Jobs claims increase from Katrina
September 29, 2005
While total first-time jobless claims in the United States were down by 79,000 last week, for a total of 356,000 new claims compared to the 435,000 claims filed the previous week, 60,000 more people left without jobs by Hurricane Katrina filed claims last week. Those brought to 279,000 the number of jobless claims attributed to Katrina.
The figure of Katrina-related claims from two weeks ago was revised upward from 103,000 to 108,000, and in the first two weeks after the storm 20,000 and 91,000 Katrina-related claims were filed. Analysts believe that there are more Katrina-related claims to come as mobile claims offices travel to shelters and take the claims of those who have not been able to reach unemployment offices to file.
Some private analysts expect the total number of people put out of work by Katrina to reach 500,000, while the Congressional Budget Office says the number of jobless as a result of the storm could reach around 400,000. There is also expected to be a rise in claims from those put out of work by Hurricane Rita.
New orders for durable goods up in August
September 28, 2005
According to figures released Wednesday by the US Commerce Department, new orders for durable goods were up by 3.3 percent in August after a drop of 5.3 percent in July.
While orders were expected to go up in August, the rebound was much better than the 0.8 percent rise that had been expected.
This news eases worries that the US manufacturing sector was heading for a slump, especially since the gains came in several key sectors.
There was a gain of 1.4 percent in orders for motor vehicles and airplanes, with an 0.8 percent rise in orders for motor vehicles and parts, a gain of 9.4 percent in orders for commercial aircraft, and a 15 percent rise in orders for military aircraft.
In other sectors, orders for computers and other electronics went up by 5.5 percent, primary metals orders such as steel rose 9.2 percent, and orders for machinery grew by 3.5 percent.
Total orders for manufactured goods were up by a seasonally-adjusted $6.8 billion to $210.9 billion. Shipments of durable goods, a measure of current demand, were up by 1.7 percent to $208.5 billion in August.
Consumer confidence reaches 15 year low
September 22, 2005
Consumer confidence in the United States fell more in September than it has in any month in 15 years, according to the Conference Board’s Consumer Confidence Index.
The index hit its lowest level in two years, falling 18.9 points to 86.6 in September. It had been expected to come in at 98 for the month. The drop was blamed on the effects of Hurricane Katrina, rising gasoline prices, and a job outlook that was less than optimistic.
However, the Conference Board’s director of consumer research also said that such shocks as Katrina generally have only a short-term impact on consumers and that confidence should rise again once rebuilding begins in the storm zone and those put out of work by the hurricane begin to find new jobs.
Within the index, the component looking at consumers’ feelings about the current economic situation fell from 123.8 in August to 108.9 in September.
The Expectations Index, a component of the survey which examines the outlook of consumers over the next six months, fell from 93.3 in August to 71.7 in September.
John Snow tries to reassure on “housing bubble” in wake of Katrina rebuilding
September 20, 2005
In remarks before the National Association of Federal Credit Unions on Tuesday, US Treasury Secretary John Snow said that some of President George W. Bush’s domestic agenda will be put on hold for a period of time in order to deal with recovery from the devastation of Hurricane Katrina along the Gulf Coast of the United States.
He said that the short-term economic impact on the zone directly affected by the hurricane will be “devastating” and that the rest of the nation will suffer what he called a temporary slowdown in growth of jobs and the economy.
He also said that the nationwide downward turn in the economy should last about a quarter, but then also said that the rebuilding effort will likely push economic growth in 2006 higher than it would have been had Hurricane Katrina not hit the United States.
Among the domestic agenda items that will be sidetracked by the recovery from Katrina, according to Mr. Snow, are work on the estate tax and making the Bush administration tax cuts permanent.
In response to a question about the housing bubble, Mr. Snow said that some easing in the market is inevitable, but that he thinks it is improbable that the market will collapse. He called the characterization of the housing market as a “bubble” a “misnomer”.
Analysts expect rate rises to continue
September 19, 2005
Results of a poll of Wall Street economists released on Monday show that only 4 out of the 22 who were asked feel that the US Federal Reserve will not raise US interest rates when it meets on Tuesday.
The rest expect the Fed to raise rates another 25 basis points to 3.75 percent despite the effects of Hurricane Katrina. This opinion is based on the comments of several Fed officials who have commented that Katrina will not substantially effect the US economy.
The poll, which was conducted by Reuters, shows that most economists do believe that the Fed will decline to raise interest rates at least once in their remaining meetings this year. Comments from Fed officials seem to indicate that they are more worried about the prospect of inflation than they are about the economic fallout of Katrina. The presidents of both the San Francisco and Chicago Federal Reserve Banks have cited price stability as their number one concern.
San Francisco Fed president Janet Yellen has said that Katrina has raised inflation pressures, and Chicago Fed president Michael Moskow was quoted as saying that he was worried about core inflation being at the “upper end of the range” where prices can remain stable.
