ragerunner

With the Philly Fed index plunging last month and now the New York gauge dropping sharply, it appears things may have taken a turn in the wrong direction over the last 2 months. If these indexes don't improve significantly over the next few months we may be in for another leg down in the economy by the end of this year. New York manufacturing gauge drops sharply in May "The Empire State manufacturing survey fell sharply to 11.9 in May from a reading of 21.7 in April. The April reading was the highest level in a year. The index has now sunk to its lowest level since December. The size of the decline surprised economists. Analysts polled by MarketWatch had expected a dip to 19.7." http://www.marketwatch.com/story/new-york-manufacturing-gauge-drops-sharply-in-may-2011-05-16 Not a surprise, but it does show that the spring hope is not arriving, again. By about July they will start calling for a recovery in the spring of 2012. Home builder index shows no improvement in May "WASHINGTON (MarketWatch) - An index that measures the confidence of home builders was unchanged in May, suggesting virtually no improvement in the moribund U.S. housing market. The National Association of Home Builders said its Housing Market Index, produced in tandem with Wells Fargo, remained "at the low level of 16." Economists surveyed by MarketWatch had expected the HMI to rise to 17." http://www.marketwatch.com/story/home-builder-index-shows-no-improvement-in-may-2011-05-16

U.S. import prices climb 2.2% in April "WASHINGTON (MarketWatch) — U.S. import prices climbed 2.2% in April, the Labor Department said Tuesday, marking the first time prices have climbed over 2% in consecutive months since June 2008." “We see the import price data as a clear and present danger on the inflation front — although it is a perspective that has not been shared by Federal Reserve Chairman Ben Bernanke,” said analysts at RDQ Economics. Bernanke has often said he expects the commodity price impact on inflation to be “transitory.” http://www.marketwatch.com/story/us-import-prices-climb-22-in-april-2011-05-10-9320

Home Market Takes a Tumble Turnaround More Distant After 3% Drop, Steepest Quarterly Decline Since 2008 "Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom. Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow." http://online.wsj.com/article/SB10001424052748704810504576309532810406782.html

Hopefully this situation stabilizes or even improves in the near future. Most countries that have a noticable 'wealth gap' tend to deal with some unpleasant situations. Expecially those that go from having a more balanced society and then move into an unbalanced society.

America’s Middle Class Crisis: The Sobering Facts "-- There are 8.5 million people receiving unemployment insurance and over 40 million receiving food stamps. -- At the current pace of job creation, the economy won't return to full employment until 2018. -- Middle-income jobs are disappearing from the economy. The share of middle-income jobs in the United States has fallen from 52% in 1980 to 42% in 2010. -- Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment. -- 17 million Americans with college degrees are doing jobs that require less than the skill levels associated with a bachelor's degree. -- Over the past year, nominal wages grew only 1.7% while all consumer prices, including food and energy, increased by 2.7%." http://finance.yahoo.com/blogs/daily-ticker/america-middle-class-crisis-sobering-facts-141947274.html

That is definitely another option. I think the for overall flexibility of our nation's workforce, one or the other needs to happen.

This would be a great step in removing the 'stigma' that many American's have about renting instead of owning. It would also support our new economy where the average worker only stay at a job for about 5 years, making the workforce more flexible. HUD chief suggests study of renters' tax credit "WASHINGTON -(MarketWatch)- The Obama administration is open to exploring whether a new tax credit for renters should be created as part of broad discussions about how to overhaul the U.S. tax system, a top official said Tuesday. Housing and Urban Development Secretary Shaun Donovan briefly mentioned the idea of a tax credit for renters in a speech at a conference about rental housing. Speaking to reporters after the speech, Donovan said the proposal is "something that is worth looking at" as a way to boost government support for renters. Any new tax breaks, he said, would have to be offset in other parts of the tax code and wouldn't add to the deficit." http://www.marketwatch.com/story/hud-chief-suggests-study-of-renters-tax-credit-2011-04-26

And it still has a noticable ways to go in most markets. But, this correction will continue to put more homes into the foreclosure catagory. CincyDad, Agreed, this correction is very good, long term news. One day we may actually have residential units that are truly affordable and not consuming a siginficant chunk of someones income.

