President Obama, facing a 10.2% unemployment rate, said Thursday he would hold a jobs forum at the White House in December.
He noted the encouraging signs of economic growth and a slowing of the loss of jobs in recent months, but said employers are still reluctant to hire and millions are desperate to find work.
"Even though we've slowed the loss of jobs -- and today's report on the continued decline in unemployment claims is a hopeful sign -- the economic growth that we've seen has not yet led to the job growth that we desperately need," the President said in a statement delivered at the White House.
"We all know that there are limits to what government can and should do, even during such difficult times. But we have an obligation to consider every additional responsible step that we can to encourage and accelerate job creation in this country," he added.
Those invited to the forum will include CEOs, small business owners, economists, financial experts, and representatives from labor and non-profits.
The forum will be held against a background of highly mixed economic news.
On the bright side: the GDP grew 3.5% in the third quarter. But there are concerns that growth may not be sustainable, given that housing and jobs haven't showed signs of recovery.
Some economists have been arguing for another round of stimulus to ward off sliding into another recession.
0:00 /1:51Stimulus jobs cost taxpayers
Not everyone is convinced. And politically, the prospects for passing a single stimulus package with a big price tag are not high. Instead the administration and Congress are looking for smaller initiatives that can be taken both by the government and the private sector.
One idea that has been floated to spur job creation is a hiring credit, whereby employers would get a tax break for every new worker hired. But many economists and tax experts say it's a flawed concept since it would end up disproportionately rewarding employers that were planning to hire anyway.
So far lawmakers have extended and expanded some measures from the original $787 billion stimulus package passed in February -- specifically, federal unemployment benefits, the homebuyer credit, and big tax break for businesses looking to write off more of their losses.
Thursday, November 12, 2009
Monday, November 9, 2009
Good news: Fewer underwater mortgages
Fewer people are underwater on their mortgages -- further evidence that the real estate free-fall may be slowing.
Just 21% of all single-family homeowners owe more on their mortgage balances than their homes are worth, according to a third quarter residential real estate report from Zillow.com. That is down from 23% at the end of the second quarter.
That is good news because it should help reduce the number of homeowners losing their homes to foreclosure. Being underwater is one of the two factors that lead to foreclosure, the other being, of course, not having enough income to make the monthly payments.
"The decline in the percentage of homeowners with negative equity is a positive sign and is directly attributable to the stabilization of home values from the second quarter to the third," said Zillow chief economist Stan Humphries.
But there's a second, less-positive factor that contributed to the reduction in underwater borrowers: foreclosures. So many people have already lost their homes that the ranks of those underwater is slowly dwindling.
And that highlights one of the most serious concerns that housing markets currently face. "Foreclosure rates," said Humphries, "are ramping up again."
Upswing
There are 1.2 million to 1.5 million seriously delinquent mortgages sitting out there like ticking time-bombs. These loans are at least 90 days late, and, historically, few borrowers who fall that far behind manage to start repaying.
Aggravating the foreclosure problem is the substantial numbers of option ARM loans that will reset over the next few months. These are loans with balances that have steadily increased because borrowers were permitted to make minimum monthly payments that did not even cover interest.
The resets will require borrowers to start paying down principal, and many will simply not be able to afford to do that.
Also resetting over the next several months will be many interest-only loans, which will also require borrowers to make much larger payments.
Another fear-factor for Humphries is that continued economic malaise will slow the housing market recovery. Recent macro-economic reports have been inconsistent. Good news came early in November, with the gross domestic product, growing at annualized rate of 3.5% during the third quarter.
A couple days later, however, the Labor Department reported the unemployment rate jumped to 10.2% in October. It's an understatement to say that losing a job can make it very difficult to pay off a mortgage.
Ghost hunting
Increased foreclosures also add to already long inventories. The National Association of Realtors reported there are 3.63 million homes on the market, a nearly eight-month supply at the current rates of sales. That's a two or three month oversupply, compared with a normal market.
But official inventory statistics may be undercounting; there is also the so-called "shadow inventory." For one, there are bank repossessions that have not been put back on the market. The banks have either fallen behind on processing these properties or they are reluctant to put REOs up for sale because the market is already overloaded.
The second element of the shadow inventory is that some individual owners would like to sell their homes but do not want to compete with foreclosures, which usually sell at a discount to market values. In many cities, foreclosures and short sales constitute the bulk of the market.
