(Reuters) - New claims for unemployment benefits slipped last week, but stayed at a stubbornly high level that underscored the labor market recovery was having trouble gaining traction.
Initial claims for state unemployment aid dropped 11,000 to 457,000, the Labor Department said on Thursday, a touch more than the fall to 459,000 that financial markets had forecast.
Analysts say new applications for jobless benefits, which have trended sideways for much of this year, have to drop to a 400,000-450,000 range to signal sustainable jobs growth.
"The labor market is steadying but at a relatively high level of unemployment. It offers a hint of improvement in labor market conditions," said John Lonski, chief economist, Moody's Investors Service, New York. "Nevertheless, jobless claims remain quite elevated, and suggest labor slack persists."
Stocks on Wall Street briefly edged higher after the data as investors drew some comfort from the report and strong corporate earnings from Exxon Mobil Corp. But share prices were lower by midday as technology shares fell.
Prices for safe-haven U.S. government bonds rose.
Sluggish jobs growth, marked by a 9.5 percent unemployment rate, is the biggest obstacle to the economy's recovery from the most brutal recession since the 1930s -- a recovery that has shown signs of wilting in the last couple of months.
President Barack Obama, struggling in polls as Americans worry about the weak recovery, is pressing for approval of a $30 billion plan to help small businesses and create jobs. The plan was blocked in the Senate by Republicans on Thursday.
While growth in the United States appears to be taking a breather, recovery in some parts of Europe is back on track after being shaken by a sovereign debt crisis.
Euro zone economic sentiment rose strongly this month to a 28-month high and unemployment in Germany fell to its lowest level since November 2008.
The upbeat European data lifted the euro to a 12-week high against the U.S. dollar.
SLOWING GROWTH
A U.S. government report on Friday is expected to show growth slowed to a 2.5 percent annual rate in the second quarter from a 2.7 percent pace in the first three months of the year. The moderation will likely reflect a step back in consumer spending and factory output, and a wider trade gap.
The slowdown in manufacturing, which has led the recovery that started in the second half of 2009, likely persisted this month as most regional surveys have shown a pullback in activity.
However, a survey of manufacturing activity in the nation's Central Plains and eastern Rocky Mountain region released on Thursday showed a strong rise for July.
The slowdown in economic activity bodes poorly for the jobs market.
"With claims (for jobless aid) at these levels the 200,000-plus increases in private payrolls that we need to see in order to bring unemployment down quickly just aren't going to happen any time soon," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
With unemployment high, consumer spending has been tepid and home foreclosures have remained elevated.
Foreclosures rose in three of every four large U.S. metropolitan areas in the first half of this year, likely ruling out sustained home price gains until 2013, real estate data company RealtyTrac said on Thursday.
Unemployment was the main culprit driving foreclosure actions on more than 1.6 million properties, the company said.
In the week ended July 17, 4.57 million people were still receiving jobless benefits after an initial week of aid, up 81,000 from the prior week. The continuing claims data covered the survey period for the government's July household survey, from which the national unemployment rate is derived.
"We expect the July household survey to show a rise in the jobless rate to 9.6 percent," said Mike Englund, chief economist at Action Economics in Boulder, Colorado. The rate stood at 9.5 percent in June.
(Additional reporting by Lynn Adler and Richard Leong in New York; editing by Todd Eastham)
(Reuters) - The economy is not likely to slip back into recession but letting tax cuts for the wealthiest Americans expire is necessary to show commitment to cutting budget deficits, Treasury Secretary Timothy Geithner said on Sunday.
In appearances on several Sunday talk shows, Geithner said only 2 to 3 percent of Americans -- those making $250,000 or more a year -- will be affected when tax cuts enacted under former President George W. Bush end on schedule this year.
Republicans want to extend the tax cuts and Democrats are divided but Geithner said reductions for top earners should end.
"We think that's the responsible thing to do because we need to make sure we can show the world that (we're) willing as a country now to start to make some progress bringing down our long-term deficits," he said on ABC's "This Week" program.
Geithner played down fears that a slow-paced recovery might slide into a double-dip recession. He told NBC's "Meet the Press" he did not expect that to happen, although recovery from the deep recession that followed the 2008-2009 financial crisis will be prolonged.
STRENGTHENING, BUT SLOWLY
"I think the most likely thing is you'll see an economy that gradually strengthens over the next year or two, you'll see job growth start to come back, investments expanding ... but we've got a long way to go still," Geithner said.
The Obama administration has said it wants to keep tax cuts in place for Americans earning less than $250,000 a year. Some Republicans say letting any of the tax cuts expire is effectively a tax hike that may hurt recovery.
Geithner disagreed, saying it was more important to aim tax cuts at lower-earning Americans and businesses.
"Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest-earning Americans in the country, expire I do not believe it will have a negative effect on growth," he said on ABC.
Geithner said the Obama administration wants Congress to agree on measures to help small businesses, traditionally the main job-creating engine. He said there were signs "critical" private sector hiring was strengthening.
"We want to see it happen at a faster pace but I think most people understand that ... this was a deep crisis," he said. "It's going to take time to repair that damage, take time to grow out of this."
He said the overhaul of U.S. financial rules signed into law last week by President Barack Obama should bolster confidence in the economy by giving consumers new protections and the government more powers to restrain bank risk-taking.
Geithner said no reforms can ward off all future crises but can mitigate the harm. If the reforms that are now law, including powers to wind down troubled financial firms, had been in place before the crisis, the damage to jobs and fortunes would have been less, he said.
On NBC, Geithner said there is work ahead to repair the housing finance system that contributed to the crisis and led to putting mortgage finance giants Fannie Mae and Freddie Mac into government conservatorship.
HOUSING REFORM STILL AN ISSUE
"We have to bring to Fannie and Freddie, to the GSEs (government-sponsored enterprises) and to the broader housing finance market a better set of policies to make sure we can deliver affordable financing ... without leaving the economy vulnerable to this kind of crisis," he said.
Geithner said some type of government guarantee to make sure people have the ability to borrow to finance a house even may be necessary but said Fannie and Freddie will not be preserved in their current forms.
"We're going to have to bring fundamental change to that market but I think there's going to be a good case for taking a look at preserving or putting in place a carefully designed guarantee so homeowners have the ability borrow ... even in a very difficult recession," he said.
Geithner said it was encouraging China recently ended a peg between its yuan currency and the dollar, which should help correct a trade relationship that enables China to rack up huge surpluses while the United States and others record soaring trade deficits.
"What matters to us and to all of China's trading partners is that they let that currency appreciate," he said. "What matters to us is how fast and how far they let it go."
(Reuters) - The Obama administration warned on Friday the U.S. economy had encountered "strong headwinds" and the country's fiscal challenge remained grim, but it lowered an estimate for the budget deficit this year.
Outlining the country's fiscal path over the next decade, the White House said the numbers were moving in the right direction but the deficit and debt were too high.
"The economy is still struggling; too many Americans are still out of work; and the nation's long-term fiscal trajectory is unsustainable," the White House said in the annual midsession review of President Barack Obama's budget.
Polls show Americans are anxious about the economy and could punish Obama's Democrats in November 2 midterm congressional elections for perceptions of big government spending and high unemployment after a severe recession.
Investors are also focused on U.S. debt at a time when European governments are stressing fiscal consolidation. The White House said the country was on track to meet its June commitment in Toronto to the Group of 20 to halve the deficit by 2013.
The administration trimmed an expected funding gap in the current fiscal year by $84 billion, to $1.47 trillion, versus the estimate released in February. The gap was seen narrowing to $1.42 trillion in 2011.
Republicans jumped on the numbers as proof "Obamanomics" was not working.
"This report confirms that our national debt will double in five years and triple in 10 years. It confirms that our deficits are not sustainable," U.S. House of Representatives Republican Leader John Boehner said in a statement.
The review also tweaked White House assumptions about the economy, which have been criticized as overly optimistic in the past. The White House forecast growth at 3.2 percent this year, 3.6 percent in 2011 and 4.2 percent in 2012.
Unemployment will only decline slowly, to 8.1 percent in 2012, the year of next presidential election, and stay above 6 percent until 2015.
The forecasts were based on data available through May and finalized in early June.
"The most pressing danger we now face is unacceptably weak growth and persistent unemployment, rather than outright economic collapse, and that is a very substantial difference," White House Budget Director Peter Orszag told reporters.
Job creation is a vital goal for Obama and will loom large in the November poll, but unemployment has lagged growth and remains at a lofty 9.5 percent.
EUROPEAN RISKS
"The U.S. economy still faces strong headwinds," the White House said, citing a weak housing market and doubts about the recovery in Europe, which could sap demand for exports.
"The European recovery is at risk because of increased uncertainty while government stimulus is withdrawn, and a further slowdown in Europe would pose problems for the rest of the world whose exports to Europe may be reduced," it said.
Britain and Germany have announced austerity plans to reassure investors, contrasting with the U.S. preference of phasing in budget controls going forward.
European Central Bank President Jean-Claude Trichet, in an article in the Financial Times on Friday, urged countries using the common euro currency to "implement a credible medium-term fiscal consolidation strategy."
In contrast, Federal Reserve Chairman Ben Bernanke argued this week the economy still needed fiscal support and it did not make sense to try to rein in this year's deficit.
