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Friday, July 7, 2012

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Economic Events of the Week

Friday – Employment Situation

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Story of the Day
US Employers Add 80,000 Jobs as Economy Struggles (The Associated Press)

Washington Update
House Farm Bill Cuts Deeper (Politico)
Pace of Recovery More Frustrating Than Jobs Report Will Suggest (National Journal)
Senators Ask Defense Contractors to Predict Impact of Looming Sequester (CQ)

Market Talk
A Measure of North American Freight Volumes (Cass Info)
Consumer Bankruptcy filings Decrease 13 Percent in First Half of 2012 (Calculated Risk Blog)
Home-Equity Loans Pose Looming Threat to Banks (The Wall Street Journal)

Editorials & Opinions
Obama's Imperial Presidency (Kimberley Strassel in The Wall Street Journal)
Bank Scandal Deepens (The New York Times Editorial)
The Sources of the Next American Boom (Michael Malone in The Wall Street Journal)
About The Dodd-Frank Act, George Washington Would Be Turning Over In His Grave (Forbes)

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Story of the Day

US Employers Add 80,000 Jobs as Economy Struggles (The Associated Press)

U.S. employers added only 80,000 jobs in June, a third straight month of weak hiring that shows the economy is still struggling three years after the recession ended. The unemployment rate was unchanged at 8.2 percent, the Labor Department said in its report Friday. The economy added an average of just 75,000 jobs a month in the April-June quarter. That's one-third of the 226,000 a month created in the first quarter.


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Washington Update

House Farm Bill Cuts Deeper (Politico)

The House Agriculture Committee leadership rolled out its vision of a new five-year farm bill Thursday, a 557-page draft that builds on the Senate passed-plan but makes deeper cuts from food stamps while restoring target prices sought by Southern growers. The action begins a long uphill climb for Chairman Frank Lucas (R-Okla.), who must contend with tepid support from the top GOP brass and a fractious class of Republican freshmen who have never been through a farm bill debate before. But with Iowa in play and President Barack Obama in Cedar Rapids next week, farm issues can no longer be ignored this presidential year. And the draft bill promises both real savings and certainty for an important segment of the economy, now faced with a Sept. 30 deadline when the current farm program expires.

Pace of Recovery More Frustrating Than Jobs Report Will Suggest (National Journal)

Bad news, job seekers--the economic recovery is probably occurring even more slowly than you thought. The Labor Department will release its latest jobs report on Friday. Economists expect the unemployment rate to remain at 8.2 percent, the same as the previous month but nearly 2 percentage points lower than the recession-era peak reached in October 2009. That’s a frustratingly slow decline, especially if you’re out of work. But when you compare it to the rate at which three other important indicators of labor-market health are improving--job openings, hires, and quits--it’s downright swift. A look at the latter paints a dismal picture for job seekers and the employed alike and isn’t showing signs of a big turnaround any time soon.

Senators Ask Defense Contractors to Predict Impact of Looming Sequester (CQ)

Seven senators — six Republicans and one independent — sent a letter last week to 15 major defense contractors asking them to describe what effects a looming sequester would have on their government contracts, employment and strategic planning. The letter appears to be part of effort to increase pressure on the White House and other lawmakers to avert the across-the-board spending cuts that were mandated in last year’s bipartisan deficit reduction law. The sequester could result in up to $500 billion in military reductions over 10 years. As a part of the law, the military has already committed to reducing its 10-year spending plans by $487 billion.


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Market Talk

A Measure of North American Freight Volumes (Cass Info)

Since 1990, the Cass Freight Index™ has been a measure of North American freight volumes and expenditures. Data within the Index is derived from $20 billion in freight transactions processed by Cass annually on behalf of its client base of 350 large shippers. These companies represent a broad sampling of industries including consumer packaged goods, food, automotive, chemical, OEM, retail and heavy equipment. Annual freight volume per organization ranges from $1 million to over $1 billion. The diversity of shippers and aggregate volume provide a statistically valid representation of North American shipping activity.

Consumer Bankruptcy filings Decrease 13 Percent in First Half of 2012 (Calculated Risk Blog)

From the American Bankruptcy Institute: Bankruptcy Filings Fall 14 Percent for the First Half of 2012, Commercial Filings Drop 22 Percent - “The 601,184 total noncommercial filings for the first half of 2012 represented a 13 percent drop from the noncommercial filing total of 691,902 for the first half of 2011. Total commercial filings during the first six months of the year were 30,946, representing a 22 percent decrease from the 39,598 filings during the same period in 2011. We are on pace for perhaps the lowest total new bankruptcies since before the financial crisis in 2008,” said ABI Executive Director Samuel J. Gerdano. “With sustained low interest rates and weak consumer spending, we expect bankruptcies to stay at relatively low levels through the end of 2012. The 99,057 total bankruptcy filings for the month of June represented an 18 percent decrease compared to the 120,698 filings in June 2011.”

