In the News
The largest economic headline maker was the massive selloff in the markets last week. A large unloading of stocks that started in Europe on Thursday intensified in the United Statesin the wake of the budget agreement that was struck by Congress and signed into law by President Obama on Tuesday. At the end of trading on Thursday, the Dow had dropped 512.76 points, the largest single-day plummet it has suffered since the mortgage crisis of 2008.
The big question on market watchers’ minds is whether or not there are any efforts being made by the Fed to bolster the economy in the face of the drop. However, the most recent word on the subject from Federal Reserve Chairman Ben Bernanke was that while the Fed was willing to step in to negate the impact of any major downturn, it expected a turnaround in the second half and wasn’t yet ready for any stimulus or similar efforts. Whether or not the Fed will change its tune in the face of last week’s sell-off remains to be seen.
Meanwhile, personal income for June skirted up while spending dipped. June personal income increased $18.7 billion, or 0.1 percent, and disposable personal income (DPI) increased $16.3 billion, or 0.1 percent, the Bureau of Economic Analysis reported last week. Personal consumption expenditures (PCE) decreased $21.9 billion, or 0.2 percent.
Personal outlays (PCE, personal interest payments and personal current transfer payments) decreased $22.6 billion in June. Personal saving (DPI less personal outlays) was $620.6 billion in June, and personal saving as a percentage of disposable personal income was 5.4 percent in June.
In terms of wages and salaries, private wage and salary disbursements decreased $2.2 billion in June, in contrast to an increase of $15.0 billion in May. Goods-producing industries’ payrolls decreased $1.8 billion in June; manufacturing payrolls decreased $2.1 billion; and services-producing industries’ payrolls decreased $0.3 billion. Supplements to wages and salaries (such as rental and personal income) increased $1.5 billion in June.
“If the recovery is ever going to gain speed, it will have to come from households deciding they want to spend money again,” said Joel Naroff, president and founder of economic consulting firm Naroff Economic Advisors. “Of course, to be able to spend a lot of money you need to make a lot of money and income growth is extremely weak.”
In housing, construction spending for June hit an annual rate of $772.3 billion, a 0.2 percent hike over May’s revised estimate of $770.5 billion, but 4.7 percent below the June 2010 estimate of $810.4 billion, according to the latest figures from the Census Bureau released last week.
Spending on private construction was at an annual rate of $493.4 billion, 0.8 percent over May’s revised estimate of $489.6 billion, and residential construction dropped to an annual rate of $235.8 billion in June, 0.3 percent below May’s revised estimate of $236.5 billion. Overall, construction spending for the year is tapering back. During the first six months of this year, construction spending amounted to $357.5 billion, 5.4 percent below the $377.9 billion for the same period in 2010.
The jobs report returned better numbers than expected for July, with the Labor Department report noting that 117,000 jobs were added to the economy in July and the unemployment rate ticked down 0.1 percent to 9.1 percent. For the week ending July 30, initial claims for jobless benefits dipped slightly to 400,000, a decrease of 1,000 from the previous week’s revised figure of 401,000, the Employment and Training Administration reported. The four-week moving average was 407,750, a decrease of 6,750 from the previous week’s revised average of 414,500.
The total number of insured unemployed workers for the week ending July 23 rose to 3,730,000, an increase of 10,000 from the preceding week’s revised level of 3,720,000. The four-week moving average was 3,729,750, an increase of 4,500 from the preceding week’s revised average of 3,725,250.
This week, the financial headlines start tomorrow with non-farm worker productivity and costs data for the second quarter of this year from the Bureau of Labor Statistics. This is followed Wednesday by wholesale inventory data for June from the Census Bureau. The Treasury Department also releases its July budget data on Wednesday.
Thursday, the Employment and Training Administration will release initial jobless claim data for last week, and the Census Bureau will distribute its trade balance figures for June. The Bureau will follow that on Friday with its retail sales data for July and business inventory figures for June.