But he stressed the country needs to curb the deficit over the next 2 to 3 years.
Obama signed an $862 billion emergency stimulus last year, which the White House says helped restore U.S. growth. But his subsequent efforts to increase aid to cash-strapped states and small businesses have been thwarted in Congress, mainly by Republicans in the Senate objecting to more deficit spending.
U.S. government debt held by the public is projected to rise above 70 percent of gross domestic product in 2012 and reach 77 percent by 2020.
Critics warn adding to the deficit could sap investor faith in the administration's commitment to phase in budget controls, risking a sovereign debt crisis here that unnerved European markets earlier this year.
Long-term U.S. interest rates have stayed low despite the grim U.S. budget outlook, supporting the recovery by holding down borrowing costs on mortgages and auto loans. But that could quickly change if bond investors take fright.
Obama vows to halve the deficit by 2013, a promise the larger Group of 20 rich and emerging nations also adopted at a meeting in Toronto last month, and the president has appointed a bipartisan commission to suggest how to tackle the fiscal challenge.
Obama's 18-strong panel is expected to recommend a mixture of spending cuts and tax increases when it reports findings by the end of December, well after the congressional vote.
(Reporting by Alister Bull; Editing by Andrew Hay and Dan Grebler)
(Reuters) - Unemployment fell but employer payrolls shrank in a majority of U.S. states in June as discouraged workers stopped looking for jobs, a government report showed on Tuesday.
The unemployment rate fell in 39 states and rose in four others, including Nevada, where the jobless rate reached a record high. Payrolls fell in 27 states.
The Labor Department report on state employment came as the Senate appeared poised to extend long-term unemployment benefits.
Employer payrolls decreased in 27 states, increased in 21, and stayed the same in 2 states, adjusting for seasonal effects, the government said.
Payroll data measures jobs gained or lost, while the unemployment rate shows the number of people looking for jobs.
Nevada, home state of Senate Majority Leader Harry Reid, reported an unemployment rate of 14.2 percent, a jump from 14.0 percent last month and its highest-ever reading.
In Michigan, the jobless rate fell to 13.2 percent from 13.9 percent -- the nation's second highest.
"The June jobless rate decline was primarily due to fewer Michigan workers active in the job market," the Michigan Department of Energy, Labor, and Economic Growth said.
Unemployment stayed flat in six other states, the government said. North Dakota reported the lowest rate at 3.6 percent.
In Georgia, the unemployment rate declined to 10.0 percent from 10.1 percent, and the number of payroll jobs fell.
"Georgia's job market is showing signs of renewed deterioration," State Labor Commissioner Michael Thurmond said. "A sharp increase in the number of discouraged workers, rising long-term unemployment, increased new layoffs, and anemic job growth suggests that the fledgling economic recovery may be losing steam."
New Mexico state payrolls were down 1.4 percent, the largest decrease.
In June, the national unemployment rate declined to 9.5 percent from 9.7 percent. Employer payrolls dropped by 125,000, reflecting a decrease in the hiring of temporary U.S. Census Bureau workers.
People who have been out of work for more than 26 weeks made up 45.5 percent of Americans looking for work.
U.S. President Barack Obama yesterday urged Congress to extend unemployment benefits for the long-term jobless.
Democrats tried to extend the benefits when they expired at the end of May, but Republicans objected to financing them by increasing the deficit.
(Reporting by Emma Ashburn; editing by Jeffrey Benkoe)
(Reuters) - President Barack Obama accused his Republican opponents on Monday of playing election-year politics by refusing to join with Democrats in approving an extension of U.S. jobless benefits.
Obama, under pressure to reduce the 9.5 percent U.S. jobless rate, sought to direct some of Americans' frustration over the sputtering economy toward the Republicans, who are hoping for big gains in November 2 congressional elections.
In Rose Garden remarks, Obama said Republicans have opposed a $34 billion extension of benefits for the unemployed in this instance but had voted for such an extension when Republican President George W. Bush had asked for them.
Republicans say they would support the benefits but want them to be paid for with spending cuts instead of simply using borrowed money that adds to the ballooning U.S. national debt.
"It's time to stop holding workers laid off in this recession hostage to Washington politics. It's time to do what's right, not for the next election, but for the middle class," Obama said with three unemployed workers joining him on steps of the Rose Garden.
Democrats hold a 58-41 advantage over Republicans in the Senate, but need 60 votes to overcome parliamentary blocking maneuvers. Their 59th will come on Tuesday when West Virginia Democrat Carte Goodwin is sworn in to fill the vacancy left by the death of Senator Robert Byrd.
The benefits package should pass on Tuesday or Wednesday because Democrats are expected to get favorable votes from two Maine Republicans, Olympia Snowe and Susan Collins, while losing Nebraska Senator Ben Nelson.
Senate Republicans have argued that the $34 billion cost of extending benefits through November could be covered by cutting other programs.
HARD TIMES
"If we can't pay for a program like extension of unemployment insurance that ... every member of the Senate wants to extend, then what are we going to pay for?" Senate Republican Leader Mitch McConnell said on CNN on Sunday.
Obama said the Republican argument ran hollow "after years of championing policies that turned a record surplus into a massive deficit."
"Times are hard right now, we are moving in the right direction, I know it's getting close to an election, but there are times where you put elections aside. This is one of those times," he said.
All 435 seats in the House of Representatives and 36 Senate seats are up for grabs in November, and most political experts believe it is possible Republicans could win the House and challenge Democratic control of the Senate.
A poll conducted for Third Way, a moderate think tank, suggested that Republicans have been successful at shedding the economic image of deficit spending left over from the Bush years.
It said two-thirds of Americans now see congressional Republicans and their economic ideas as new and completely separate from those of the former president.
"If in November, voters continue to believe that Republican ideas are new and different from President Bush, the poll shows they could win control of Congress. But the poll also showed a glimmer of light for Democrats, indicating that if they can tie their opponents to Bush's economic ideas, they can win," Third Way said.
(Additional reporting by Alister Bull and Patricia Zengerle; editing by David Alexander)
(Reuters) - The White House is trumpeting a "summer of economic recovery," but it could soon be facing a winter of discontent.
President Barack Obama, Vice President Joseph Biden and other officials have visited far-flung locales such as Holland, Michigan, Louisville, Kentucky, and Barre, Vermont, to see first-hand some of the projects financed by an $862 billion stimulus package passed last year.
While economists generally agree the recession would have been worse without the government spending spree, it's a hard sell to voters with unemployment at 9.5 percent and unlikely to fall much by November's congressional elections.
"I think it's a very risky strategy to use the term 'recovery' and the promise and claim of recovery when for many Americans, the evidence is simply not there," said Julian Zelizer, a history professor at Princeton University.
White House officials are trying to frame the mid-term elections as a choice between Republicans, whose policies the administration says caused the economic mess, and Democrats, who are trying to dig the country out.
Dana Milbank, a Washington Post columnist, pointed out this wasn't exactly the stuff of catchy bumper sticker slogans. "Vote Democratic. Things might have been even worse without us" probably won't sway voters, he wrote.
CREATED OR SAVED?
The recovery theme cropped up often in the administration's recent tours of taxpayer-funded projects.
"This summer is sure to be a Summer of Economic Recovery," Ron Sims, deputy secretary of Housing and Urban Development, wrote on the White House blog last month after visiting a senior citizen apartment complex being built in Baltimore.
The White House says the "Recovery Summer" slogan was not a promise that unemployment would fall rapidly. Rather, it was intended to draw attention to the variety of stimulus-funded projects that were now up and running.
"We understand that we aren't always going to get credit for digging us out of a ditch until we're out of the ditch," said White House deputy communications director Jen Psaki.
"What we have to keep our focus on is telling people what we are doing and talking about the success of the clean-energy projects and the battery investments and the small businesses that are working again," she said.
Projects funded by the stimulus are beginning to "really ramp up," Biden told the ABC program "This Week."
"We have two, three times as many highway projects going. We have significant investment in broadband for the first time now," Biden said.
The upbeat message doesn't seem to be resonating. Consumer confidence is weakening with less than four months to go until the congressional elections.
The Thomson Reuters/University of Michigan's consumer sentiment index released on Friday sank to its lowest level in 11 months in July, a much steeper decline than economists had predicted.
The survey's gauge of consumer expectations slid to the lowest level since March 2009, when stock markets were at their weakest point of the recession amid fears of another Great Depression.
"This is bad news, clearly," said Jennifer Lee, senior economist at BMO Capital Markets. "We need job growth now more than ever."
Indeed, the poor job market lies at the heart of public dissatisfaction with Obama's handling of the economy.
The administration did not do itself any favors when it released a report on Wednesday saying the stimulus package created or saved millions of jobs.
"Does the White House really think we are buying that unicorn poop?" was one reader's comment on reuters.com.
ROSY SCENARIO PARTLY RIGHT
Republicans pounced on the report at a congressional hearing on Wednesday with White House economic adviser Christina Romer. They pointed out that Romer had co-authored a paper, released in January 2009, predicting that stimulus spending would cap the jobless rate at 8 percent.
In fact, unemployment peaked at 10.1 percent last October.
Romer said that forecast error stemmed from a steeper-than-expected drop in economic activity in late 2008 and early 2009 and was not an indication the stimulus failed.
