AUGUST 13, 2010

Job Losses Continue in July

The economy lost 131,000 net jobs in July, versus market expectations of a much lower loss of 63,000 jobs. The drop was driven by the layoff of 143,000 temporary census workers, and a net total of 202,000 displaced government employees.

The private sector added 71,000 jobs in July, bringing net private-sector job growth to 630,000 this year. Although better than the previous two months’ job figures, private-sector job creation in July still fell below the normal pace of growth.

The construction sector lost 11,000 jobs while financial services lost 17,000 jobs—a large chunk coming from the real estate sector. Growth continued in the manufacturing sector, which added 36,000 jobs, reaching a net total of 161,000 jobs so far this year, with 21,000 attributed to the auto industry. The production of motor vehicles has been increasing as the auto industry scrambles to replenish inventory following a sharp reduction in manufacturing last year.

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JULY 23, 2010

By Dwight Brown, CFC Derivatives Supervisor

Overall corporate profits have recovered from declines experienced during the recession. Profit levels through Q1 2010 were 5.7 percent higher than Q4 2007. And yet the labor market is far from its pre-recessionary level, having lost a net 7.5 million jobs over the same period. Despite the rebound in profits, companies remain on the sidelines pending stabilization of economic conditions.

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JUNE 11, 2010

By Josh Silverman, Director, Term Funding & Risk Management

In prepared testimony to the House Budget Committee on June 9, Federal Reserve Chairman Ben Bernanke said the European sovereign debt crisis likely will have only a “modest” impact on recovery efforts in the United States if financial markets continue to stabilize.

“Although the recent fall in equity prices and weaker economic prospects in Europe will leave some imprint on the U.S. economy, offsetting factors include declines in interest rates on Treasury bonds and home mortgages as well as lower prices for oil and some other globally traded commodities,” he said. Read More »

APRIL 30, 2010

Increased investments in energy efficiency could reduce energy bills by $41 billion in 16 southern states and the District of Columbia by 2020, while moderating electric rate increases, creating up to 380,000 new jobs and growing the regional economy by $1.23 billion, according to a joint study released by Duke University and the Georgia Institute of Technology and published by the Southeast Energy Efficiency Alliance.

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FEBRUARY 26, 2010

Consumer Confidence Drops

The Conference Board’s index of consumer confidence fell in February to 46, the lowest level since April 2009. The drop in confidence is a sign that consumers are still hesitant to spend as the economy slowly recovers.

With predictions of higher interest rates and the government’s plan to remove stimulus dollars from the market, consumers are wary about the state of the economy. Economists predict that improvements in confidence will take time, with higher levels not expected until later this year. They key drivers for an improvement in confidence, which should result in improved consumer spending, will be more favorable labor market conditions, an improved housing market without government support and improved credit fundamentals.

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JANUARY 29, 2010

Consumer Confidence Improves

The Conference Board’s index of consumer confidence continued to increase in January, rising to 55.9 from December’s upwardly revised reading of 53.6. The increase was driven more by an improved assessment of current conditions rather than an improved outlook for the future.

Despite continued job losses, consumers’ assessments of current labor market conditions improved, helping drive January’s modest gain in confidence. Although the index now stands at its highest level since September 2008, recent gains have been small and the level of consumer confidence is still consistent with an economy in recession.

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JANUARY 15, 2010

By Madhuri Dhawan, CFC Financial Analyst

Minutes from the most recent Federal Open Market Committee (FOMC) meeting in December were more dovish than expected, signaling a greater likelihood of keeping short-term interest rates low for an extended period of time.

While acknowledging recent signs of economic improvement, the FOMC is only cautiously optimistic regarding the outlook for continued increases in economic activity. In addition, the Federal Reserve maintained its outlook of low inflation for the near future. Although the degree of deterioration in the labor markets has slowed in recent months, the FOMC expects the unemployment rate to remain high for “some time.”

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JANUARY 15, 2010

Economy Sheds Jobs, Unemployment Rate Unchanged

The recent string of promising news reports on the labor market ended in December as payrolls declined by 85,000. The economy shed 4.2 million net jobs in 2009 and has shed 7.2 million since the start of the recession.

Job cuts have slowed in recent months, with November’s revised payroll figures showing a net gain of 4,000 jobs—the first increase since December 2007. October’s figures, however, were revised lower by 16,000. Employers are still reluctant to increase hiring as they gauge the strength of the economic recovery and continue to deal with tight credit conditions.

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JANUARY 15, 2010

Based on its economic research, Standard & Poor’s (S&P) RatingsDirect this week said its U.S. economic forecast for 2010 was for “a prosperous new year.” While still expecting a half-speed recovery, S&P predicted gross domestic product (GDP) growth of 2.7 percent in 2010.

S&P also boosted its estimate of Q4 GDP growth to 3.9 percent based on stronger-than-expected retail sales and a modest rebound in manufacturing. The surprising splurge in holiday spending occurred despite still-weak consumer confidence, unfavorable weather conditions and without consumers running up additional debt, with November witnessing a record decline of $17.5 billion in consumer credit. In fact, the savings rate moved up to 4.7 percent—compared with 1.7 percent in 2007—although it remains barely half the pre-1990 average of 8.9 percent.

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JANUARY 8, 2010

By Josh Silverman, CFC Director, Term Funding & Risk Management

The Economy

According to the latest monthly Bloomberg survey of 41 Wall Street economists, the U.S. economy will grow at a 2.6-percent pace in 2010, compared to an anticipated 2.5-percent contraction for 2009, with slightly stronger growth of 2.85 percent expected for 2011.

Labor market conditions will gradually improve during 2010, with job growth expected to turn positive by the middle of the year. The unemployment rate, however, will likely remain above 10 percent for much of the year because previously discouraged job seekers—who are not now counted in the unemployment figures—will try to return to the work force as economic conditions and job prospects improve.

One key area to watch in 2010 is spare capacity/resource slack in the economy. The Federal Reserve has been able to keep short-term interest rates low for such a long period because there has been a significant amount of spare capacity in the economy. The nation is currently operating at a capacity utilization rate of just over 71 percent—well below the pre-recession level of nearly 80 percent.

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