Home prices in 'double dip' "NEW YORK (CNNMoney) -- Home prices in February sank 3.3% to just above the post-crisis lows reached in April 2009. It was the seventh straight month of declines. There is very little, if any, good news about housing," said David Blitzer, spokesman for S&P. "Prices continue to weaken, trends in sales and construction are disappointing." The drop has come in two stages. First, the index recorded 36 months of nearly uninterrupted declines after reaching the spring 2006 peak. Then came a 13-month upswing during which the index recorded a 5% gain. That rebound ended last June. Since then, the index has recorded losses every month and it has now edged closer to a new low -- the dreaded double-dip." http://money.cnn.com/2011/04/26/real_estate/february_case_shiller/index.htm?source=cnn_bin&hpt=Sbin

If/when the banks have been healed through a weaker dollar (inflating their way out of the debt), then the FEDs will show more support for a stronger dollar. Until then, main street will feel the pain of stagflation for the forseeable future. Don't Like a Weak Dollar? Might as Well Get Used to It "The greenback is approaching pre-financial crisis lows and threatening to smash through its all-time low when measured against the world's predominant national currencies. A combination of factors accounts for the weakness, with the Federal Reserve's easy-money policies, huge national debts and deficits and the consequential possibility of a debt downgrade because of the financial mess in Washington leading the way. In short, as trader Dennis Gartman noted Thursday, "the rout of the US dollar" is in full effect." "Gartman described the dollar as being in "serious jeopardy" because of its status against the euro, which was defended recently as European Central Bank President Jean-Claude Trichet announced a rate hike in the zone. No such defense is being offered in the US, where neither Fed Chairman Ben Bernanke nor most of the rest of the central bank's Open Market Committee seems much in the mood to raise rates despite the anemic dollar." http://www.cnbc.com/id/42703813

This is another reason oil prices are rising. As the dollar weakens it takes more dollars to buy said item. This becomes even more pronounced since most oil prices are pegged to the dollar.

This was more than just a slump, this was a plunge. But, one time data doesn't set a trend. This will need to be watch for the next few months, if things don't improve than another recession is well on the way. Philly Fed manufacturing index slumps in April "The Philadelphia Fed’s index of current activity tumbled to 18.5 in April after a March reading of 43.4, which was its highest level since January 1984. Economists polled by MarketWatch had expected the gauge to fall to 35.5 in April." http://www.marketwatch.com/story/philly-fed-manufacturing-index-slumps-in-april-2011-04-21-1023480

Goldman may need to improve its PR to handle it damage image. Goldman is up to its old tricks Commentary: Managing expectations dull the pain of weak profits "Tuesday’s results seemed on the surface like an old Goldman quarter — a $2.74 billion profit that translated into $1.56 a share, easily topping analyst expectation of 82 cents. Shares rallied in morning trading, then slipped an hour into the session. Why the pullback? It could be because the market took a closer look at the numbers. Profit was actually down 21% from the $3.46 billion reported a year ago, stung by a $1.64 billion preferred dividend paid to Warren Buffett’s Berkshire Hathaway Inc." "It could be just a fluke. Or it could be the negative fallout from the financial crisis, the $550 million settlement over collateralized-debt obligations and a growing suspicion that Goldman doesn’t have its clients’ best interests at heart." http://www.marketwatch.com/story/goldman-is-up-to-its-old-tricks-2011-04-19

Speaking of the rating agency's above. I guess they have to keep some resemblance of equity in the system. Stocks drop after S&P cuts U.S. outlook "NEW YORK (MarketWatch) — U.S. stock indexes fell sharply Monday after Standard & Poor’s revised its long-term outlook on the U.S. to negative from stable. “Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating,” the ratings agency said in a release. S&P may have acted partly in self-defense, “given these guys were notably behind the curve when it came to subprime,” said Stuart Hoffman, chief economist at PNC Financial Services. “It’s a recognition of the facts on the part of the [credit] agencies that don’t want to be accused of being asleep at the switch again.” http://www.marketwatch.com/story/stocks-open-lower-after-sp-cuts-us-debt-outlook-2011-04-18 Moody's downgrades Irish banks "LONDON (MarketWatch) -- Moody's Investors Service on Monday downgraded the ratings of several Irish banks following its recent downgrade of Irish government bonds." http://www.marketwatch.com/story/moodys-downgrades-irish-banks-2011-04-18 Finland, Greece spark new Europe debt fears Strong showing by True Finns party, Greek worries in spotlight "LONDON (MarketWatch) — Finland and Greece, two relatively small nations on opposite ends of the euro zone both in terms of geography and fiscal health, sparked a fresh round of turmoil in European government bond markets Monday. In Finland, a strong showing by the anti-euro True Finns party in Sunday’s national election raised fears that the country of 5.4 million could slow or even block a pending European Union–International Monetary Fund bailout package for Portugal." http://www.marketwatch.com/story/finland-greece-weigh-on-european-bond-market-2011-04-18