"Before the stimulus could have done anything, the economy deteriorated rapidly," she said.
While her employment target was off, Romer's 2010 economic growth forecast -- which earned her the derisive nickname "Rosy Scenario" among those who thought she was wildly optimistic -- has proved accurate.
Back in February 2009, when Obama presented his first budget proposal, the administration's forecast called for 2010 growth of 3.2 percent. At the time the "Blue Chip" consensus of leading economists was just 2.1 percent. Those forecasts have since come up and are now in line with the White House's view.
Unfortunately for the White House, the economy is still not creating enough jobs to make much of a dent in the unemployment rate.
(Reuters) - Oil slid for a third day on Friday toward $76 as stock markets in Asia fell after disappointing U.S. economic indicators, while a potential Atlantic storm provided some support to prices.
Japan's Nikkei average shed almost 3 percent on Friday, after reports showing U.S. industrial production slowed sharply last month and manufacturing output snapped a three-month streak of increases capped Wall Street gains on Thursday.
But there was some positive economic news as U.S. claims for jobless benefits tumbled to a near two-year low last week.
An oceanic weather system in the central Caribbean had a 10 percent chance of strengthening into a tropical cyclone over the next two days, the U.S. National Hurricane Center said. It was days away from potentially entering the oil-rich Gulf of Mexico.
"Given that the economic outlook is mixed, the key will be the weather as we head into the hurricane season," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney, adding that prices could reach $80 as soon as next week.
U.S. crude for August fell 14 cents to $76.48 a barrel by 0701 GMT (3:01 a.m. EDT), extending Thursday's slide of more than 0.5 percent. The contract was heading for its second consecutive weekly increase, trading a few cents higher than last Friday's close.
Prices have traded in a range between $71 and $80 for almost six weeks as volatility related to the European debt crisis dwindled. Over the year, they have stayed within a $23 range, hitting a 19-month peak above $87 and a trough below $65, both in May.
The market's attention will be on U.S. consumer prices and the Reuters-University of Michigan sentiment index due out later on Friday.
CONTANGO RETURNS
ICE Brent for September, the front-month contract after August expired on Thursday, fell 17 cents to $75.92. As August went off the board, the Brent market returned to a contango structure.
Brent futures earlier this week had flipped into backwardation, largely reflecting a drop in supply of North Sea crude grades in August because of oilfield maintenance, analysts said, rather than a tightening of the global market.
Oil fell on Thursday after China, which is leading global demand growth as the world's second-largest oil consumer, said annual gross domestic product growth moderated to 10.3 percent in the second quarter from 11.9 percent in the first quarter.
"The slowdown in China's economy would have been the telltale sign for the price to move lower, but the market has absorbed it," Barratt said. "Given the state of the economy, inventories will continue to be drawn."
U.S. crude inventories fell about 5 million barrels for the second week in a row last week, government statistics showed two days ago. <EIA/S>
But Energy industry data provider Genscape on Thursday said crude stockpiles at the key U.S. Cushing, Oklahoma oil hub, the pricing point for crude trading on the New York Mercantile Exchange (NYMEX), rose in the week to July 13 to 39.93 million barrels.
BP Plc (BP.L) (BP.N) said on Thursday it stopped the flow of oil into the Gulf of Mexico from its deep-sea well for the first time since it ruptured in April, prompting hope that the leak can be plugged for good.
The U.S. Congress on Thursday approved the broadest overhaul of financial rules since the Great Depression and sent it to President Barack Obama to sign into law.
(Reuters) - President Barack Obama heard a sobering message from Warren Buffett when he asked for the investment guru's views about the economic recovery, according to an interview Obama gave NBC News on Thursday.
"I'll tell you exactly what Warren Buffett said. He said, 'We went through a wrenching recession. And so we have not fully recovered. We're about 40, 50 percent back. But we've still got a long way to go'," Obama told NBC during a visit to Holland, Michigan, to promote his job creation policies.
Obama chatted with Buffett in the Oval office on Wednesday as he sought ideas on how to translate higher U.S. growth into stronger hiring. This would help him deliver on an election year promise to tackle unemployment currently at 9.5 percent.
Buffett, who built an estimated $47 billion fortune running his insurance and investment company Berkshire Hathaway Inc, warned Obama the recession created a huge overhang of excess capacity in the economy that would simply take time to mop up.
Obama said Buffett specifically used the example of the U.S. housing market, noting 1.2 million new homes were built on average per year in the United States, according to historic trends. That number soared above 2 million during the property bubble, but construction activity has since collapsed.
"What Warren pointed out was, look, we're gonna get back to 1.2 (million). But right now we're soaking up a whole bunch of inventory. So a lot of -- the challenge is to work our way through this recession," Obama said.
High unemployment is another type of excess economic capacity. Obama's Democrats risk severe punishment by voters in midterm congressional elections on November 2 if he fails to convince them stronger U.S. growth means better times ahead.
(Reporting by Alister Bull; editing by Mohammad Zargham)
(Reuters) - Sales at U.S. retailers fell for a second straight month in June and businesses wary of ebbing demand barely raised inventories in May, more evidence the economic recovery has slowed in recent months.
Retail sales slipped 0.5 percent last month, pulled down by weak receipts at automotive dealers, the Commerce Department said on Wednesday. The decline outstripped the 0.2 percent fall economists had expected and followed a 1.1 percent drop in May.
The data comes on the heels of an unexpectedly wider trade deficit in May and prompted economists to trim growth forecasts for the second quarter.
"Activity at the end of the quarter was much weaker than at the start," said Paul Dales, a U.S. economist at Capital Economics in Toronto. "It has therefore become much more likely that private sector demand will not be able to offset the fading fiscal stimulus."
The back-to-back declines in retail sales followed seven straight months of gains that had been helped by government incentives.
The retail sales was the latest in a series of weak data -- from home sales to factory activity to hiring -- that suggest the recovery from the most severe recession since the 1930s is softening a bit earlier than economists had expected.
With demand sluggish and inflation pressures, the Federal Reserve is expected to hold benchmark interest rates near zero into next year, a Reuters survey on Wednesday showed. [ID:nLAG006343]. The Fed was set to release fresh economic forecasts later on Wednesday, which are expected to show policy makers ratcheting back expectations for growth.
The data weighed on Wall Street and major stock indexes were little changed in early afternoon. Prices for U.S. government debt gained as investors sought safe havens, while the dollar fell to a two-month low against the euro.
Despite the moderation in the recovery's pace, some economists argued fears the economy could slip back in recession are overdone.
"We don't think the recovery itself is in jeopardy. The fundamentals are in place; we have been adding private jobs on a pretty consistent basis," said Scott Hoyt, a senior director of consumer economics at Moody's Economy.com in West Chester, Pennsylvania.
CONSUMER SPENDING LOSING STEAM
After strong gains in the first quarter, consumer spending is losing steam as households grapple with a 9.5 percent unemployment rate and sluggish income growth. In June, earnings slipped as employers trimmed working hours.
Slackening demand may already be making businesses wary of building inventories, an exercise that has been largely behind the economic recovery that started in the second half of 2009.
Business inventories barely rose in May as sales fell for the first time since March 2009.
The sluggish recovery and high unemployment have become a headache for President Barack Obama and his fellow Democrats on Capitol Hill, who face a struggle to maintain majorities in the House of Representatives and Senate in November elections.
Republicans charge that Obama's efforts to stimulate the economy have failed, while the White House argued on Tuesday that the $862 billion stimulus plan it backed has saved or created 3 millions jobs.
The U.S. Chamber of Commerce on Wednesday credited the administration with helping to stabilize the economy, but said it had also created an environment of regulatory uncertainty that was restraining business activity.
Last month, motor vehicle and parts purchases dropped 2.3 percent. Excluding autos, retail sales dipped 0.1 percent last month after dropping 1.2 percent in May.
Although the report showed weakness in some key categories, "core" retail sales, which exclude autos, gasoline and building materials, rose 0.2 percent after slipping 0.1 percent in May.
Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. But given that core sales for April and May were revised down, analysts lowered their expectations for consumer spending growth in the second quarter.
Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, grew at a 3 percent annual rate in the first quarter, while the broader economy expanded at a 2.7 percent pace.
Last month, receipts at gasoline stations fell 2 percent after dropping 2.5 percent in May on lower prices.
Declining energy costs handed import prices their biggest decline in June in nearly 1-1/2 years, a separate report from the Labor Department showed. The weak energy costs and general price declines have some economists worried the economy could be flirting with deflation.
Sales of building materials and garden equipment fell 1.0 percent last month, extending the prior month's 9 percent drop, consistent with a recent decline in home construction.
The housing market distress was also highlighted by a fall in the demand for home purchase loans to a 13-year low last week. Refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said.
(Additional reporting by Doug Palmer in Washington; Editing by Leslie Adler)
(Reuters) - U.S. President Barack Obama discussed his efforts to stimulate the economy and create jobs with billionaire U.S. investor Warren Buffett in an Oval Office meeting on Wednesday, a White House official said.
The White House held a series of events focused on job creation and the economy during the day, as the U.S. Chamber of Commerce issued a rebuke of Obama's economic agenda. The Chamber, a leading business group, accused Obama and his fellow Democrats in Congress of neglecting job creation and hampering growth with burdensome regulatory and tax policies.
