2011 August

No Surprise, Jobless Claims Are Up

New unemployment claims for benefits rose more than analysts forecasted for last week. Initial claims for benefits rose by 5,000 to a seasonally adjusted 417,000 claims. The rise was due in part by the striking Verizon Communications workers. Although there was a rise in unemployment in the U.S., the Labor Department states it is not near levels that would signal another recession.

Striking Verizon workers filed 8,500 jobless claims for benefits last week after submitting 12,500 claims the previous week. The strike ended earlier this week. Excluding the work stoppage by Verizon workers, layoffs appear to be stabilizing. Typically workers who walk off the job are not eligible for unemployment benefits, but some states have specific rules governing labor disputes.

The number of people who receive benefits under regular state unemployment programs fell to 3.6 million this week. That’s the fewest reported since Sept. 20, 2008, the week following the collapse of Lehman Brothers and the intensified ensuing financial crisis. At this point there are roughly 3.5 million additional people receiving extended unemployment benefits paid out by the federal government. These were emergency programs enacted by Congress. A total of 7.3 million unemployed workers received jobless benefits in the week ending August 6, 2011.

Businesses added 117,000 jobs in July. Twice as many new jobs are needed in order to significantly reduce the unemployment rate which now stands at 9.1%

Some analysts have suggested that the economy is improving. A huge jump in July for durable goods orders along with an uptick in consumer spending have investors feeling a little uneasy. The increase in consumer spending could only be the usual back to school purchases typically made in July and August. Investors will be watching for consumer spending to make modest gains through the fall as just another gauge of a possible pending recession looms.

IMF Warns America’s Economic Dominance Will End In 2016

The International Monetary Fund has recently issued a forecast setting a date when it expects China’s economy to overtake the economy of the U.S. IMF officials are forecasting that the date looms closer than one might think. 2016 is only four and a half years away and could mark the end to the U.S. dominance of the world’s economies.

Given our present problems of trying to get our economy growing again and the unfortunate attitude that Washington has concerning unemployment in this country, this ominous forecast looms in our near future while most experts believe this transition is decades away. Most experts are either in full on “ignore-mode” or completely unaware that this situation looms around the corner.

According to the IMF, whoever is elected to the Office of The President of the United States in 2012, could very well be the last U.S. President to serve over the world’s current largest economy. Given all the weak economic news for both the U.S. and China, it could happen sooner or later than the anticipated date of 2016 by the IMF. A decade ago, the U.S. economy was three times the size of China’s.

China’s economy is having great problems of its own right now which could slow down its progression to the #1 spot. Undoubtedly the outcome will be certain. The “Age of America’s Dominant Economy” is nearing an end. It remains to be seen what the effect to the confidence of the American consumer will be. America has been dominant for so long, there is no longer anyone alive who remembers the world differently. The U.S. people need to wake up and stop ignoring the realities of our future and elect leaders who do all within their power to keep this country at the top of the leader board.

Big Deficit For 2011

The United States government is set to rack up some big deficits over the next decade, although not quite as expensive as previously indicated. Economic growth is expected to proceed at a modest pace, but the unemployment picture in this country will continue to drag the economy for a few more years.

The Congressional Budget Office (CBO) drew these conclusions in its recent update to its 10-year budget and economic outlook. “The United States continues to face profound budgetary and economic challenges,” CBO director Douglas Elmendorf noted in his blog.

The U. S. is on track to accrue a $1.3 trillion deficit this year. This will make it the third straight year the country has built up a $1 trillion plus deficit. This years deficit will be the third largest shortfall in the past 65 years. Over the next decade, the United States government is set to total up a projected $8.5 trillion in new debt, with annual deficits to average 4.3% of gross national product(GDP). This years deficit will be twice that coming in at 8.5% of GDP.

It is also projected that by year 2021, the debt held by the public will reach 82% of the size of the economy. This will mark the highest since 1948.

This year Congress passed the 2011 budget calling for modest spending cuts and a deal was reached in August calling for a larger debt-reduction over the next decade.

“About two-thirds of that reduction stems from the effects of enacting the Budget Control Act, which set caps on future discretionary spending and created a process for adopting additional deficit reduction measures,” CBO director Doug Elmendorf said in his blog post.

The Congressional Budget Office’s 10 year estimates are based on the assumption that the current U.S. government policies will continue and not expire as they are scheduled to under current law.

