Subscribe to List View Past Issues RSS translate   facebook facebook Like 0 Comment 0 twitter

 

dashed-line

Friday, May 4, 2012

dashed-line
Economic Events of the Week

Friday – Employment Situation

dashed-line
Story of the Day
Fed Officials Expect Continued Growth, but Split on Jobs Progress (The Wall Street Journal)

Washington Update
Democrats Say GOP Plan Would Cut Access to Medicaid, Food Assistance (CQ)
Consensus Emerging Among Experts on New Revenue as Part of Tax Reform (National Journal)
Export-Import Bank Deal Appears Near (Politico)

Market Talk
Bad: Jobs Report Misses Badly At 115K, Unemployment Drops To 8.1% (Business Insider)
Freddie Mac: Fixed Mortgage Rates Average New All-Time Record Lows (Calculated Risk Blog)
Heat's on Triparty Repos (The Wall Street Journal)
Majority of US States Expect Cash Surplus (Financial Times)

Editorials & Opinions
Krugman v. Friedman (David Glasner in UneasyMoney.com)
College Grads Need Jobs, Not a Lower Loan Rate (Andrew Biggs in The Wall Street Journal)
Inequality, Debt and the Financial Crisis (New York Times Editorial)

dashed-line

e21 Reaction & Commentary

Fed Officials Expect Continued Growth, but Split on Jobs Progress (The Wall Street Journal)

A trio of Federal Reserve officials said Thursday they expect growth to continue and inflation to stay low, although there were differences in how much progress they expect on the jobs front. Their comments come in the wake of last week’s Federal Open Market Committee meeting, which left in place the policy makers’ collective expectation interest rates will stay very low until late 2014. The Fed also decided to continue forward with its $400 billion program to lengthen the average maturity of its $2.9 trillion balance sheet. But the waters were muddied by the release of Fed officials’ official forecasts that showed a diminished interest in keeping rates low. The remarks of the officials speaking Thursday came from the San Francisco Fed’s John Williams, the Atlanta Fed’s Dennis Lockhart and Charles Plosser of the Philadelphia Fed. They portrayed an environment in which the Fed has room to act because none of them saw much to worry about on the inflation front. The officials spoke at the University of California Santa Barbara Economic Forecast Project, held in Santa Barbara, Calif.


arrow Back to Top dashed-line

Washington Update

Democrats Say GOP Plan Would Cut Access to Medicaid, Food Assistance (CQ)

House Democrats blasted a Republican plan to replace planned automatic spending cuts on Thursday, saying it would cause 2 million people to lose access to food assistance and knock 100,000 people off Medicaid.The charges come in a report by House Budget Committee Democrats, “Republican Reconciliation Proposals Reflect the Wrong Priorities,” released ahead of the committee’s planned markup next week of a plan (HR 4966) to replace automatic spending cuts with reductions in a broad range of domestic programs. “This report makes clear that the Republican budget makes the wrong choices for America,” said Chris Van Hollen of Maryland, top Democrat on the Budget panel. “Next week, Democrats will continue to draw a strong contrast between the lopsided Republican plan to protect tax breaks for powerful special interests at the expense of the rest of America, and the Democratic plan that takes a balanced approach to deficit reduction with shared responsibility and shared prosperity.”

Consensus Emerging Among Experts on New Revenue as Part of Tax Reform (National Journal)

Politicians may be divided over the goals of tax reform, but consensus is emerging among some of the top tax-thinkers in Washington that any overhaul will have to include a revenue increase. “What we need to do is look at our whole tax system and see what ... deductions and exclusions that have accumulated over the years for worthy purposes could be either eliminated or reduced to a more progressive form in a way that will allow us to have a fairer tax system and one that raises more revenue,” said Alice Rivlin, a former Office of Management and Budget director and former vice chair of the Federal Reserve Board. “Because we're going to need more revenue. We can't get to a stable debt unless we have more revenue.” Much of the political discussion of tax reform in recent months has been focused solely on driving down the rate that individuals and corporations pay. Typically, the plans include cutting spending, but rarely have lawmakers offered details on how they aim to reach that goal.

Export-Import Bank Deal Appears Near (Politico)

House leaders appear to have settled on a framework to extend the Export Import Bank’s charter into 2014 and raise its loan exposure cap to $140 billion – a 40 percent increase. Some language issues remain, and there was no official comment late Thursday from the two principals in the talks, Majority Leader Eric Cantor (R-Va.) and Democratic Whip Steny Hoyer (D-Md.). But several people familiar with the talks said a three-year extension with the higher $140 billion cap is now the agreed-upon target. And the hope is to have a bill that can be moved through Congress before the end of May. The $140 billion cap is still shy of what the White House projects will be needed by the bank by 2014 but reflects significant movement by Cantor to get a deal.


arrow Back to Top dashed-line

Market Talk

Bad: Jobs Report Misses Badly At 115K, Unemployment Drops To 8.1% (Business Insider)

It's a miss! Just 115K new jobs. That's well below the 160K that was expected. But unemployment rate fell from 8.2% to 8.1% and last month was revised from a gain of 121K to 166K. Other key numbers: The underemployment rate has stayed flat at 14.5% No improvement in weekly hours. Average hourly earnings grew 0.2% month over month. Markets have ticked lower on the news...