Four months before the November congressional elections in which Democrats are fighting to keep majorities in Congress, Republicans have tried to paint Obama and his fellow Democrats as anti-business.
Buffett built an estimated $47 billion fortune running his insurance and investment company Berkshire Hathaway Inc (BRKa.N).
"Today, the president met with Warren Buffett, one of the world's most well-respected business leaders, to discuss the economy and our ongoing efforts to work with the private sector to stimulate growth and create jobs," the official said.
(Reporting by Patricia Zengerle, editing by Doina Chiacu)
(Reuters) - President Barack Obama sought on Wednesday to lift sagging confidence in his economic stewardship by enlisting the help of predecessor Bill Clinton, as a leading business group issued a scathing critique of the administration's policies.
Clinton, who presided over the 1990s economic boom, was to join Obama at a White House meeting with business leaders at 2:35 p.m. Eastern time (1835 GMT) to encourage job creation and investment, including in clean energy.
Obama also consulted investment guru Warren Buffett earlier in the Oval Office as he gathered views on how to boost growth, the White House said.
The U.S. Chamber of Commerce, a leading business group, issued a rebuke of Obama's economic agenda, accusing him and his Democrats in Congress of neglecting job creation and hampering growth with burdensome regulatory and tax policies.
Four months before the November congressional elections, Republicans have tried to paint Obama and his Democrats as anti-business.
Obama is increasingly turning to former President Clinton to help win over voters and the business community.
Clinton, seen by many in corporate America as sympathetic, has helped the White House by campaigning for Democratic candidates running in November's elections.
And Obama on Tuesday named former Clinton administration veteran Jack Lew as the White House budget chief to help cut the huge deficit.
With unemployment stubbornly high, polls have reinforced Democrats' fears of big losses in November.
A survey by The Washington Post-ABC News showed 54 percent of Americans disapproved of Obama's leadership on the economy. In a CBS News poll, only 40 percent of Americans said they approved of Obama's handling of the economy.
JOBS SAVED
To counter such perceptions, the administration trumpeted an analysis from the White House Council of Economic Advisers that said government funding of clean energy, economic development, construction projects and other initiatives was spurring "co-investment" by the private sector.
The report, unveiled by CEA Chairman Christina Romer and Vice President Joseph Biden, estimated that Obama's $862 billion economic stimulus package had saved or created roughly 3 million jobs, and was on track to meet its goal of 3.5 million jobs by the end of this year.
"The impact of the fiscal stimulus suggest that the (Recovery Act) has raised the level of GDP as of the second quarter of 2010, relative to what it otherwise would have been, by between 2.7 and 3.2 percent," the report said.
"Real GDP growth is expected to remain steady in the second half of 2010 and throughout 2011."
Republicans disputed the numbers and said Obama was letting Americans down.
"No amount of Washington spin or fuzzy math can change the fact that the trillion-dollar 'stimulus' is failing by the Obama Administration's own standards," House of Representatives Republican Leader John Boehner said in a statement.
An open letter from the Chamber of Commerce also threatened to overshadow the White House analysis. The Chamber's letter gave Obama credit for stabilizing the economy and preventing another Great Depression.
"But once accomplished, the congressional leadership and the administration took their eyes off the ball," the letter said.
"They neglected America's number one priority -- creating the more than 20 million jobs we need over the next 10 years for those who lost their jobs, have left the job market, or were cut to part-time status -- as well as new entrants into our workforce."
The Chamber released the letter to coincide with its "Jobs for America" summit in Washington on Wednesday.
A White House request to have senior Obama aide Valerie Jarrett address the event was declined because the offer came too late. The Chamber said the request arrived on Tuesday.
High budget deficits are among the complaints business groups have lodged against the Obama administration. A healthcare overhaul, financial regulatory reform and proposals to cap carbon emissions are cited by some corporate chieftains as examples of regulatory overreach.
(Additional reporting by Alister Bull and Patricia Zengerle; Editing by Alistair Bell and Eric Beech)
(Reuters) - Democrats will have little margin for error this week as they push for final congressional approval of the most comprehensive rewrite of financial rules since the Great Depression.
Senate Majority Leader Harry Reid hopes to take up the sweeping legislation as Congress returns from a weeklong break, even though he has not yet locked down the 60 votes needed to clear a procedural hurdle in the 100-seat chamber.
The House of Representatives has already approved a final version of the bill, which imposes a range of tough new restrictions on the industry in an effort to avoid a repeat of the 2007-2009 financial crisis. After a year and a half of work, Democrats are eager to send it to President Barack Obama to sign into law.
Passage of the bill would give them a second major legislative achievement, alongside healthcare reform, to show voters as they try to retain control of Congress in elections this November.
In the Senate, Reid can count on 57 Democratic votes for the measure, which would create new consumer protections and saddle financial firms with tough new restrictions.
Republicans Susan Collins and Scott Brown have indicated that they are inclined to support it as well.
But that still leaves Reid one vote short. Republicans Olympia Snowe and Charles Grassley have backed the bill earlier in the legislative process, but neither has said whether they will support the final version.
Reid could pick up another Democratic vote if West Virginia Governor Joe Manchin promptly appoints a successor to fill the seat of the late Senator Robert Byrd.
While Manchin is expected to name a Democrat who supports the Wall Street reform bill, it is unclear if he will name a successor in time for a vote this week, in which case Democrats may have delay action.
Analysts, however, expect Reid will ultimately get the votes he needs to send the measure to Obama, as moderate Republicans will be hard-pressed to justify a "no" vote after winning a wide range of key concessions.
"I think everyone's pretty comfortable that they have the numbers," said Jodi Lashin, a lawyer at Pryor Cashman who has been tracking the bill closely.
Alan Lancz, president of Alan B. Lancz & Associates in New York, said a failure to move the bill to a final vote would add another layer to the concerns of investors.
"If it doesn't pass, there will be a slight positive, but there will be worry as to whether it will come back in a worse form down the road," Lancz said. "If it's just delayed, it might actually worry investors more as to what else is being planned or added to the bill."
Since hitting a 2010 high in April, the KBW Banks Index has fallen nearly 15 percent as concern grew on how the legislation would crimp industry profits.
COULD HAVE BEEN TOUGHER
With a nervous eye on the coming elections, Democrats hammering out the sweeping bill rode a wave of public disgust against Wall Street, perhaps the only address in America less popular with voters than Capitol Hill.
Despite the best efforts of industry lobbyists, the legislation actually got tougher over the past year as it moved through the chambers of Congress.
Financial firms will face a range of new restrictions, from increased scrutiny of consumer loans to limits on their trading activities.
But the industry managed to soften the impact of many of the bill's harshest provisions during a final all-night negotiating session.
Banks would be barred from trading for their own profits under a provision named after former Federal Reserve Chairman Paul Volcker. But lawmakers softened the "Volcker Rule" to allow banks to maintain small investments in hedge funds and private-equity funds, and gave them further leeway by opting to loosen the way they measure those stakes.
Though consumer loans will come under new scrutiny from a consumer-protection authority, auto dealers -- among the largest players in this area -- won a hard-fought exemption.
And while Wall Street banks will have to spin off much of their lucrative swaps-dealing activity into separately capitalized affiliates, lawmakers at the last minute allowed banks to keep many types of swaps in-house.
Even when Obama signs the bill into law, its ultimate impact will not be known until regulatory agencies put it into an effect -- a process that will take years.
"In broad and significant areas, (the legislation) endows regulators with wholly discretionary authority to write and interpret new rules," lawyers at Skadden Arps wrote in a research note.
The bill has been criticized for failing to make changes to Fannie Mae and Freddie Mac, the government sponsored mortgage finance companies that have taken more than $145 billion from taxpayers since being seized in 2008.
White House spokesman Robert Gibbs said Republicans should not use that as an excuse to vote against the financial reform bill. "We are going to reform Fannie Mae and Freddie Mac," Gibbs said Sunday on NBC's Meet the Press.
(Reporting by Andy Sullivan; Additional reporting by Matthew Lynley in New York and Corbett B. Daly in Washington; Editing by Tim Dobbyn)
(Reuters) - President Barack Obama defended his handling of the U.S. economy and blasted Republicans on Thursday for "peddling snake oil" as he went on a two-day campaign swing for fellow Democrats going into November's congressional elections.
Obama has come under fire for bank and auto bailouts and a $787 billion stimulus package whose effectiveness is a subject of debate. He is under election-year pressure to reduce a 9.5 percent unemployment rate but said he was confident Americans would "dig ourselves out of this hole".
"We've got a long way to go," Obama said at a Kansas City electric car factory. "But what is absolutely clear is we're moving in the right direction."
Obama was raising cash for the U.S. Senate campaigns of two Democrats -- Robin Carnahan of Missouri and Senate Majority Leader Harry Reid of Nevada.
Reid is in a tough fight despite being the most powerful Democrat in the Senate, a sign of an election year in which many incumbents are running for their political lives.
Obama praised Reid for pushing through reforms that might not have been popular but were the right thing to do.
"For the last two years, Harry's been dealing with the do-nothing Republican leadership in the Senate," Obama told a raucous rally in Las Vegas, blaming the opposition for thwarting his efforts to support growth and help the jobless.