A Ray Of Hope – Durable Goods Orders Up

The Commerce Department just released data stating that durable goods orders rose 4% after a revision in June showed a 1.3% drop. The strong demand for durable goods orders comes mostly from aircraft and motor vehicles. This rise is a welcome sign that at least some sectors of the economy are making modest gains.

Motor vehicle orders jumped 11.5, the largest increase dating back to 2003. Recent news coming from Japan’s auto manufacturing suggests the disruption of their supply chain is easing.

Aircraft orders also surged last month coming in with a 43.4% increase in orders. This virtually erases June’s decline of 24%. Boeing reports it has received 115 new orders in July, up from 48 in June.

The news agency, Reuters had recently polled economists who expected the rise to be around 2%, this doubles the expectations and gives rise to a ray of hope. “It is quite encouraging as it shows the weakness in the U.S. economy is not as severe as had been expected,” senior currency strategist Sebastien Galy of Societe Generale told Reuters.

Manufacturing has supported the U.S. economy’s recovery, however a drop in share prices has pummeled business and consumer confidence as well.

Besides transportation, details of the durable goods report were somewhat mixed. Orders in other sectors such as computers, electronic products, and machinery fell, while orders for capital goods and primary metals rose.

While the news is welcomed on durable goods orders, a gauge of business spending shows a decline. This is not surprising as most business spending plans tend to weaken during the first quarter.

Market watchers looking for any sign that the U.S. economy remains on track are looking at these reports with some relief. The start of the fourth quarter always brings anxiety to Wall Street, and that’s right around the corner.

Oil Prices Stall At $109

On Wednesday, Brent crude oil prices hovered near $109 a barrel, as supply disruptions balanced against demand worries. Cautious investors are sitting on the edge of their seats anticipating the U.S. Federal Reserve Chairman Ben Bernanke’s speech on Friday in Jackson Hole, WY.

Oil trading is expected to remain cautious until Bernanke’s speech on Friday when investors are hoping for a clearer picture as to the state of the U.S. economy. On the demand side, investors are pinning their hopes on a rescue from the Federal Reserve and carefully watching the eurozone for a miracle to emerge.

‘’There is not a lot of impetus in either direction, with the market caught between problems with supply on one side – with Libyan exports offline and probably offline for some time – and weak economic growth and slowing demand,” said Tobias Merath, Head of Private Banking Commodity Research at Credit Suisse.

The underlying fundamentals issues are: a still uncertainty concerning Libyan exports, and a reduction in crude stockpiles in the U.S. The main focus being U.S. crude inventory data which is due to be reported by the Energy Information Administration (EIA) today.

There are predictions in the oil markets for a tighter oil supply in 2012. Analysts are looking for a surge in demand through the last quarter of 2011 which could bring an even tighter supply to the forefront and higher prices for consumers in 2012. The uncertainty in Libya still looms in the background, and the recent push by the people in the middle east countries toward democracy has countries like Saudi Arabia ,desperate to hold its power, trying to win the hearts of its people.

5.9 Earthquake Hits VA Affecting D.C.

A magnitude 5.9 earthquake struck Mineral, VA on Tuesday afternoon. Tremors were felt as far north as Canada and as far south as North Carolina. The U.S. Geological survey said the earthquake was 3.7 miles deep and struck VA in an area 83 miles south west of the nation’s capital, Washington D.C.

At this time most of downtown D. C. has been evacuated, including the U.S. Capital, the Pentagon, and other buildings. It has reported that the Washington Monument is tilting.

Buildings in New York City have been evacuated and residents have been told to stay out of the subways in case there are aftershocks. JFK airport has been closed for a short time while Laguardia remains open at this time. Most people say they what they experienced almost felt like an explosion and immediately thought of 9/11.

A peremiter has been set up around the Capital building so that the nations landmarks can be inspected. Its been reported that pictures fell from the walls of the White House and Capital buildings.

Also 2 nuclear reactors in VA have been taken off-line to insure safety. All Federal buildings in the D.C., and New York City areas have been evacuated at this point. Workers have filled the streets in D.C. and New York City waiting for an all clear from officials.

There have be no reports of injuries and no significant reports in the area. There are some reports of flooding in some D.C. buildings, but nothing has been confirmed at this time. This is a breaking news story that will take several hours to flush out.

New Home Sales Data Is Out

In the U.S. new single-family home sales fell more than expected in July hitting a five month low as the supply of homes available on the market dropped to a record low. The Commerce Department released the data today, and reported that new home sales slipped 0.7% to a seasonally adjusted 298,000-unit annual rate, the lowest since February of this year.