Freddie Mac: Fixed Mortgage Rates Average New All-Time Record Lows (Calculated Risk Blog)

From Freddie Mac: Freddie Mac today released the results of its Primary Mortgage Market Survey, showing average fixed mortgage rates finding new all-time record lows ... The 30-year fixed averaged 3.84 percent, down from its previous all-time record low of 3.87 percent last registered on February 9, 2012. The 15-year fixed averaged 3.07 percent, also dropping below its previous all-time record low of 3.11 percent set April 12 of this year. The 1-year ARM also averaged a new all-time record low in the PMMS at 2.70 percent. 30-year fixed-rate mortgage (FRM) averaged 3.84 percent with an average 0.8 point for the week ending May 3, 2012, down from last week when it averaged 3.88 percent. Last year at this time, the 30-year FRM averaged 4.71 percent.

Heat's on Triparty Repos (The Wall Street Journal)

U.S. bank regulators are turning up the heat on the financial industry to reduce risk in an obscure but massive corner of the credit market known as triparty repos, where many large institutions get funding for their trading businesses. This $1.7 trillion market came under deep duress during the 2008 financial crisis and the Federal Reserve has been pressing big players—most notably Bank of New York Mellon Corp. and J.P. Morgan Chase & Co.—to reduce their exposure to the market. Fed supervisors have been pushing the big banks to invest more aggressively in the technology to help reduce their risks. Some regulators have informally discussed the idea of having the Financial Stability Oversight Commission designate the entire market "systemically important" and in need of closer oversight, according to several people familiar with the matter.

Majority of US States Expect Cash Surplus (Financial Times)

More than half of US states expect to end their current fiscal year with a cash surplus, as the recovery in the economy boosts tax revenues and reduces pressure that has weighed on state budgets for several years, a survey of state budget officials showed. “State fiscal conditions continue to improve at a slow and steady pace,” the National Conference of State Legislatures, the bipartisan research group that conducted the study, said on Thursday. During the past four years, state lawmakers have closed more than $500bn of budgets gaps as tax revenues plummeted in the wake of an economic recession that began in 2007. For the first time since then, a number of states are expecting to have extra cash at year end.


arrow Back to Top dashed-line

Editorials & Opinions

Krugman v. Friedman (David Glasner in UneasyMoney.com)

Regular readers of this blog will not be surprised to learn that I am not one of Milton Friedman’s greatest fans. He was really, really smart, and a brilliant debater; he had a great intuitive grasp of price theory (aka microeconomics), which helped him derive interesting, and often testable, implications from his analysis, a skill he put to effective use in his empirical work in many areas especially in monetary economics. But he was intolerant of views he didn’t agree with and, when it suited him, he could, despite his libertarianism, be a bit of a bully. Of course, there are lots of academics like that, including Karl Popper, the quintessential anti-totalitarian, whose most famous book The Open Society and Its Enemies was retitled “The Open Society and its Enemy Karl Popper” by one of Popper’s abused and exasperated students.

College Grads Need Jobs, Not a Lower Loan Rate (Andrew Biggs in The Wall Street Journal)

President Barack Obama has been on a tour of college campuses touting proposals to lower student loan repayments for college graduates. He hopes to rekindle the enthusiasm of young voters, who in 2008 favored him over Sen. John McCain by more than two-to-one. Ironically, these same young Americans may suffer most from the administration's inability to get the economy back on its feet. College graduates who enter the workforce during an economic downturn accept lower wages in lower-quality jobs, and the effects on their income and promotions can last for well over a decade. All workers face wage cuts and job losses during a recession, when the supply of labor outstrips demand. But in this recession, new college graduates have been particularly hard hit. According to an analysis by the Center for Labor Market Studies at Northeastern University, 54% of bachelor's degree-holders under age 25, about 1.5 million in total, were jobless or underemployed last year.

Inequality, Debt and the Financial Crisis (New York Times Editorial)

Recent research by economists from the International Monetary Fund and academia offers some new insights about income inequality, with important implications. The researchers compared the top 5 percent of United States households from 1983 to 2007 with the remaining 95 percent. What they found is that as the rich got richer in the decades before the Great Recession, everyone else tried to maintain his standard of living by going deeper into debt. As income inequality grew over that period so did debt levels, because the rich increasingly invested their growing wealth in bonds and bank deposits, in effect providing money for ever more lending to the poor and middle class.


arrow Back to Top dashed-line

solid-line

e21: Economic Policies for the 21st Century is a nonprofit, nonpartisan organization dedicated to economic research and innovative public policies for the 21st century. Drawing on the expertise of practitioners, policymakers, and academics, we aim to advance free enterprise, fiscal discipline, economic growth, and the rule of law.

solid-line_1px

2011, e21: Economic Policies for the 21st Century


1150 17th Street, NW - Suite 504 - Washington, DC 20036
Phone: 202-232-0090 | Email: info@economics21.org

52 Vanderbilt Avenue - New York, New York 10017
Phone: 646-673-8539 | Email: info@economics21.org