At a pair of earlier Carnahan events, Obama was biting in his criticism of Republicans who look set to pick up seats from Democrats in November in an election that some see as a referendum on Obama's first two years in office.
Obama said Republicans promote a "you're on your own" philosophy and would bring back policies that he believes have been discredited, such as tax cuts for all including the richest Americans.
"They are peddling that same snake oil that they've been peddling for years and somehow they think that you will have forgotten that it didn't work," Obama said.
Of concern among Republicans about deficit spending, Obama said: "It is a little odd getting lectures on sobriety from folks that spent like drunken sailors for the last decade."
The president, who came to office promising to change the tone in Washington, has found compromise impossible in the hyper-partisan capital, a failure that each side blames on the other.
All 435 seats in the House of Representatives are up for grabs in the November 2 election as well as 36 Senate seats.
Democrats hold a clear edge in the 100-member Senate over Republicans, who need a near sweep of all of the competitive races to pick up the 10 seats they need to gain control.
A poll by a Democratic-leaning organization, Democracy Corps, said Americans plan to support Republican candidates over Democrats in the election by 46 percent to 43 percent.
ELECTRIC CARS
Obama, who will face a tougher audience for his agenda if Republicans make big gains in November, is trying to convince impatient Americans that his economic policies are working and that improvements will take time.
Obama pointed to the Kansas City electric car factory, Smith Electric, as an example of how his policies are paying off. It received $32 million in funding from his stimulus plan and recently hired a 50th worker.
"The surest way out of this storm is to go forward, not to go backwards," he said. "There are going to be some hard days ahead, That's the truth. It's going to take a while for us to dig ourselves out of this hole."
Missouri's unemployment rate was 9.3 percent in May, a touch lower than the national average, but Obama must still convince voters his policies to create jobs are working and overcome concerns over a record deficit and rising debts.
New U.S. claims for jobless benefits fell last week to their lowest level in two months but unemployment remains painfully high and other data on Thursday showed that consumers continue to struggle.
Public doubt over spending more taxpayer money on top of the $787 billion emergency spending plan Obama signed in 2009 has frustrated his administration's efforts to get congressional backing for additional stimulus measures.
This is despite concern that U.S. growth might flag as that stimulus fades, reinforced by a disappointing June jobs report that showed the economy lost 125,000 jobs last month.
The House voted last week to extend unemployment aid to millions of long-term unemployed Americans but similar measures have been thwarted by the Senate and there is no guarantee this legislation will fare better.
The latest Gallup tracking poll had Obama's job approval rating at 44 percent, compared with 48 percent who disapproved.
(Additional reporting by Caren Bohan and Matt Spetalnick; Writing by Alister Bull and Steve Holland; Editing by Simon Denyer and John O'Callaghan)
(Reuters) - Alan Krueger can wax poetic about data -- literally.
The top economic adviser to U.S. Treasury Secretary Timothy Geithner, Krueger quoted poet Carl Sandburg in an 84-page research paper he co-authored proposing a new database to measure how people spend their time in order to understand what makes the economy tick.
"Time is the coin of your life," Sandburg wrote. "It is the only coin you have, and only you can determine how it will be spent. Be careful lest you let other people spend it for you." (here)
Before he was appointed Assistant Secretary for Economic Policy last year, Krueger was a scholar whose passion was time use studies. Now he is in a position to bring this type of information into economic policy decisions in Washington.
The United States is deluged with economic data, yet the figures cannot conclusively answer even the most fundamental questions: Is the recession really over? Are people living better? Is government serving its citizens well?
Inside the corridors of power, the nerds are stirring. A handful of data-loving economists in key positions at Treasury, the Commerce Department and the White House are pushing for alternative measures to provide a clearer picture of how well the economy is working.
The interest is more than just academic. U.S. economic data moves stock markets, drives public policy, and can even swing a presidential election.
No one is talking about jettisoning the classics like gross domestic product, or GDP, the broadest measure of the nation's economic output. But by combining that information with deeper understanding of how people live, work and feel, officials hope to identify economic trouble spots more quickly and make better policy decisions.
"If you were running a $2 trillion company, would you spend such a small share of your budget collecting data on how it's working?" Krueger said in an interview in his office, where stacks of economic data sit on bookshelves and tables. "We grossly underspend on statistics."
In fact, the Agriculture Department spent more than four times as much on research last year as the total budget for the Bureau of Labor Statistics, the group responsible for crunching some of the most critical numbers such as the jobless rate.
Krueger isn't the only data devotee in high places. Austan Goolsbee, one of President Barack Obama's economic advisers, called himself a "data dog" in his Senate confirmation hearing last year. And the data dogs may finally have their day.
Two new sets of statistics are due to be launched next year. The Labor Department is working on an enhanced time use study to track what Americans do all day and how they feel about those activities, a project that draws on Krueger's academic research.
And the Commerce Department is planning a new poverty metric it hopes will provide a more up-to-date measure of which groups are struggling to meet basic needs.
MAKING DATA SEXY
The latest recession proved what we don't know can hurt us. The Federal Reserve vastly underestimated the destructive power of a U.S. housing slump. One reason the Fed was so off-base is that there was little or no data tracking the trading of complex financial instruments created in the past decade.
Data on economic output also did not tell the whole story of how this downturn hurt living standards, which helps explain why President Barack Obama still gets low marks on his handling of the economy even though it has been growing for a year.
As the debt crisis in Greece calls attention to America's own wobbly public finances, it is becoming more important to understand how people live to determine where government ought to channel increasingly limited resources.
Rebecca Blank, Undersecretary for Economic Affairs at the Commerce Department, senses an opportunity to persuade Congress to allocate more money for statistics now that lawmakers understand the cost of not knowing. "We have seriously underinvested in data in this country because it's not sexy," she said.
Like Krueger, Blank was trumpeting better poverty data long before she took up her Commerce post, and now she finds herself in a position to make it happen. (www.brookings.edu/~/media/Files/rc/pape … blank.ashx)
"The problem with data collection is someone has to be interested in it and it costs a little bit of money," she said.
Obama's budget request for next year includes $16 million more for Blank's economics and statistics administration, and an additional $34 million for the Bureau of Labor Statistics.
Both require congressional approval, and while the sums are a tiny portion of the total $3.76 trillion in government outlays, deficit hawks are ascendant in Congress so nothing is guaranteed.
WHAT WE DON'T KNOW
For all its shortcomings, U.S. economic data is arguably the most robust in the world. Compared with Europe, for example, U.S. readings on employment and GDP are released faster and contain more detail. There is, however, a trade-off between speed and accuracy, and U.S. reports are subject to revisions that can be dramatic.
Between the Labor and Commerce departments, there are dozens of sets of statistics released each month, and that doesn't even count figures from the Federal Reserve and Treasury. In addition, there are various surveys provided by private sector groups such as ADP Employers Services (ADP.O) which provides employment data from private firms, as well as the National Association of Realtors which supplies housing reports.
But they cannot measure everything, and the holes tend to be more noticeable in times of crisis.
The Commerce Department can tell you that Americans spent $714 million at men's clothing stores in April but there is no tally of how many families missed meals even though their income exceeded the cutoff to qualify for food stamps.
Labor Department databases can tell you how many people work at museums, parks and zoos, but cannot accurately gauge how many stay on jobless benefits because it makes more economic sense than taking a low-paying position and spending half of every paycheck on childcare.
Just how imperfect economic data can be was laid bare during the past two years. The Labor Department underestimated the number of unemployed by nearly 1.4 million during the recession because of a failure with the economic model it used to estimate how many companies opened or closed in a given month.
That meant the job market was far weaker than thought when the Obama administration took office. Better information would not have altered the policy approach, Treasury's Krueger said, but it might have made it easier for the White House to make the case for a massive stimulus package.
"The public would have been more confident that the medicine we were applying was working," he said. "Maybe it would have generated more support for more action or swifter action, but I don't think it would have fundamentally changed the direction of the administration's policy."
A MILLION HERE, $100 BILLION THERE
The Labor Department isn't the only agency to get the numbers wrong occasionally. Douglas Holtz-Eakin, former head of the Congressional Budget Office which crunches numbers for Congress, recalled he once missed a budget forecast by $100 billion because he had to rely on outdated statistics.
"It's embarrassing to miss by that much," he said.
Holtz-Eakin said it was a "constant struggle" to get reliable, real-time data, and simply spending more money on data gathering isn't enough. He said businesses object to the added paperwork burden of complying with government data requests, and individuals have privacy concerns.
Randall Kroszner, who served on the White House's Council of Economic Advisers under President George W. Bush, said he also pushed for better data but with little success.
The current head of the CEA, Christina Romer, said her chief forecaster has to remind her not to get too caught up in any single piece of data because it could prove to be anomalous or get sharply revised the next month.
"They're state-of-the-art," she said of U.S. economic data. "They're still imperfect."
HOW WE GOT HERE
The quest for better data goes back generations.
Gross domestic product, the best known and still the most important gauge of the economy, traces its roots to the Great Depression, when Congress ordered a report on national income.
The New York Times carried a two-paragraph Associated Press story about it on June 14, 1932, placing it just above a brief report about a furrier who committed suicide by drinking a bottle of poison because of "recent financial reverses."