The housing market recovery will be affected by "how quickly these foreclosures transition back onto the marketplace," said Humphries.
Nationally, 21.4% of all sales were REOs, the industry term for bank-owned properties.
High as that rate is, that pales in comparison with some of the worst-hit metro areas. In Merced Calif., for example, 74.2% of all single-family home sales were of foreclosed properties; in nearby Stockton, the rate was 68.7%; and El Centro, down near the Mexican border, the rate was 68.1%.
The good news is that, in many areas at least, foreclosures are selling off quite quickly. The trouble is that, like Alice, who had to run to stay in place in "Through the Looking Glass," REO sales will have to increase at a blistering pace just to keep up with the new inventory coming onto the market.
That could put a damper on home prices for many months to come.
Just 21% of all single-family homeowners owe more on their mortgage balances than their homes are worth, according to a third quarter residential real estate report from Zillow.com. That is down from 23% at the end of the second quarter.
That is good news because it should help reduce the number of homeowners losing their homes to foreclosure. Being underwater is one of the two factors that lead to foreclosure, the other being, of course, not having enough income to make the monthly payments.
"The decline in the percentage of homeowners with negative equity is a positive sign and is directly attributable to the stabilization of home values from the second quarter to the third," said Zillow chief economist Stan Humphries.
But there's a second, less-positive factor that contributed to the reduction in underwater borrowers: foreclosures. So many people have already lost their homes that the ranks of those underwater is slowly dwindling.
And that highlights one of the most serious concerns that housing markets currently face. "Foreclosure rates," said Humphries, "are ramping up again."
Upswing
There are 1.2 million to 1.5 million seriously delinquent mortgages sitting out there like ticking time-bombs. These loans are at least 90 days late, and, historically, few borrowers who fall that far behind manage to start repaying.
Aggravating the foreclosure problem is the substantial numbers of option ARM loans that will reset over the next few months. These are loans with balances that have steadily increased because borrowers were permitted to make minimum monthly payments that did not even cover interest.
The resets will require borrowers to start paying down principal, and many will simply not be able to afford to do that.
Also resetting over the next several months will be many interest-only loans, which will also require borrowers to make much larger payments.
Another fear-factor for Humphries is that continued economic malaise will slow the housing market recovery. Recent macro-economic reports have been inconsistent. Good news came early in November, with the gross domestic product, growing at annualized rate of 3.5% during the third quarter.
A couple days later, however, the Labor Department reported the unemployment rate jumped to 10.2% in October. It's an understatement to say that losing a job can make it very difficult to pay off a mortgage.
Ghost hunting
Increased foreclosures also add to already long inventories. The National Association of Realtors reported there are 3.63 million homes on the market, a nearly eight-month supply at the current rates of sales. That's a two or three month oversupply, compared with a normal market.
But official inventory statistics may be undercounting; there is also the so-called "shadow inventory." For one, there are bank repossessions that have not been put back on the market. The banks have either fallen behind on processing these properties or they are reluctant to put REOs up for sale because the market is already overloaded.
The second element of the shadow inventory is that some individual owners would like to sell their homes but do not want to compete with foreclosures, which usually sell at a discount to market values. In many cities, foreclosures and short sales constitute the bulk of the market.
The housing market recovery will be affected by "how quickly these foreclosures transition back onto the marketplace," said Humphries.
Nationally, 21.4% of all sales were REOs, the industry term for bank-owned properties.
High as that rate is, that pales in comparison with some of the worst-hit metro areas. In Merced Calif., for example, 74.2% of all single-family home sales were of foreclosed properties; in nearby Stockton, the rate was 68.7%; and El Centro, down near the Mexican border, the rate was 68.1%.
The good news is that, in many areas at least, foreclosures are selling off quite quickly. The trouble is that, like Alice, who had to run to stay in place in "Through the Looking Glass," REO sales will have to increase at a blistering pace just to keep up with the new inventory coming onto the market.
That could put a damper on home prices for many months to come.
Thursday, November 5, 2009
Dow tops 10,000
Stocks rallied Thursday, with the Dow industrials topping 10,000, after the government reported a bigger-than-expected drop in jobless claims, and a number of retailers reported improved October sales.