The amount of greed, fraud and unethical conduct is just amazing. It makes you wonder what has not yet been revealed behind doors numbered 2 and 3. Wall Street is looking more and more like a very untrustworthy bunch. Moody's, S&P Caved to Mortgage Pressure by Goldman, UBS, Levin Report Says "Moody’s Investors Service and Standard & Poor’s adjusted the way they graded securities after Goldman Sachs Group Inc., UBS AG and at least six more banks pressured them, according to a U.S. Senate report. The world’s two largest bond-ranking companies, both based in New York, made exceptions to rules when bankers asked for better safety ratings on complex mortgage-backed securities, the Senate Permanent Subcommittee on Investigations said yesterday. When Moody’s and S&P changed their assessments of hundreds of those bonds in July 2007, it helped trigger the financial crisis, the panel said." “The ratings agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share,” according to the report. “The result was a race to the bottom.” http://www.bloomberg.com/news/2011-04-13/moody-s-s-p-caved-to-mortgage-pressure-by-goldman-ubs-levin-report-says.html

Blah, Blah, Blah. Lets see someone actually prosecute some of these big boys. Until then its just fluff. Goldman Sachs misled Congress after duping clients, Senate panel chairman says "Goldman Sachs misled clients and Congress about the firm’s bets on securities tied to the housing market, the chairman of the U.S. Senate panel that investigated the causes of the financial crisis said. Senator Carl Levin, releasing the findings of a two-year inquiry yesterday, said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought the complex securities known as collateralized debt obligations without knowing the firm would benefit if they fell in value. The Michigan Democrat also said federal prosecutors should review whether to bring perjury charges against Goldman Sachs Chief Executive Officer Lloyd Blankfein and other current and former employees who testified in Congress last year. Levin said they denied under oath that Goldman Sachs took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue. “In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin said at a press briefing yesterday where he and Senator Tom Coburn, an Oklahoma Republican, discussed the 640-page report from the Permanent Subcommittee on Investigations." http://www.washingtonpost.com/business/economy/goldman-sachs-misled-clients-lawmakers-on-cdos-senate-panel-says/2011/04/13/AFhEv8ZD_story.html

While he tries to point the finger to low population growth as a major reason prices will stay down in many parts of the country. I think it will also be slow job growth, slow/stagnate income growth, over supply and many other things that will keep pressure on prices for many years to come. I also think we are seeing a noticable shift in product demand which will change migration patterns from what they used to be. This will leave many areas that where once the 'hot place to be' (suburban areas and place that lack transit) not so hot in the future (growth wise and price wise). BofA CEO: Owners shouldn't look at home as an asset Housing rebound may take so long that homeowners should seek other long-term investments "CHARLOTTE, N.C. — Homeowners may need to look elsewhere for long-term investment returns as housing prices in some areas may not rebound long-term, Bank of America Corp Chief Executive Officer Brian Moynihan said on Tuesday." "It's sobering to think, but some people shouldn't be thinking of (their home) as an asset," Moynihan said at the 2011 National Association of Attorneys General conference. "They should be thinking of it as a great place to live." http://www.msnbc.msn.com/id/42556230/ns/business-real_estate/ The number of foreclosures are clearly going to increase later this year and they will put even more pressure on prices. Foreclosure delays near end, might get 'scary' "Foreclosure delays due to the increased scrutiny of robo-signing and other investigations of bank practices may be ending. RealtyTrac's Rick Sharga says "it's a little scary to think about what's coming down the pike." http://www.marketwatch.com/story/foreclosure-delays-near-end-might-get-scary-2011-04-14

The last sentence could be a big one. Banks facing $3.6 trillion 'wall of maturing debt', IMF Global Financial Stability Report says "Debt-laden banks are the biggest threat to global financial stability and they must refinance a $3.6 trillion "wall of maturing debt" which comes due in the next two years, the International Monetary Fund said in its Global Financial Stability Report." "Government debt was generally high and on a worryingly upward path in many advanced economies, the IMF said. It repeated its warning that the United States and Japan faced particularly dangerous debt dynamics." "Advanced economies were "living dangerously" with high debt burdens, and faced the difficult task of trying to pare deficits without choking off the economic recovery." "The IMF said banks' exposure to troubled sovereign debt is "uncertain," which adds to the funding strains." http://www.telegraph.co.uk/finance/economics/8448169/Banks-facing-3.6-trillion-wall-of-maturing-debt-IMF-Global-Financial-Stability-Report-says.html

I would say without inflation, retail sales numbers would have been negative this month. People are clearly starting to cut back. I think April's numbers will show this in an even more pronounced way. U.S. retail sales rise 0.4% in March Gasoline sales bolster monthly growth from February "Total retail sales increased 0.4% in March, compared with a 1.1% gain in the prior month, the Commerce Department estimated, as rising gasoline and home-furnishings revenue offset declining sales of cars." "The 0.4% overall increase for last month was boosted by sales of gasoline. Excluding sales at gas stations, retail sales were up a slim 0.1%." http://www.marketwatch.com/story/us-retail-sales-rise-04-in-march-2011-04-13

That is why I think Spain may not be that far behind. Tons of debt, 20% unemployment, and very little appetite to implement austerity measure that will add more to the unemployment lines.