The task of drawing up the national accounts fell to a young economist named Simon Kuznets who was working at the National Bureau of Economic Research in New York. His report to Congress in 1934 was a bombshell. National income had dropped 40 percent in four years. A measure of inflation tumbled 32 percent.
Kuznets, who was awarded the Nobel prize in economics in 1971, set up a framework for measuring economic output that still forms the basis of today's GDP.
Some economists say the measure looks outmoded. Today's economy is very different from the 1930s. Kuznets broke out 12 major industrial categories, starting with agriculture, which in 1930 employed 21.5 percent of the U.S. work force.
Services, now the largest component of the economy, was listed eleventh, just ahead of "miscellaneous."
THE WORK OF HOUSEWIVES
Kuznets devoted part of the first chapter to spelling out the limitations of the data. Some of the difficulties he identified still frustrate economists today.
In its early days, the national income data was used to help figure out how quickly the United States could ramp up production for World War Two, and some economists say it still has a war-time feel. Kuznets himself was keenly aware the data did not and could not measure well-being. He wrote about the "reverse side of income, that is, the intensity and unpleasantness of effort going into the earning of income."
Nearly eight decades later, economists are still trying to figure out how best to put a number on well-being. Krueger sees time use studies as a step in that direction. GDP "doesn't include the joy we get from walks, or the pleasure we get from a game of chess," he said.
The biggest hole in Kuznets's national income report may be what he called the "services of housewives and other members of the family," which includes cooking, cleaning and childcare.
"It was considered best to omit this large group of services from national income, especially since no reliable basis is available for estimating their value," the 1934 report to Congress says.
Nancy Folbre, an economist who teaches at the University of Massachusetts, is still fuming over that line. "Many people have a very forgiving attitude toward Kuznets," she said. "I'm not convinced. Kuznets was pretty dismissive of the issue of household production."
She calls herself the "token spokesperson" for the cause of including household labor in measures of economic output, and spoke about it at a Sarkozy Commission conference last fall looking at the adequacy of economic indicators.
The commission, created by French President Nicolas Sarkozy in 2008, includes Nobel laureates Joseph Stiglitz and Amartya Sen. In a report released last September, they called for broader measures of the economy that go beyond just growth. (here)
Ignoring the value of household labor can skew readings on well-being, poverty and inequality. Imagine two families, each with two parents and two children, each earning a household income of $50,000. One has a single bread-winner earning that full amount, while the other has two working parents, each earning $25,000.
In the first family, the parent who doesn't work outside the home has time to care for children, make meals or clean, services that the second family might have to pay someone else to provide.
Looking solely at household income, the two families appear similarly situated. Add in the value of household labor and one family looks much poorer.
Folbre wants satellite accounts that would include the value of this so-called non-market labor. The Commerce Department is working on that, but Folbre is tired of waiting.
"Let's stop talking about the damn satellites," she said. "Put the satellites into orbit."
TRACKING YOUR TIME
Krueger's time use study can shed light on how much time is spent on housework, if not the value of it.
The Labor Department began collecting this information in 2003 and the first estimates were released the following year. The agency conducts telephone surveys and asks people how they spent their time over the previous 24 hours.
Starting this year, Labor is adding a new component that will ask people a subjective question -- how they feel during various activities.
To the untrained ear, that may sound as mundane as telling a neighbor to have a nice day. But it can be a vital addition for policy decisions. For example, Krueger said the data shows people spending more time commuting, and it's an activity they loathe, which suggests government ought to direct more money to improving infrastructure and transit.
Roughly 50 other countries are collecting similar data, including Germany, Australia, Canada, New Zealand and South Africa, the U.S. Labor Department said. To keep the results consistent, there is a coding lexicon to ensure interviewers are properly classifying each activity.
Although the responses are officially listed only under broad categories such as sleeping or housework, the level of detail in the lexicon is astonishing -- and perhaps a bit unsettling to privacy advocates worried about Uncle Sam peering a bit too closely into people's lives.
Under "grooming" it lists among the possible responses everything from gargling mouthwash to brushing lint off clothing. It differentiates between religious and nonreligious meditation (the former goes under "religious and spiritual activities"; the latter "health-related self care").
HEALTH AND WEALTH LINK
The Labor Department did not have the funding for this enhanced time use project, so Krueger found an unlikely benefactor at the National Institutes of Health.
Richard Suzman is director of behavioral and social research at the National Institute on Aging, part of the NIH, and a data fan himself. He has been pushing for better health-related economic research since he joined the agency in 1983.
"There were some people who said 'We don't do economics at NIH'," he said. "I did some of it below the radar for a while."
Now, he said his agency is "probably the largest funder" of such research, although that is primarily because there isn't much funding for it.
The link between health and wealth goes both ways. Poor health can hurt finances, and poverty is often associated with higher incidence of illness.
Suzman is interested in how older people spend their time. What do retirees do with themselves? How much exercise are they getting? How does time use change with illness or disability? Do they spend much time alone?
The answers to all those questions can influence health and well-being. That in turn has an impact on government spending on Medicare, the healthcare program for the elderly and one of the biggest future strains on U.S. public finances.
ASK ME NO MORE QUESTIONS
The Commerce Department has no other funding source lined up, Blank said, so if Congress denies the Obama administration's request for extra money the new poverty data won't be produced.
Even if it does prevail, the new data won't replace the current poverty measure, which will still be used to determine eligibility for various government aid programs. Instead, the new report is designed as a "supplemental" data set that better reflects 21st century realities of poverty.
The existing measure, which dates back to 1964, has its critics from both sides of the political spectrum.
Liberals have long complained that it doesn't take into consideration things like childcare costs, which were less of an issue 50 years ago when most mothers stayed home.
Conservatives say it overstates poverty because it excludes government benefits such as the earned income tax credit, food stamps and housing assistance.
The supplemental data is trying to address both sets of concerns.
Bruce Meyer, an economist who teaches at the University of Chicago, said including the earned income tax credit would lift six million people above the poverty line, and he wants the data to measure what people consume rather than their income.
He has a broader concern about the quality of government data collection. Normally, government data agencies rely on surveys of businesses and consumers to get numbers on employment, retail sales, and a host of other indicators.
What they cannot accurately count, they impute. As the Labor Department's miscount of unemployment shows, imputing can be error-prone, but the government is having to do more of that because fewer people are willing to respond to surveys.
"People are over-surveyed," he said. "It's no longer a novelty to be asked your opinions."
GOOGLING FOR DATA
The private sector is wading in where the public sector falls short. The University of Michigan has been polling consumers for decades, but more recent entrants include credit card issuers, paycheck processors, and even Google (GOOG.O).
Hal Varian, Google's chief economist, said he has spoken to a number of government officials at agencies he did not want to name about what sort of information Google can compile. By tracking search terms such as "Where is the unemployment office" Google is trying to predict how many people will apply for initial jobless benefits in a given week.
Reuters (TRI.N), Bloomberg and other financial news services poll economists for their forecasts on such data every week. Varian said some weeks, Google's jobless benefits tracker predicted that number more accurately than the economists.
"This fully automated solution is doing at least as good a job as 30 people out there poring over the tea leaves," he said.
Google is also producing predictions for other indicators including retail sales. Varian said the company is thinking about branching out into politics, predicting election results based on its search data.
In theory, data collection ought to be easier in the electronic age. Companies such as retail behemoth Wal-Mart (WMT.N) can track sales the second a credit card is swiped. It may be only a matter of time before GDP can be calculated instantly too.
Krueger, Treasury's data dog, wants to create a "rapid response" data gathering program that could quickly crunch numbers on how a new development like the swine flu outbreak or the BP oil spill might affect the economy. "It is as if you only had a speedometer that told you your speed five minutes ago," he said in a speech to economists back in October.
HAPPY NOW?
The better data movement has been somewhat subsumed by the Sarkozy Commission and the "economics of happiness" trend which aims to measure well-being. Some economists cringe at that phrase because it sounds trivial.
Carol Graham, a senior fellow at the Brookings Institution think tank in Washington, said when she wrote a book on that topic 10 years ago, her boss told her to take "happiness" out of the title or no one would take it seriously.
"Needless to say, I refused and the book didn't do all that well either," she said.
Graham has no trouble getting people to take her happiness research seriously now. In fact, The Economist magazine held a debate in late April on whether GDP or happiness measures were better at gauging living standards.
Keith Hennessey, a top economic adviser in the last Bush administration, argued in favor of GDP even as he acknowledged its limitations.
"Money cannot buy happiness, and GDP cannot measure it," he said, adding that GDP was adequate and superior to gauges "based on someone's subjective decision about how you should measure your happiness."
The United States is not going the way of Bhutan and its Gross National Happiness indicator, but officials are paying closer attention to how people feel -- particularly now when the population is awfully unhappy despite a growing economy.
Obama says frequently that the recession isn't over for those still out of work. But that doesn't mean he and his team of economic advisers aren't watching every GDP report, and smiling when the numbers go up.
Romer, the head of the Council of Economic Advisers, said well-being measures have their use, value and place, but not in the GDP tables that Kuznets pioneered.