The Dow Jones industrial average (INDU) gained 200 points, or 2%, with 40 minutes left in the session. The S&P 500 (SPX) gained 19 points, or 1.8%, and the Nasdaq composite (COMP) climbed 47 points, or 2%.
"Today's big news was that we saw fewer claims for unemployment benefits," said Mike Stanfield, chief investment officer at VSR Financial Services. "That suggests that the underlying economics are continuing to improve."
He said that this was reassuring to investors following several weeks of concerns about the pace of the recovery. It was also encouraging for investors ahead of Friday's monthly employment report.
Stocks have been volatile over the past three weeks, with the S&P 500 losing 5% through Wednesday's close on worries that the rally has gotten ahead of the recovery. Between March 9 and the peak on Oct. 19, the S&P 500 gained 63%.
Stocks ended mixed on Wednesday after the Federal Reserve held interest rates steady at historic lows near zero -- and said it will keep them low for an extended period.
The issue for markets is whether there have been enough positive developments of late to give stocks another leg up, Stanfield said. He said he thinks that the next leg up could be delayed, and that stocks are likely to churn in a range for the next six months or so. After that point, investors will have a better sense of how the economy is doing without the benefit of trillions of dollars in government stimulus, which many credit for the 3.5% rise in GDP in the third quarter.
Gains were broad based, with all 30 Dow issues rising, led by Boeing (BA, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), IBM (IBM, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Procter & Gamble (PG, Fortune 500), 3M (MMM, Fortune 500), United Technologies (UTX, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).
Market breadth was positive. On the New York Stock Exchange, winners beat losers four to one on volume of 890 million shares. On the Nasdaq, advancers topped decliners by almost three to one on volume of 1.75 billion shares.
Jobs: The government's weekly jobless claims report and third-quarter productivity report showed that the pace of layoffs is slowing, but also that employers are still not creating jobs.
The number of Americans filing new claims for unemployment fell to 512,000 last week from 532,000 the previous week, the lowest level since January. Economists surveyed by Briefing.com expected 522,000 claims, on average.
Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 5.749 million from 5.817 million the week before. Economists thought it would fall to 5.750 million. It was the eighth decline in nine weeks. Although the decline could mean people are running out of benefits -- not that they are finding jobs.
Separately, the Senate and House both voted Wednesday to extend unemployment benefits by up to 20 weeks -- and extend the homebuyer tax credit. President Obama is expected to sign the bill into law Friday.
Unemployed ... without a lifeline
Another economic report showed that worker productivity is up, a good sign for corporate profits, but also further evidence that companies aren't hiring. Third-quarter productivity rose by 9.5% after rising 6.6% in the previous quarter. Economists thought it would fall to 6.5%.
"The productivity and jobless claims show a rapidly improving economy," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
But the key report this week is the October unemployment report from the Labor Department, due Friday, Detrick said.
Due before the start of trading, employers are expected to have cut 175,000 jobs from their payrolls after eliminating 263,000 in the prior month. The unemployment rate, generated by a separate survey, is expected to rise to 9.9% from 9.8% in September.
Retail: Shoppers remained cautious with their spending last month, with discounters and warehouse clubs seeing the best October retail sales.
On the upside, Costco (COST, Fortune 500) said sales at stores open a year or more rose 5% during the month, topping forecasts for a rise of 4.7%.
Gap (GPS, Fortune 500) reported sales rose a better-than-expected 4%, sending shares higher in morning trading.
On the downside, American Eagle Outfitters (AEO) said sales fell 5% versus forecasts for a rise of 1.7%. Shares fell over 11% in active New York Stock Exchange trading.
Company news: After the close Wednesday, Cisco Systems (CSCO, Fortune 500) reported weaker quarterly earnings and revenue that beat estimates.
The company's CEO, John Chambers, said current-quarter revenue would top estimates and that business conditions had bottomed at least six months ago. Cisco shares gained 2% Thursday.
Automaker Toyota (TM) reported a surprise quarterly profit Thursday and cut its annual loss forecast by over 50%
Shares of CVS Caremark (CVS, Fortune 500) slumped 21% in active trading after the company warned that 2010 profits at Caremark, its pharmacy benefits management division, are likely to slump by 10% to 12%. The company also said Caremark's CEO is stepping down. Drugstore CVS bought Caremark in March 2007
The news overshadowed the company's bigger-than-expected jump in quarterly profit.