The sale’s pace for June was also revised down to 300,000 units vice the earlier reported 312,000 units. The news agency Reuter’s earlier polled economists who forecasted the rate to be at 310,000 units. Since July 2010, new home sales have risen 6.8%.

Along with the newly reported data comes an increasingly strong indication that home builders have almost come to a standstill in several states as the demand for new homes dwindle. The drop-off in demand for new home permits is bleak when compared to the total number of existing homes in each state.

Building permits are not the only indication of a slowdown, but give rise for concern. The unemployment in the construction sector is as high as 25% in many areas. The number of permits issued in relation to the total existing homes in each state indicates the housing market is far from a recovery stage. For example, in California where across the state just over 20,000 new housing permits have been issued during the first six months of 2011, the permits are a drop in the bucket compared to the 13.6 million existing homes in the state.

The top ten states where new home permits have come to a paralyzing slowdown. Ranked at number one is Rhode Island, followed by WV,IL, MI, CT, OH, MA, NY,ME, PA. This does not bode well for the housing industry and is definitely reflected by the sluggish economy and bleak unemployment outlook.

Hurricane Irene Could Threaten East Coast

All eyes are on the first hurricane of the Atlantic season as Irene continues to churn and build strength and possibly form into a major storm. There is a current projected forecast that will take Irene up the east coastline of the U.S. with anybody’s guess as to where she will make landfall. Nonetheless, the east coast can expect strong winds with a lot of rain. As of this date, it looks like Irene’s track could impact a lot of land from south Florida northward into the Carolinas. U.S. financial market watchers will closely monitor the storm’s track in order to gauge what impact, if any, Irene will have on the economy along the eastern seaboard.

Hurricane Irene proved to be a force to be reckoned with as power was lost to over a million people in Puerto Rico on Monday. There have been no reports of death or major injuries from this storm. Irene reached hurricane strength early on Monday and was quickly upgraded to a Category 2 storm with maximum sustained winds of 100 miles per hour.

Forecasters are closely monitoring the progress of the storm and state that it is too early to tell if the center of hurricane Irene would directly impact the south Florida region or wobble and track in the Atlantic Ocean just off the coastline. The most favorable weather tracking models have Irene making landfall in South Carolina by Thursday.

Before, Irene becomes a larger threat to the U.S., she has unfinished business, as she tracks over or near the Turks and Caicos Islands, and the southeastern portion of the Bahamas today. On Tuesday, forecasters have warned that Irene could reach Category 3 status as a major hurricane with sustained winds of 110 miles per hour. The National Hurricane Center cautions all U.S. residents in Florida northward up the entire east coast to start taking preparations to secure homes and property, be prepared to evacuate to protect your life.

U.S. Stock Futures Follow A Global Rally

Today, U.S. stock futures wake up following global markets into the green after China releases its data on manufacturing. Plus, there is a lot of speculation that the Federal Reserve is going to move to provide additional economic stimulus to the sputtering U.S. economy. This has set the stage for a round of buying opportunities for investors worldwide.

With loads of data pointing to a potential double dip recession for the U.S., economic reports from across the world have been having significant implications for Wall Street. China, one of the world’s largest economies, has closely been monitored in its manufacturing sector. Although China’s manufacturing has continued to decline, the numbers for August are better than forecasted. Readings for this sector of China’s economy are teetering on contraction. The August reading is 49.8. Typically a reading below 50, points to a contraction while a reading above 50, indicates expansion.

The Dow Jones Industrials have opened today with a modest gain. With several reports due out this week and the highly anticipated speech by Fed Chairman Ben Bernanke on Friday in Jackson Hole,WY, market watchers will be waiting for any piece of good news that they could run with. Traders are widely speculating that Bernanke will announce some sort of stimulus later on this year. Could there be something similar to QE2? The speech on Friday will be interesting.

Today at 10:00 a.m. ET, the U.S. housing sector is scheduled to report the lastest data on new home sales. It is expected that these sales have fallen to a rate of 310,000 in July. Also the Richmond Federal Reserve will post its gauge on manufacturing activity. A few weeks ago, the Philadelphia Federal Reserve released a dismal report on manufacturing which put a damper on Wall Street.

President Obama Calls On Warren Buffett

According to Josh Earnest, an Obama administration spokesman, President Obama called billionaire Warren Buffett today to seek his counsel. The President is preparing a speech laying out his initiatives for boosting job growth and overall economic health.