Sharp fall shown in consumer confidence
September 16, 2005
According to the University of Michigan’s consumer sentiment index, the confidence of consumers in the United States fell sharply in early September.
A number of factors played into the decline, including the effects of Hurricane Katrina and rising gasoline prices. The index showed consumer sentiment at 76.9 in September.
This was lower than August’s level of 89.1, and even lower than the 81.8 level reached directly after the terrorist attacks of September 11, 2001. Analysts believe that the current slump in consumer confidence does not indicate the onset of a recession, but is simply the result of a shock and that it will recover soon.
One analyst said that he believes one component of the low index reading is a loss of confidence in the government. Recent polls have shown that support for the Bush administration’s economic policies is fading, and the government has come under fire for its perceived slow response to Katrina’s devastation.
Reports of conditions after the hurricane also highlighted social and economic inequalities in the US which might have contributed to the drop in confidence.
Although analysts emphasized that a drop in consumer confidence does not necessarily mean that consumers will curtail spending, the new numbers still constitute a worry for retailers in the short term.
Katrina impacts Labor Department figures
September 15, 2005
According figures reported by the US Labor Department on Thursday, a total of 71,000 more people filed first-time unemployment claims in the week ending September 9 than in the week before.
This was the largest rise in new claims in nearly 10 years, topping the number of claims filed in the weeks following the September 11, 2001 terrorist attacks, which generated 59,000 and 64,000 new jobless claims in consecutive weeks.
Most of last week’s increase, 68,000 new claims, was attributed to the effect of Hurricane Katrina, and officials say that the number will likely be adjusted upward once state unemployment offices catch up with a backlog of claims.
The estimate of new claims generated by Hurricane Katrina for the week ending September 3 has already been increased from an initial estimate of 10,000 to between 15,000 and 16,000. The surge in new claims brought the total number of first time claims in the week to 398,000, which was the highest weekly total in two years.
Some analysts believe that when all is said and done, Hurricane Katrina will have cost somewhere around 400,000 jobs.
Commerce Department report drop in retail sales
September 14, 2005
The US Commerce Department reported on Wednesday that retail sales in the United States dropped a much larger than expected 2.1 percent in August.
The report said that while the department could not give a numerical value to the impact of Hurricane Katrina on the monthly data, but it did say that the impact would not have been high because the area affected accounts for only around 1 percent of nationwide sales and because it would have only had an impact on the last few days of the month.
Analysts had only forecast a drop in sales of 1.2 percent for the month, but a decline of 12 percent in sales of motor vehicles and parts took its toll on the total figures. Outside the automobile sector, retail sales actually rose by 1.0 percent, when only an 0.5 percent gain was expected.
Most of that rise, however, was due to higher gasoline prices, which spiked at the end of the month as gas station sales gained 4.4 percent on the month. When both motor vehicle and gasoline sales are excluded, retail sales gained just 0.5 percent. Furniture sales were up by 0.9 percent on the month, while building materials and garden equipment gained 0.5 percent.
Economic news mixed
September 13, 2005
US economic news was mixed on Tuesday as separate reports had wholesale inflation up in August due to higher prices for gasoline but the trade deficit down in July despite record-high oil imports.
The US Labor Department reported that wholesale prices were up by 0.6 percent in August, less than their 1 percent rise in July. Core inflation, which excludes food and energy costs, remained the same in August.
Wholesale energy costs were up by 3.7 percent in August, but food costs were down for the fifth month in a row and the wholesale price of passenger cars fell by 1.3 percent on the month.
Some analysts are concerned, however, that high oil prices will begin to leak through to other sectors as energy surcharges are being assessed more frequently and the high energy prices begin to be passed on to the consumer. Meanwhile, July’s trade deficit fell by 2.6 percent to $57.9 billion.
However, even the news about the trade deficit is not good with the annual rate so far this year running at $693.1 billion, ahead of last year’s deficit. The US trade deficit with China was up 0.3 percent to an all-time high of $17.7 billion and was running an annual rate 29 percent higher than last year at the same time.
Meanwhile, the US exports of goods and services were up by 1 percent. Analysts believe that the trade deficit will be even steeper next year as oil prices continue to soar and the US imports more oil. Total imports were down by 0.7 percent, but oil imports were up by 21.3 percent in July.
Credit cards becoming more popular than checks
September 12, 2005
According to the president of the Federal Reserve Bank of Philadelphia, paper checks are rapidly being replaced by credit cards and debit cards as the most popular way, other than cash, to pay for goods and services in the United States.
In remarks before the Pennsylvania Association of Community Bankers, Anthony Santomero said that only around 45 percent of non-cash payments for retail purchases are paid for by paper check now, while the balance are paid for through electronic means.
If the current rate continues, both credit cards and debit cards will individually surpass paper checks as methods of payment. In addition, many paper checks are now cleared by many banks using an electronic clearing system that transfers an image of the check rather than the check itself.