"GDP is doing pretty well at what it set out to do, which is measure the total amount of everything we produce," Romer said. "I am very happy to look at other indicators of well-being, but I would rather not muck up GDP with lots of other pieces."
(Reuters) - President Barack Obama, under pressure to spur job growth, said on Saturday two solar energy companies will get nearly $2 billion in U.S. loan guarantees to create as many as 5,000 green jobs.
In his weekly radio and Web address, Obama coupled his announcement with an acknowledgment that efforts to recover from the recession are slow a day after the Labor Department reported that private hiring in June rose by 83,000.
"It's going to take months, even years, to dig our way out and it's going to require an all-hands-on-deck effort," he said.
All told, 5,000 jobs are expected to be created through use of $1.85 billion in money taken from the $787 billion economic stimulus that Obama pushed through the U.S. Congress in early 2009 over the strenuous objections of Republicans.
Obama announced the Energy Department will award $1.45 billion in loan guarantees to Abengoa Solar Inc to help it build Solona, one of the largest solar generation plants in the world near Gila Bend, Arizona.
Abengoa Solar, headquartered in Lakewood, Colorado, is a unit of Spanish renewable energy and engineering company Abengoa SA. In the short term, construction will create some 1,600 jobs in Arizona.
"After years of watching companies build things and create jobs overseas, it's good news that we've attracted a company to our shores to build a plant and create jobs right here in America," Obama said.
Obama said $400 million in loan guarantees will be awarded to Colorado-based Abound Solar Manufacturing to manufacture advanced solar panels at two new plants, creating more than 2,000 construction jobs and 1,500 permanent jobs.
PLANT IN EMPTY CAR FACTORY
A Colorado plant is already being constructed and an Indiana plant will be built in what is now an empty Chrysler factory.
The announcement addresses Obama's desire to create jobs related to green technologies.
Obama, whose Democrats are anticipating losses in November 2 congressional elections because of the weak jobs picture, said the steps he is taking "won't replace all the jobs we've lost overnight" and that "I know folks are struggling."
He accused Republicans of blocking a $33 billion extension of unemployment benefits that failed to pass the House of Representatives on Tuesday.
"At a time when millions of Americans feel a deep sense of urgency in their own lives, Republican leaders in Washington just don't get it," Obama said.
Republicans say the problem is Democrats want to pass legislation that would add to the country's debt.
In the Republican response to Obama's address, Senator Saxby Chambliss called the country's $13 trillion debt "one of the most dangerous threats confronting America today."
"At a time when many Americans are clipping coupons and pinching pennies, President Obama and the Democrats in Congress continue to spend money that they -- we -- do not have," Chambliss said.
(Reuters) - U.S. employment likely contracted for the first time this year in June as thousands of temporary jobs for census workers ended, though private-sector hiring probably picked up, according to a Reuters survey.
The government's closely followed employment report due at 8:30 a.m. on Friday could shed more light on the strength of the economy after a raft of data pointed to a loss of momentum, fanning fears of a double-dip recession.
Nonfarm payrolls are forecast to have dropped by 110,000 last month after increasing 431,000 in May on a surge in census hiring. Those temporary workers -- 411,000 hired in May alone -- are now being let go.
But private hiring, considered a better measure of labor market health, likely rose by 112,000 after May's 41,000 increase, the poll found. However, a report on Wednesday showing private employers added only 13,000 jobs last month is seen posing a downside risk to that forecast.
"The labor market is definitely losing steam. I expect private payrolls to rise only fifty thousand," said Sung Won Sohn, an economics professor at California State University in the Channel Islands.
"At this stage of the recovery this is nothing. We need a couple hundred thousand a month to grow the economy," he said. "The best thing we can say is the labor market has hit the bottom, it's not getting any worse, but there really isn't any meaningful recovery."
Public unhappiness with the economy is eroding President Barack Obama's popularity. Obama, who has called job creation his No. 1 priority, has tried to put the blame on policies of the previous administration.
With voters in an anti-Washington, anti-incumbent mood, failure to put back to work the more than 8 million Americans who lost jobs during the recession could cost the Democratic Party dearly in the November mid-term elections.
BUSINESSES HOLDING BACK
The economy has expanded for three straight quarters following the longest and deepest recession since the 1930s, but growth has not been vigorous enough to convince businesses to step up hiring.
With unemployment stubbornly high, household spending has turned sluggish in recent months, threatening to create a vicious cycle that stock market investors and some analysts worry could tip the economy back into recession.
"We are in a difficult situation. I don't think there is political will to have another stimulus program and even if we did I am not sure people feel it would be that effective," said Stephen Bronars, a senior economist at Welch Consulting in Washington.
The Federal Reserve is also in a bind. It has held benchmark overnight interest rates close to zero since December 2008 and has pumped more than $1 trillion into the economy. Fed officials believe a sustainable recovery has taken hold, but are watching cautiously.
According to Census Bureau data, there were 344,157 temporary census workers during the survey week for the employment report. That compares to 573,779 in May.
The loss of the temporary census jobs, combined with the anticipated return of some previously discouraged workers back into the labor force, is seen lifting the jobless rate to 9.8 percent from 9.7 percent in May.
Analysts said uncertainty in Europe, where huge budget deficits are forcing governments to slash public spending, was contributing to the reluctance by some U.S. businesses to hire. Layoffs at cash-strapped U.S. state and local governments is also seen weighing on employment.
Slower export growth to Europe as economies there slow is expected to have only a limited impact on the U.S. economy, but analysts said falling share prices could crimp spending.
With businesses wary of hiring, economists look for a further rise in the length of the average workweek before employment perks up. However, for June they see the work week holding steady at 34.2 hours.
(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)
(Reuters) - New claims for U.S. jobless benefits unexpectedly rose last week, while growth in the manufacturing sector slowed in June, heightening fears the country's economic recovery was stalling.
Small Business
The data on Thursday added to worries over the risk of a double-dip recession which has spooked investors and pummeled share prices in recent days. Analysts, however, think another downturn is unlikely.
"Just because the economy is slowing doesn't mean it's going into a recession, that's the nuance the market has not figured out. The market has pretty much fully priced in a double-dip recession; at this point we don't agree," said John Canally, an economist at LPL Financial in Boston.
Initial claims for state unemployment benefits increased by 13,000 to 472,000, the U.S. Labor Department said. The market had expected claims to decline to 452,000.
In a separate report, the Institute for Supply Management said its barometer of growth in U.S. manufacturing activity slipped to a six-month low of 56.2 in June from 59.7 the prior month. The reading remained above the 50 level that marks expansion. The employment sub-index slipped slightly.
Stocks on Wall Street ended down for a fourth straight day, as investors worried that sluggish economic growth would hurt earnings. Yields on U.S. government bonds were little changed after falling earlier in the day, but the U.S. dollar slumped to a six week low against the euro and a seven month low against the yen.
While layoffs have slowed sharply from early last year, businesses remain skeptical of the strength of the recovery and are holding back on hiring, analysts said.
The data on jobless claims comes a day ahead of the closely watched monthly U.S. government report on employment.
High unemployment is a sore spot for President Barack Obama, whose approval ratings have plummeted, and it could cost his fellow Democrats dearly at the polls in November.
More than 8 million Americans lost their jobs during the recession, but employment growth has been so tepid that it could take years for many of the jobless to find work again.
PAYROLLS EXPECTED TO FALL
A Reuters survey found economists expect Friday's U.S. Labor Department report on June non-farm payrolls to show a decline of 110,000, due to a reversal of the May hiring of temporary workers to conduct the decennial U.S. census. In May, the government hired 411,000 census workers. However private sector hiring is forecast to rise by about 112,000 in June, up from only 41,000 in May.
Economists had been expecting non-government hiring to accelerate, but an industry report on Wednesday that showed a gain of only 13,000 private sector jobs last month led some to reduce their payrolls forecasts.
"It's looking more and more like the job market is treading water. Layoffs are down from 2009, but hiring hasn't really picked up and this is disappointing," said Stephen Bronars, a senior economist at Welch Consulting in Washington.
"There is a lot of uncertainty on the hiring side. In order for the recovery to give people confidence it needs to cut across different sectors of the economy."
Adding to the darkening cloud, contracts for sales of previously owned homes plunged a record 30 percent in May, the National Association of Realtors said on Thursday. The NAR's pending sales index fell to 77.6, its lowest level since the measurement started in 2001. The decline followed the April 30 expiration of a popular homebuyer tax credit.
Manufacturing has largely led the recovery from the longest and deepest recession in the United States since the 1930s, but the recovery had looked to be broadening earlier this year.
However, data ranging from retail sales to home sales has hinted at a slackening in the pace of growth over the past couple months.
U.S. auto sales slipped in June from the previous month's pace and major automakers said there was no sign of the second-half recovery that the embattled industry had expected at the start of the year.
Although U.S. manufacturing activity slowed last month, it remains stronger than in China, where it hit its slowest pace in more than a year, exacerbating fears the global recovery could be at risk. Euro zone manufacturing growth fell in June to its slowest pace in four months.
Analysts blamed some of the pullback in U.S. manufacturing on the sovereign debt crisis in Europe, which is expected to choke off growth in the region as governments slash spending to cut massive budget deficits.
