are all absolutely committed to maintaining the support for our economies until we make sure that we have recovery established.” The Euro is loosing value due to the large debt in Greece, accompanied by Portugal, Spain, and Italy. However, American officials do not believe that Greece will default, due to the extensive programs that are going to be initiated. European officials do not believe the IMF should be involved in the matter because of political pressure to decrease spending and increase revenues. The G-7 does not believe this is an issue that they should be handling so it was turned over to the European Union. It is a worry that sovereign debt might come to effect Britain and the US. The IMF concluded that rising sovereign debt “could crowd out private sector credit growth, gradually raising interest rates for private borrowers and putting a drag on the economic recovery.” Another worry is that "massive debts" could also lead to an increased cost of borrowing to the government. In conclusion, the G-7 declared that stimulus spending was necessary in the short run to speed up the process for recovery.