0:00 /2:55Steve Jobs - CEO of the Decade
World markets: European markets rallied in late-afternoon trading. Asian markets tumbled.
Currency and commodities: The dollar fell versus the euro and gained against the yen.
U.S. light crude oil for December delivery fell 62 cents to settle at $79.78 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery climbed $2 to settle at $1,089.30 an ounce.
Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.53% from 3.52% Wednesday. Treasury prices and yields move in opposite directions.
The Dow Jones industrial average (INDU) gained 200 points, or 2%, with 40 minutes left in the session. The S&P 500 (SPX) gained 19 points, or 1.8%, and the Nasdaq composite (COMP) climbed 47 points, or 2%.
"Today's big news was that we saw fewer claims for unemployment benefits," said Mike Stanfield, chief investment officer at VSR Financial Services. "That suggests that the underlying economics are continuing to improve."
He said that this was reassuring to investors following several weeks of concerns about the pace of the recovery. It was also encouraging for investors ahead of Friday's monthly employment report.
Stocks have been volatile over the past three weeks, with the S&P 500 losing 5% through Wednesday's close on worries that the rally has gotten ahead of the recovery. Between March 9 and the peak on Oct. 19, the S&P 500 gained 63%.
Stocks ended mixed on Wednesday after the Federal Reserve held interest rates steady at historic lows near zero -- and said it will keep them low for an extended period.
The issue for markets is whether there have been enough positive developments of late to give stocks another leg up, Stanfield said. He said he thinks that the next leg up could be delayed, and that stocks are likely to churn in a range for the next six months or so. After that point, investors will have a better sense of how the economy is doing without the benefit of trillions of dollars in government stimulus, which many credit for the 3.5% rise in GDP in the third quarter.
Gains were broad based, with all 30 Dow issues rising, led by Boeing (BA, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), IBM (IBM, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Procter & Gamble (PG, Fortune 500), 3M (MMM, Fortune 500), United Technologies (UTX, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).
Market breadth was positive. On the New York Stock Exchange, winners beat losers four to one on volume of 890 million shares. On the Nasdaq, advancers topped decliners by almost three to one on volume of 1.75 billion shares.
Jobs: The government's weekly jobless claims report and third-quarter productivity report showed that the pace of layoffs is slowing, but also that employers are still not creating jobs.
The number of Americans filing new claims for unemployment fell to 512,000 last week from 532,000 the previous week, the lowest level since January. Economists surveyed by Briefing.com expected 522,000 claims, on average.
Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 5.749 million from 5.817 million the week before. Economists thought it would fall to 5.750 million. It was the eighth decline in nine weeks. Although the decline could mean people are running out of benefits -- not that they are finding jobs.
Separately, the Senate and House both voted Wednesday to extend unemployment benefits by up to 20 weeks -- and extend the homebuyer tax credit. President Obama is expected to sign the bill into law Friday.
Unemployed ... without a lifeline
Another economic report showed that worker productivity is up, a good sign for corporate profits, but also further evidence that companies aren't hiring. Third-quarter productivity rose by 9.5% after rising 6.6% in the previous quarter. Economists thought it would fall to 6.5%.
"The productivity and jobless claims show a rapidly improving economy," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
But the key report this week is the October unemployment report from the Labor Department, due Friday, Detrick said.
Due before the start of trading, employers are expected to have cut 175,000 jobs from their payrolls after eliminating 263,000 in the prior month. The unemployment rate, generated by a separate survey, is expected to rise to 9.9% from 9.8% in September.
Retail: Shoppers remained cautious with their spending last month, with discounters and warehouse clubs seeing the best October retail sales.
On the upside, Costco (COST, Fortune 500) said sales at stores open a year or more rose 5% during the month, topping forecasts for a rise of 4.7%.
Gap (GPS, Fortune 500) reported sales rose a better-than-expected 4%, sending shares higher in morning trading.
On the downside, American Eagle Outfitters (AEO) said sales fell 5% versus forecasts for a rise of 1.7%. Shares fell over 11% in active New York Stock Exchange trading.
Company news: After the close Wednesday, Cisco Systems (CSCO, Fortune 500) reported weaker quarterly earnings and revenue that beat estimates.
