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Thursday, March 8, 2012

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Economic Events of the Week

Thursday – Jobless Claims
Friday – Employment Situation

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Story of the Day
Services Power Job Growth (Wall Street Journal)

Washington Update
GOP Budget Target Could Provoke Fight (Politico)

Market Talk
Interpreting Jobs Data (Bloomberg)
‘Sterilized’ Bond Buying an Option in Fed Arsenal (Wall Street Journal)
Jobless Claims in US Rose 8000 Last Week to 362,000 (Bloomberg)

Editorials & Opinions
A Third King of Unemployment? (Conservable Economist)
How Good Is the Housing News? (New York Times Editorial)
Foreclosures Will Probably Rise in 2012 (Suzy Khimm in Washington Post)

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Story of the Day

Services Power Job Growth (Wall Street Journal)

U.S. businesses added more workers in February than January, the latest sign that improvements in the economy are making it a bit easier for Americans to find jobs. Private-sector employers hired 216,000 workers last month, an increase from an upwardly revised 173,000 in January, according to payroll processor Automatic Data Processing Inc. and Macroeconomic Advisers LLC, a consulting firm. The upbeat report comes ahead of Friday's jobs snapshot from the government, which will include public and private employers. The ADP update isn't as comprehensive as the government's monthly snapshot of the jobs market. But Wednesday's reading likely will fuel optimism that recent improvement on the jobs front will continue. Most forecasters expect Friday's government job report to show that the U.S. added a net new 210,000 nonfarm jobs in February—with gains among private employers trimmed by continued cutbacks in government. The unemployment rate is expected to remain unchanged at 8.3%, having fallen from a high of 10% in October 2009.


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Washington Update

GOP Budget Target Could Provoke Fight (Politico)

Anxious to change the subject, House Republicans moved toward picking a new fight with the White House over spending Wednesday even as the leadership confirmed it will go slower on legislation challenging President Barack Obama’s policy of requiring contraception coverage by health insurance companies. House Budget Committee Republicans are to meet Thursday morning on options for the new fiscal year that begins Oct. 1, and the GOP is coalescing around a plan that would cap appropriations at a level of $1.028 trillion — nearly $20 billion below what was agreed to last August as part of the Budget Control Act. The move is designed to appease fiscal conservatives, many of whom opposed last summer’s debt agreement and have threatened to delay action on the budget. But the strategy only ensures more delay and rancor this year, since the Senate intends to move ahead at the higher $1.047 trillion cap set in the law.


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Market Talk

Interpreting Jobs Data (Bloomberg)

At precisely 8:30 a.m. Eastern Standard Time tomorrow, the Bureau of Labor Statistics will release the Employment Situation report for February. (Note: It is not the “unemployment report,” a misnomer favored by almost every TV and radio commentator.) Then the real fun begins: dissecting the numbers and spinning them to reflect one’s political biases or entrenched view on the U.S. economy. In other words, attempting to make reality conform to the model.How much of the job creation is real? How much of it is the result of the unseasonably warm winter weather, which boosts seasonally adjusted employment in industries such as construction, mining and real estate? (Remember, what the seasonal adjustment factors add in one month, they take away in others.) What about the birth-death model, which uses sample- based estimates to capture new business formation and the creative destruction of others? Last month, the BLS incorporated new data from the 2010 census into its January statistics, which created a break in the series and a headache for anyone trying to fend off the conspiracy theorists.

‘Sterilized’ Bond Buying an Option in Fed Arsenal (Wall Street Journal)

Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed's previous efforts to aid the recovery.

Jobless Claims in US Rose 8000 Last Week to 362,000 (Bloomberg)

The number of Americans filing claims for jobless benefits rose to 362,000 last week, a level consistent with an improving labor market. Applications for unemployment insurance payments increased by 8,000 in the week ended March 3, Labor Department figures showed today. Economists forecast 352,000 claims, according to the median estimate in a Bloomberg News survey. The average over the past four weeks held close to a four-year low. The rate of firings indicates companies have grown more comfortable with headcounts and could take on additional employees when demand picks up. Economists forecast a Labor Department report tomorrow will show that employers boosted payrolls in February and the jobless rate held at an almost three-year low.


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Editorials & Opinions

A Third King of Unemployment? (Conservable Economist)

Economists typically think of unemployment as falling into two categories. There is "cyclical" unemployment, which is the unemployment that occurs because of a recession. And there is "structural" unemployment--sometimes called the "natural rate of unemployment" or the NAIRU for "nonaccelerating inflation rate of unemployment." This is the rate of unemployment that would arise in a dynamic labor market even if there was no recession, as firms expand and contract and people move between jobs. The level of structural unemployment will be influenced by factors that influence the incentives of people to seek out jobs (like the costs of mobility between jobs and the structure of unemployment, welfare, and disability benefits) and the incentives of businesses to hire (including rules affecting the costs of business expansion, rules affecting what firms must provide to employees, and even rule affecting the costs of firing employees, if necessary, later on). Inconveniently, the unemployment that the United States is currently experiencing doesn't fit neatly into either of the two conventional categories.

How Good Is the Housing News? (New York Times Editorial)

The housing market has shown signs of life recently. Home sales have beat expectations and pending sales neared a two-year high. But prices — the crucial measure of housing-market health — are still falling, driven down by increasing levels of distressed sales of foreclosed properties. That means the market, and the broader economy, which derives much of its strength from housing, are not out of the woods — not by a long shot. For too long, President Obama and his team have relied on the banks to voluntarily modify troubled loans. Those efforts were focused on reducing monthly payments, not principal — a more powerful form of relief. Now President Obama is trying again. On Tuesday, he announced a new policy of easier refinancings for loans that are backed by the Federal Housing Administration. As part of the settlement announced in February, the major banks will be required to promote loan modifications for troubled borrowers, including principal reductions for underwater homeowners.

Foreclosures Will Probably Rise in 2012 (Suzy Khimm in Washington Post)

There are too many vacant houses and not enough people who want to buy them. And that’s a reality that’s likely to get worse before it gets better: The number of foreclosures is expected to rise significantly in 2012, adding to a housing overhang that has depressed prices and held back the recovery. But some of these new defaults may be necessary medicine for the housing market to recover in the long term: They represent homes that have been backlogged in the courts and elsewhere that can’t be sold until they finish going through legal foreclosure proceedings. Over the past year, delays in the foreclosure process have prevented a large number of distressed homes from going on to the market. It’s partly because of the recent crackdown on robo-signing and other abusive, illegal practices that forced people out of their homes. But it’s also because states where foreclosures go through the courts — including Florida, New York and Maryland — have become backlogged, slowing down the process even further.


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