So we have had, Greece, Ireland, and now Portugal. Is Spain or Italy that far behind? If one or both get to this point, the markets may find it very difficult to deal with a larger debt issue. Portugal finally asks EU for help Poorly received auction prompts finance minister’s comments "WASHINGTON (MarketWatch) — Portugal finally threw in the towel and asked for international assistance Wednesday, after paying a high price in its latest test of the global bond market. Portugal’s prime minister, Jose Socrates, told the nation that the assistance was “inevitable” after parliament rejected an austerity plan. Portugal now looks set to join Greece and Ireland in receiving bailouts from the European Union and the International Monetary Fund." http://www.marketwatch.com/story/portugal-pays-nearly-6-to-borrow-12-months-2011-04-06?dist=afterbell

Kind of sobering. It also makes you realize just how much job lose has occured. Wouldn't be nice if someone in the MSM would do a little math, instead of just printing what the press release had to say.

You are right, many things affect inflation and other economic issues. Weather, wars, etc. But, I firmly believe that the FED and other world economic agencies clearly have an impact on inflation and many other economic issues. If they didn't, then why do they exist?

Here is some more detailed information about the most recent employment and unemployment numbers. As you can see the number of unemployed has really not moved over the last several months and the ability to return to pre-recession levels will take years at this rate. Comments on Friday's employment numbers "Nonfarm payroll employment increased by 216,000 in March, and the unemployment rate was little changed at 8.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up. The number of unemployed persons (13.5 million) and the unemployment rate (8.8 percent) changed little in March. The labor force also was little changed over the month. Since November 2010, the jobless rate has declined by 1.0 percentage point. According to the household survey, total employment is still about 6.3 million jobs below the 2008 peak level. To return to more "normal" unemployment rates, the economy will need to add back these 6.3 million jobs while also adding additional jobs to absorb new workers who have entered the labor force since the recession began in December 2007. (This will take several years even at March's robust rate of job creation.)" http://www.divisionofhousing.com/2011/04/comments-on-fridays-employment-numbers.html

All the big boys seem to be scrabbling to reduce their GDP estimates over the last few weeks. If we get this type of GDP number, look for the case for QE3 to become much stronger. I wonder how much more inflation we are willing to create? If inflation continues at this rate or speeds up it will clearly put a major dent in this fragile economy (unless wages start to really rise). But, I also believe inflation will only go so high before commodity prices come falling back to earth, do to the reduction in growth that it will cause to the US, European and world economies. Maybe this is what the FED is banking on. If they do QE3, 4, 5 (whatever) it will cause enough inflation that the economy will tank, bring inflation pressures down allowing for more QE. Rinse and repeat. BofA's new 1.5% growth view now lowest on Street "WASHINGTON (MarketWatch) -- Bank of America Merrill Lynch has taken their first-quarter growth estimate down to 1.5%, from 2.2% recently, in what is now the lowest estimate for GDP growth on Wall Street. Though the jobs market is improving, wage growth is muted and not keep up with inflation, and the weak construction data also is weighing, the brokerage points out. Even if there are modest revisions to January and February data and monthly consumption grows 0.3% in March, annualized consumption will be just 2.3% in the first quarter. Economists polled by MarketWatch are expecting 2.5% first-quarter growth." http://www.marketwatch.com/story/bofas-new-15-growth-view-now-lowest-on-street-2011-04-04 Economy gains steam, but inflation a brake Consumer spending, a key to U.S. growth, hurt by rising prices "In the meantime, economists have been busy redoing their math and recalculating their forecasts for first-quarter growth. Many firms have already trimmed their estimates based on data showing that consumer spending slowed during the first three months of 2011. The consensus of economists surveyed by MarketWatch, for example, now puts first-quarter growth at 2.8%, down from 4.0% just a month ago. One of the big reasons for slower spending: wages are barely growing, and whatever increases workers do get in their paychecks are being eaten up by the rising price gas and food." http://www.marketwatch.com/story/economy-gains-steam-but-inflation-a-brake-2011-04-03