The company's CEO, John Chambers, said current-quarter revenue would top estimates and that business conditions had bottomed at least six months ago. Cisco shares gained 2% Thursday.
Automaker Toyota (TM) reported a surprise quarterly profit Thursday and cut its annual loss forecast by over 50%
Shares of CVS Caremark (CVS, Fortune 500) slumped 21% in active trading after the company warned that 2010 profits at Caremark, its pharmacy benefits management division, are likely to slump by 10% to 12%. The company also said Caremark's CEO is stepping down. Drugstore CVS bought Caremark in March 2007
The news overshadowed the company's bigger-than-expected jump in quarterly profit.
0:00 /2:55Steve Jobs - CEO of the Decade
World markets: European markets rallied in late-afternoon trading. Asian markets tumbled.
Currency and commodities: The dollar fell versus the euro and gained against the yen.
U.S. light crude oil for December delivery fell 62 cents to settle at $79.78 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery climbed $2 to settle at $1,089.30 an ounce.
Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.53% from 3.52% Wednesday. Treasury prices and yields move in opposite directions.
Monday, November 2, 2009
Manufacturing in 'recovery mode'
A key index of U.S. manufacturing activity jumped in October, reaching its highest level in three and a-half years, a purchasing managers' group said Monday.
The Tempe, Ariz.-based Institute for Supply Management's (ISM) manufacturing index rose to a reading of 55.7 in October from 52.6 the month before. It was the highest reading since April 2006 when the index registered 56.
Economists were expecting a reading of 53, according to consensus estimates gathered by Briefing.com.
"The jump in the index was driven by production and employment," said Norbert Ore, chair of the ISM's manufacturing business survey committee. "Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode."
The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing field. Index readings above 50 indicate growth, while levels below 50 signal contraction. Readings below 41.2 are associated with a recession in the broader economy.
The index dipped slightly in September from the previous month. It first showed growth in August, after 18 months of contraction.
The ISM tracks new orders, production, employment, supplier deliveries, inventories, customers' inventories, the backlog of orders, prices, new export orders, imports and buying policies.
Of the 18 manufacturing sectors reporting, 13 posted growth -- including categories such as petroleum and coal products, apparel and transportation equipment. Sectors reporting contractions included metals, mineral products and wood products.
The Tempe, Ariz.-based Institute for Supply Management's (ISM) manufacturing index rose to a reading of 55.7 in October from 52.6 the month before. It was the highest reading since April 2006 when the index registered 56.
Economists were expecting a reading of 53, according to consensus estimates gathered by Briefing.com.
"The jump in the index was driven by production and employment," said Norbert Ore, chair of the ISM's manufacturing business survey committee. "Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode."
The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing field. Index readings above 50 indicate growth, while levels below 50 signal contraction. Readings below 41.2 are associated with a recession in the broader economy.
The index dipped slightly in September from the previous month. It first showed growth in August, after 18 months of contraction.
The ISM tracks new orders, production, employment, supplier deliveries, inventories, customers' inventories, the backlog of orders, prices, new export orders, imports and buying policies.
Of the 18 manufacturing sectors reporting, 13 posted growth -- including categories such as petroleum and coal products, apparel and transportation equipment. Sectors reporting contractions included metals, mineral products and wood products.
Friday, October 30, 2009
Personal income flat in September
Personal income was essentially unchanged in September, while spending by individuals fell, government figures showed Friday.
The Commerce Department said personal income fell by less than 0.1% in September, after a downwardly revised 0.1% increase in August. The slight decline was in line with economists' forecasts, according to a consensus estimate gathered by Briefing.com.
Spending by individuals was down 0.5% last month, which was also expected. August was revised to show that personal spending was up 1.4%.
Personal saving totaled $355 billion in September, or 3.3% of disposable personal income. That was up from $307 billion, or 2.8% of disposable personal income, in August.
The report came one day after the government said U.S. gross domestic product, the broadest measure of economic activity, grew in the third quarter following a prolonged contraction.
Thursday's GDP data showed consumer spending rose at a 3.4% rate in the quarter, the biggest increase in nearly three years. Spending by consumers accounts for more than two-thirds of the nation's economic activity.
The Commerce Department said personal income fell by less than 0.1% in September, after a downwardly revised 0.1% increase in August. The slight decline was in line with economists' forecasts, according to a consensus estimate gathered by Briefing.com.