Mr. Santomero commented that this trends shows an evolution in the nation’s pattern of payments and that this evolution will continue as new innovations in payment technology are made. He also said that the Federal Reserve has encouraged these new technologies.
Consumer confidence down
September 9, 2005
Consumer confidence is down in the US at the beginning of September based on figures provided by the RBS CASH index. The index showed consumer confidence down to 61.5, its lowest level since March 2003, and down from 72.6 in August and drastically lower than the 103.4 level of the same time last year.
At least one analyst blamed the decline on “fear and uncertainty” in the wake of Hurricane Katrina and on soaring prices for oil and the products made from it. Besides economic concerns, confidence seems also to have been shaken by what is seen by many as a slow response of the US government to the aftermath of the storm.
The biggest drop in the survey was in consumers expectations for the economy over the next six months, which registered a negative 13.5 in the latest survey, the lowest on record and the first time the index has ever gone negative. The August figure was 32.2.
Again, analysts cited Katrina and soaring oil prices as key reasons for this decline, as well as consumer fears that the “housing bubble” could burst at any time. The index is based on polling by international pollster Ipsos.
Polling took place Tuesday through Thursday and included 1,005 respondents who were asked about the opinions concerning the economy and personal finance. The poll’s results have a margin of error of plus or minus 3.1 percent.
Labor Department stats show picture before Katrina
September 8, 2005
While US Labor Department statistics released Thursday show that 319,000 people filed first-time unemployment claims last week, 1,000 less than the previous week, jobless numbers are expected to rise sharply as the numbers of people put out of work by Hurricane Katrina become clearer.
Officials say that last week’s numbers likely would have been much higher except for the fact that many unemployment offices in the affected area were themselves shut down by storm damage. Based on checks of unemployment offices in Louisiana, Mississippi, and Alabama that are still in operation, and in Texas, where officials have agreed to accept jobless claims from storm evacuees, the Labor Department estimates that 10,000 people displaced by the storm have already filed claims, and they are sure to be joined by many more.
The Labor Department also announced on Thursday that $30.8 million dollars in grants have been extended to Louisiana, Mississippi, Alabama, and Texas to facilitate the processing of unemployment claims and to expedite the payment of benefits to people put out of work by Katrina.
Economic growth threatened by Katrina devastation
September 7, 2005
The most recent report on the US economy from the Federal Reserve, completed before Hurricane Katrina struck the Gulf Coast but released Wednesday, showed that the economy was quite healthy.
Now, however, the Congressional Budget Office and private economists are saying that they believe that US economic growth in the second half will be half a percent to a full 1 percent lower than it would have been had the hurricane not occurred.
What the impact of the storm will be on the budget deficit is still to be seen, according to the CBO. Before the storm, the Bush administration had predicted that the deficit would fall to $333 billion, lower than last years $412 billion deficit.
The CBO says that privately insured losses could reach $30 billion, and that as many as 400,000 jobs could be lost to the storm. Besides oil prices, the price of many other items, including lumber and coffee, could rise as a direct result of the effects of the storm.
The uncertainty over exactly how much impact Katrina and the recover from her effects will have on the US economy has analysts split on whether or not the Fed will raise interest rates when it meets on September 20, with some convinced that rates will not be raised this month, while others are certain that rates will go up again to deal with the inflation expected to be produced by rising prices in the wake of the storm.
Series of economic reports bring mixed message
September 1, 2005
A series of economic reports were released in the United States on Thursday.
According to the US Commerce Department on Thursday, consumer spending was up by 1 percent in July, while incomes rose by only 0.3 percent during the month.
At the same time, personal savings rates fell to negative 0.6 percent, meaning that consumers were actually dipping into savings to finance their increased spending.
Chain stores reported that consumer sales was up significantly in August despite rising oil prices.
In a separate government report, figures showed that spending for construction was flat in July after a decline in June, an indication that the sector is beginning to slow down due to rising interest rates.
Analysts had expected construction activity to increase in July. The largest drop was 0.8 percent, in public construction, while private construction grew by 0.2 percent in the month.
Meanwhile, the Institute of Supply Management released figures showing that while manufacturing continued to expand in August, it grew at a slower rate than analysts had predicted.
The ISM’s manufacturing index was down from 56.6 in July to 53.6 in August, causing some analysts to worry about the future of the manufacturing sector.
Also on Thursday, the Labor Department released employment data that showed the number of first-time filings for unemployment benefits grew by 3,000 last week to 320,000, a seven week high. Those figures are expected to rise sharply in the next few weeks as those put out of work by Hurricane Katrina begin to file unemployment claims.
Based on this information, and on the disruptions caused by Katrina as well as taking into consideration higher oil prices, analysts have begun to lower their expectations for US economic growth in the third quarter, cutting their previous estimates of 4.5 percent growth in the economy in that quarter by 1 percent or more.