The U.S. ISM report showed declines in new orders and exports. A steep drop in the price index backed views the Federal Reserve would be in no hurry to back away from its ultra-low interest rate policy. Fed officials in recent days have struck a cautious tone on the recovery's prospects.
"Forward momentum is slowing down in the manufacturing sector, but there are no signals in this report that an abrupt growth slowdown is in the cards," said Brian Bethune, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
"Price pressures have virtually vanished. The Fed is expected to be on extended hold in this environment."
In the Labor Department report on jobless benefit claims, the four-week moving average of new jobless claims -- considered a better measure of underlying labor market trends -- rose to its highest level since early March.
And the number of people still receiving benefits after an initial week of aid rose more than expected, increasing by 43,000 to 4.62 million in the week ended June 19, the latest week for which the data was available.
Separately, the number of planned layoffs at U.S. companies rose slightly last month, but remained close to a four-year low, global outplacement consultancy Challenger, Gray & Christmas said.
(Additional reporting by Corbett Daly in Washington and Edward Krudy and Richard Leong in New York)
(Reuters) - U.S. jobless numbers likely fell in June for the first time this year, a Reuters poll showed. The key monthly unemployment report will be released on Friday.
REUTERS FORECASTS:
* Median forecast for nonfarm payrolls -110,000 in June versus +431,000 in May. Forecasts range from -200,000 to +30,000.
* Private payrolls seen +112,000 versus +41,000 in May.
* Unemployment rate seen at 9.8 pct versus 9.7 pct. Forecasts range from 9.6 pct to 9.9 pct.
* Average work week for all workers seen steady at 34.2 hours.
FACTORS TO WATCH:
Nonfarm payrolls probably fell in June for the first time this year as many of the 411,000 temporary workers hired in May to complete the census were laid off. According to Census Bureau data, there were 344,157 temporary workers for the decennial population count during the survey week of the closely monitored employment report. That compares to 573,779 temporary workers during the same period in May.
Employment is also seen weighed down by layoffs at cash-strapped state and local governments. However, private hiring -- viewed as a better measure of the labor market's health -- is expected to have picked up in June after a sharp slowdown in May. This should help pacify investors who are increasingly worried about a double-dip recession after some key data suggested the recovery from the worst downturn since the 1930s is losing some edge.
Average weekly hours worked likely remained steady in June, which should also support the fragile recovery. The loss of temporary census jobs is expected to result in a decline in household employment. That, combined with the anticipated return of some discouraged workers back into the labor force, is seen lifting the unemployment rate marginally.
High unemployment is a sore point for President Barack Obama, whose approval ratings have plummeted. The economy's failure to create sufficient employment to absorb the more than 8 million Americans who lost their jobs during the recession, could haunt the Democratic Party in the November mid-term elections.
Labor market strength is one of the factors that will determine the timing of the Federal Reserve's first interest rate hike since slashing overnight lending rates to near zero in December 2008.
MARKET IMPACT
With worries of a double-dip recession uppermost in investors' minds, the employment report will be watched for fresh clues on the strength of the recovery. A recent batch of weak U.S. data and budget troubles in Europe have hurt stock prices, but boosted the appeal of safe-haven U.S. Treasuries.
Treasury yields should fall on a weaker-than-expected report. But yields have fallen near record lows from their peaks in April and analysts caution a rally in government bonds would be short-lived.
A weak report could benefit the U.S. dollar as anxious investors become averse to higher-risk currencies and assets, but hurt the currency against the yen, which also tends to rise on risk aversion.
Key levels to watch for euro/dollar are $1.2150, a break of which could open the way for a retest of $1.2000 and the pair's four-year low around $1.1875 set on June 7. For dollar/yen, the key level is at 88 yen.
(Polling by Bangalore unit)
(Reporting by Lucia Mutikani, Richard Leong and Wanfeng Zhou; Editing by Andrea Ricci)
(Reuters) - U.S. consumer confidence dropped in June after rising for three months, adding to the view the economic recovery is slowing, while home prices unexpectedly climbed in April.
The report Tuesday from The Conference Board, an industry group, showed the drop in confidence came from worries about the labor market which has been one of weakest areas of the U.S. economy.
The group's index of consumer attitudes fell to 52.9 in June from a downwardly revised 62.7 in May. The June figure was sharply below the median of forecasts from analysts polled by Reuters.
Assessment of the labor market also worsened, with the "jobs hard to get" index rising while the "jobs plentiful" index slipped.
"There remain a lot of questions around the sustainability of economic growth," said Sean Simko, fixed-income portfolio manager in Oaks, Pennsylvania.
The confidence report was at odds with last Friday's consumer sentiment data from the Thomson Reuters/University of Michigan Surveys of Consumers. That survey showed sentiment in June rose to its highest since January 2008.
Tuesday's report comes just days ahead of the government's monthly data on employment, one of the most widely watched economic indicators. The report this Friday is forecast to show non-farm payrolls fell in June, according to a Reuters survey.
President Barack Obama, in a wide-ranging Oval Office meeting, said he and Federal Reserve Chairman Ben Bernanke agree the economy is strengthening and is in recovery but that more needs to be done, particularly on the job front.
U.S. stocks fell sharply, with the Standard & Poor's 500 index .SPX finishing down more than 3.0 percent and at its lowest close in about eight months. The U.S. dollar rose against a basket of currencies .DXY while U.S. Treasury debt prices advanced.
In another report, Standard & Poor's/Case Shiller home price indexes showed an unexpected rise as a rush to take advantage of the federal tax credit for home buyers pushed prices up before the credit expired at the end of April.
The S&P composite index of home prices in 20 metropolitan areas for April rose 0.4 percent on a seasonally adjusted basis, compared with a forecast for a 0.1 percent decline, after a downwardly revised 0.2 percent drop in March. March prices were previously reported as unchanged.
On an unadjusted basis, prices gained 0.8 percent in April following March's 0.5 percent drop. A 0.2 percent rise was forecast in a Reuters poll.
Home sales have fallen since the April 30 end of tax credits. The housing market has yet to show signs of a sustained recovery.
"Inventory data and foreclosure activity have not shown any signs of improvement," David Blitzer, chairman of S&P's index committee, said in a statement.
(Additional reporting by Lynn Adler, John Parry and Wanfeng Zhou, Editing by Chizu Nomiyama)
(Reuters) - Democrats are mounting a final push to send President Barack Obama their landmark overhaul of financial regulations, but the death of a colleague and cold feet among Republican allies could postpone a final victory.
Democrats could bring the sweeping bill up for a vote in the House of Representatives on Wednesday, where it is expected to pass easily.
They hope to pass the measure through the Senate by the end of the week so Obama can sign it into law by the July 4 Independence Day holiday, but they could see final action slide into mid-July.
Senator Christopher Dodd, the Democrats' point man on the issue, said on Tuesday that it was "doubtful" the Senate would act by the end of the week.
Legislative action will be out of the question for much of Thursday as the late Democratic Senator Robert Byrd lies in state in the Senate chamber.
Furthermore, Dodd and other backers had yet to nail down the support of wavering moderate Republican senators whose support will be needed to overcome a procedural hurdle.
And lawmakers are doubtless eager to get out of town for a week-long break for the July 4 holiday.
That would mean several more weeks of uncertainty for the financial industry, which is bracing for tighter regulations, tougher oversight and diminished profits.
Still, analysts say it is a question of when, not if, the most sweeping rewrite of Wall Street rules since the 1930s becomes law.
The bill, which aims to prevent a repeat of the 2007-2009 financial crisis that shook the global economy, is a top priority for Obama and would give him and fellow Democrats a big legislative win ahead of November congressional elections.
It would force banks to reduce, but not cease, risky trading and investing, set up a new government process for liquidating troubled financial firms and establish a new consumer-protection bureau. It would saddle financial firms with a host of new regulations and reduce their profits.
Wall Street and many Republicans have tried to delay or water down the bill, but it has grown stronger during its yearlong journey though Congress as Democrats have ridden a wave of public disgust at an industry that has awarded itself fat paydays while the rest of the country struggles with high unemployment.
ANOTHER NEGOTIATING SESSION
Democrats thought they had hammered out a final version of the bill during an all-night negotiating session last week.
With no margin for error in the Senate, Byrd's death left them one vote shy of the 60 needed to overcome procedural hurdles in the 100-seat chamber.
On top of that, moderate Republicans who had previously backed the bill objected to an $18 billion tax that was added to the bill to cover its costs.
Dodd and other Democrats reopened negotiations on Tuesday to remove that tax, replacing it with other funding sources. The bill now taps $11 billion from an unpopular bank-bailout fund and raises the amount that larger banks must pay to insure their customer's deposits.
That approach is not without its political risks. Republicans involved in the negotiations said that the $11 billion would fall on the shoulders of taxpayers, because it otherwise would be used to pay down the national debt.
But Dodd and other Democrats do not expect them to back the bill. Instead, they are focused on the handful of Republican moderate senators -- Scott Brown, Olympia Snowe and Susan Collins -- who had previously supported it.
Snowe and Collins are studying the final version and have yet to decide how to vote, aides said on Tuesday night. A Brown aide declined to comment.
Representative Barney Frank, who has led the reform effort in the House, said the three moderates helped to craft the new funding mechanism. He said he would not have bothered to change the bill unless the alterations would pick up the votes needed to pass the Senate.