Spending by individuals was down 0.5% last month, which was also expected. August was revised to show that personal spending was up 1.4%.
Personal saving totaled $355 billion in September, or 3.3% of disposable personal income. That was up from $307 billion, or 2.8% of disposable personal income, in August.
The report came one day after the government said U.S. gross domestic product, the broadest measure of economic activity, grew in the third quarter following a prolonged contraction.
Thursday's GDP data showed consumer spending rose at a 3.4% rate in the quarter, the biggest increase in nearly three years. Spending by consumers accounts for more than two-thirds of the nation's economic activity.
Saturday, October 17, 2009
On stimulus jobs reporting, a big 'Oops'
Gaffes in federal reports this week about stimulus have called into question the government's ability to accurately track how many jobs are being created by the massive $787 billion Recovery Act.
The data in Thursday's reports were filled with mistakes, including an error that made it look like a French vaccine maker received the largest stimulus contract, $1.4 billion, when in fact it has gotten an award one-100th the size.
Government research organization OMB Watch said its assessment of the reports revealed many inconsistencies in the job data.
"The data is rife with mistakes," said Craig Jennings, senior federal fiscal policy analyst at OMB Watch. "When you put out data that hasn't yet been checked, it undermines transparency, because you are putting out wrong information."
According to the Recovery Board, a non-profit, government-funded organization that operates stimulus data tracker recovery.gov, the government expected mistakes and is reviewing reports of them.
Uncovering how many jobs stimulus created is critical to the debate about the Recovery Act's value. Critics argue that the mammoth funding simply represents more government spending and is not effectively being used to create jobs. But proponents say stimulus is a crucial shot in the arm for the economy, and that the labor market would have fallen further without it.
"Understanding how many jobs are created will answer the very fair and important question, 'What return on our investment are we getting?' " said Christopher Mihm, the Government Accountability Office's managing director of strategic issues.
But the enormity of the stimulus bill leaves some experts saying it will be impossible to accurately portray the data. The sheer size of the reporting is dumbfounding: Tens of thousands of recipients will file reports after receiving stimulus funds from one of 28 government umbrella agencies, or from one of countless agencies from the 50 states.
Making it even more difficult to discover the true jobs number is a decision to put the responsibility of correcting mistakes on the stimulus recipients' shoulders. For transparency's sake, government agencies can point out errors but are powerless to change them. All of the data are under government review, and a report on the errors the agencies find will be available at the end of the month.
"It's important that those errors get caught before they get published, and right now they're still under review," said Jennings. "It's possible that some will be caught by the review, but it will take an incredible amount of man power just to sift through the data."
Recipients of stimulus funds were required to report how many jobs they saved or created and how much money they have received from government agencies by Oct. 10. The first sliver of that information was posted on recovery.gov on Thursday, with much more data to come on Oct. 30.
The contract awards posted Thursday represented less than 7% of the total stimulus funds doled out so far. By far the largest part of stimulus is in grants to states, which account for 83% of stimulus funding. Federal agencies and recipients are spending nearly three weeks reviewing these state reports to improve their accuracy before publishing them.
Loans to recipients make up the other 10%. Both grants and loans will be posted on recovery.gov at the end of the month.
There were 5,232 federal contracts reported Thursday, but 41,944 grants and loans will be reported on Oct. 30. Gov. Arnold Schwarzenegger of California recently said that his state alone submitted 5,747 reports from agencies and others who received funds from the state.
Mistake-prone reporting
A mistake in the very first contract listed on the site prompted doubts about the reliability of the reports.
Recovery.gov erroneously reported Thursday that French vaccine maker Sanofi Pasteur had received $1.4 billion in stimulus funds from the Department of Health and Human Services. The company topped the site's list titled "Largest federal contracts in U.S."
When CNNMoney.com first asked about the contract on Thursday, a spokeswoman from Sanofi Pasteur suspected the $1.4 billion figure was a mistake. HHS spokeswoman Vicki Rivas-Vazquez said the number on recovery.gov was erroneous and the actual amount was $10.4 million.
Sanofi Pasteur said Friday that $10.4 million is the correct figure.
"We anticipated errors in the reporting and so informed many reporters beforehand," said Edward Pound, spokesman for the Recovery Board. "This is the first time this kind of reporting is being done. These reports are being reviewed by federal agencies and recipients to catch any errors or problems."