Home-Equity Loans Pose Looming Threat to Banks (The Wall Street Journal)

U.S. banks may be hit with a new round of mortgage losses over the next five years as borrowers who took out home-equity loans a decade earlier face increased monthly payments, a regulator warned Thursday. The Office of the Comptroller of the Currency warned that more than half the amount borrowed on equity lines at national banks, or $221 billion out of $380 billion, will face higher payments from 2014 to 2017, exposing banks to the possibility of losses if some equity-line borrowers default. Home-equity lines extended during the mid-2000s housing-market boom years typically had a 10-year period in which the borrower made only interest payments. When that period ends, borrowers must start to pay back the principal balance as well, increasing monthly payments for some homeowners who have seen their incomes and property values decline.


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Editorials & Opinions

Obama's Imperial Presidency (Kimberley Strassel in The Wall Street Journal)

The ObamaCare litigation is history, with the president's takeover of the health sector deemed constitutional. Now we can focus on the rest of the Obama imperial presidency. Where, you are wondering, have you recently heard that term? Ah, yes. The "imperial presidency" of George W. Bush was a favorite judgment of the left about our 43rd president's conduct in war, wiretapping and detentions. Yet say this about Mr. Bush: His aggressive reading of executive authority was limited to the area where presidents are at their core power—the commander-in-chief function. By contrast, presidents are at their weakest in the realm of domestic policy—subject to checks and balances, co-equal to the other branches. Yet this is where Mr. Obama has granted himself unprecedented power. The health law and the 2009 stimulus package were unique examples of Mr. Obama working with Congress. The more "persistent pattern," Matthew Spalding recently wrote on the Heritage Foundation blog, is "disregard for the powers of the legislative branch in favor of administrative decision making without—and often in spite of—congressional action."

Bank Scandal Deepens (The New York Times Editorial)

The settlement between government authorities and Barclays over the bank’s attempts to rig benchmark interest rates drew a picture of a bank that was negligent and corrupt at various times and to varying degrees. Unfortunately, as big banks go, that comes as no shock. It would be a shock if regulators and prosecutors found the resources and willingness to go wherever the rate-rigging scandal leads, even to the upper echelons of the world’s biggest banks and powerful central banks, including the Bank of England and the Federal Reserve. On Wednesday, the deposed chief executive of Barclays, Robert Diamond Jr., presented documents and testimony to a British parliamentary committee, saying that it had advised both the Bank of England and the Federal Reserve Bank of New York about lowballed interest rates by banks across Wall Street. The disclosures speak to the overly cozy relationships between authorities and bankers, before, during and since the crisis. To be thorough, further investigations into rate-manipulation will need to answer questions about what the authorities knew about rate-rigging and when they knew it.

The Sources of the Next American Boom (Michael Malone in The Wall Street Journal)

Three years after the recession was declared officially over, unemployment remains high and there's worry that a new recession is down the road. And yet waiting in the wings for when we get our economic policies in order are a mounting number of stunning discoveries, inventions and technological breakthroughs that could set off a burst of growth and wealth creation as big as any in living memory. The fracking technology that is making available vast new sources of recoverable oil and natural gas in North America is one such breakthrough. But all across the commercial and industrial landscape, there are exciting developments: Nanoculture: One of the truths of tech is that revolutions take longer than predicted, but they arrive sooner than we are prepared for them. That is the case with nanotechnology, the hot new science story of a decade ago.

About The Dodd-Frank Act, George Washington Would Be Turning Over In His Grave (Forbes)

President Obama counts the Dodd-Frank Wall Street Reform Act as one of his signature accomplishments.  And yet, much like Obamacare, this week it has been challenged in federal court for violating the United States Constitution and threatening what the founders of our Republic risked their lives to protect. Many small businesses approached about this challenge were afraid to participate, fearing retribution, but a prominent retired seniors organization, a think tank and and a small community bank have, like David fighting Goliath, challenged the Obama Administration no matter the cost. President George Washington counted the separation of powers principles contained in the Constitution for which he’d fought, bled, and lost comrades among the Continental Army as core principles.


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