Warren Buffett, the CEO and Chairman of Berkshire Hathaway Inc., has served as an informal advisor on the economy to President Obama. The President also called on Ford Motor Company CEO Alan Mullaly, concerning developments in the automotive and manufacturing sectors of the U.S. economy.

“The President and Mr. Buffett discussed the overall outlook on the economy and the reaction to the headwinds we’ve experienced over the last couple of months,” Earnest said. “They talked a little bit about some possible measures that would spur investment and increase economic growth and they also talked about some measures that could address the long term fiscal situation in this country.”

President Obama is planning on addressing the U.S. people about the state of our economy shortly after Labor Day Sept. 5. President Obama’s plan to take action to shrink our nation’s long term deficit will also include steps to give a shot in the arm to the continued unemployment
problem we currently face. We can expect to hear a plan for infrastructure spending, the usual tax incentives for hiring workers, a cut in the payroll tax, and a push for worker training programs. Financial market watchers are wondering if we will hear something new or more of the same.

During President Obama’s bus tour last week through rural Mn, IA, and IL, President Obama was quick to quote from a New York Times opinion piece in which Warren Buffett wrote that the nation’s richest individuals have been “coddled long enough by a billionaire friendly Congress”. Most of us would be willing to make that same quote if we were billionaires too. One wonders if Mr. Buffett would have been so willing to be taxed as a young man on his way towards the American dream. Hopefully Mr. Buffett gave our President some sound advice on moving our sputtering economy forward.

Greece Anticipates A Deepening Recession

On Monday, Greece’s Finance Minister Evangelos Venizelos said he expects that Greece’s ailing economy will shrink even more than expected this year. This will put even more pressure on the country’s ambitious deficit cutting efforts. The forecasted annual output will be 4.5% to 5.3% of the country’s Gross Domestic Product according to the Greece’s finance ministry.

During a news conference on Monday August 22, 2011, Minister Venizelos called on the European Union to fully and immediately implement an agreement reached last month overhauling the euro-zone’s rescue fund and extending a bailout. Greece is only being kept solvent by a double rescue deal worth around $317 billion from its European partners and also the International Monetary Fund. European Union and IMF officials will go to Athens later this week to monitor the progress undertaken by the Greek government. Further disbursement of the rescue loans depends on how satisfied the EU and IMF officials are with the progress.

At this point, Greece is in a world of hurt. The government has agreed to strict fiscal adjustment which in turns puts huge restraints on the real economy and has created a cycle that Greece had hoped to break by early 2012. It now looks unlikely that 2012 will bring any growth in the economy, which is what the Greeks really need.

There are now rumblings of more austerity measures, but it is highly unlikely the Greek people will let the government add to the year and a half old austerity program already implemented. Unemployment rates are fast approaching 17% and there have been repeated tax hikes. General strikes by ordinary workers and the unions alike leads one to believe that the Greek government may reach a breaking point sooner than later.

All this news from Greece continues to spotlight the ongoing problems with Europe’s economies and gives rise for concern in the U.S. markets as well.

The Dow Wakes Up On Monday In A Good Mood

Today the markets are showing signs that maybe this week will be better than last. As this Monday gets cranking, traders are scooping up equities that took a beating during last week’s slide.

By 10:00 a.m. ET, the Dow Jones Industrials average jumped 152 points, a 1.4% gain. The S&P 500 15.3 points while the NASDAQ Composite gained 36.7 points, a 1.5% gain.

The sell-off over the past few weeks has created great buying opportunities to market participants who are willing to jump in the murky waters of the market. All in all, U.S. markets still remain a good place for investments. “The recent market downdraft will eventually be viewed as a buying opportunity for those who are willing to look beyond the most recent data point” analysts at Barclays Capital recently wrote in a research note.

During last week’s volatile trading, the blue chips lost 4%. This brings the loss to 14.7% over the past month alone. It is inevitable when there is such a drastic sell-off, that the upside will be great buying opportunities for investors with the nerves to stay calm.

Also, the welcome news coming out of Libya this morning gives a boost to energy markets. The Libyan rebels reportedly control 95% of Tripoli, the country’s capital. Energy markets view this as a welcome sign that Libya may be at a point of stabilizing which will enable oil production to resume, thus relieving some pressure in those markets. Libya mostly exports oil to Europe and is the 17th largest producer and a member of OPEC.

With several crucial data reports due out this week and a much anticipated speech this upcoming Friday by Fed Chairman Ben Bernanke, this Monday morning wake-up call by the Dow sets the stage for what one hopes will be a more upbeat week on Wall Street.

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