The Recovery Board has the tall task of compiling all of the data, and is spending $18 million revamping its Web site to manage all of the information.
OMB Watch said its review yielded "really weird job numbers," including many discrepancies within the reports themselves. For instance, Jennings said OMB Watch found that many companies said in a narrative portion of their reports that it was able to retain several employees because of stimulus funds, but the "jobs created" column read "zero."
The Recovery Board aggregates its jobs data from the "jobs created" column to display the total number of jobs saved or created. Jennings speculated that recipients might have been confused about the scope of the term "created."
"I would not stake any sort of claims on those job numbers," said Jennings. "We don't know what's going on there."
Even the job figures that are input correctly do not always reflect the true number of positions created by stimulus funds.
For instance, UT-Battelle received a $338.7 million contract, listed as the fourth largest on the recovery.gov site. So far, the company, which manages Oak Ridge National Laboratory in Tennessee for the Department of Energy, has spent $13 million and created 41 jobs, mostly related to the oversight of subcontractors.
But the funding is actually creating many more jobs, said Thom Mason, UT-Battelle's CEO. Among the firm's first stimulus projects is the building of a chemistry and new materials research lab, which will employ 150 construction workers. None of these positions will appear on UT-Battelle's reports to the federal government.
"It's important that everyone reports on a consistent basis," said Mason, who expects to hire up to 4,000 subcontractors with stimulus funds. "The difficulty is that it gives you a number that's not really a realistic reflection of how many jobs are created."
The data in Thursday's reports were filled with mistakes, including an error that made it look like a French vaccine maker received the largest stimulus contract, $1.4 billion, when in fact it has gotten an award one-100th the size.
Government research organization OMB Watch said its assessment of the reports revealed many inconsistencies in the job data.
"The data is rife with mistakes," said Craig Jennings, senior federal fiscal policy analyst at OMB Watch. "When you put out data that hasn't yet been checked, it undermines transparency, because you are putting out wrong information."
According to the Recovery Board, a non-profit, government-funded organization that operates stimulus data tracker recovery.gov, the government expected mistakes and is reviewing reports of them.
Uncovering how many jobs stimulus created is critical to the debate about the Recovery Act's value. Critics argue that the mammoth funding simply represents more government spending and is not effectively being used to create jobs. But proponents say stimulus is a crucial shot in the arm for the economy, and that the labor market would have fallen further without it.
"Understanding how many jobs are created will answer the very fair and important question, 'What return on our investment are we getting?' " said Christopher Mihm, the Government Accountability Office's managing director of strategic issues.
But the enormity of the stimulus bill leaves some experts saying it will be impossible to accurately portray the data. The sheer size of the reporting is dumbfounding: Tens of thousands of recipients will file reports after receiving stimulus funds from one of 28 government umbrella agencies, or from one of countless agencies from the 50 states.
Making it even more difficult to discover the true jobs number is a decision to put the responsibility of correcting mistakes on the stimulus recipients' shoulders. For transparency's sake, government agencies can point out errors but are powerless to change them. All of the data are under government review, and a report on the errors the agencies find will be available at the end of the month.
"It's important that those errors get caught before they get published, and right now they're still under review," said Jennings. "It's possible that some will be caught by the review, but it will take an incredible amount of man power just to sift through the data."
Recipients of stimulus funds were required to report how many jobs they saved or created and how much money they have received from government agencies by Oct. 10. The first sliver of that information was posted on recovery.gov on Thursday, with much more data to come on Oct. 30.
The contract awards posted Thursday represented less than 7% of the total stimulus funds doled out so far. By far the largest part of stimulus is in grants to states, which account for 83% of stimulus funding. Federal agencies and recipients are spending nearly three weeks reviewing these state reports to improve their accuracy before publishing them.
Loans to recipients make up the other 10%. Both grants and loans will be posted on recovery.gov at the end of the month.
There were 5,232 federal contracts reported Thursday, but 41,944 grants and loans will be reported on Oct. 30. Gov. Arnold Schwarzenegger of California recently said that his state alone submitted 5,747 reports from agencies and others who received funds from the state.
Mistake-prone reporting
A mistake in the very first contract listed on the site prompted doubts about the reliability of the reports.
Recovery.gov erroneously reported Thursday that French vaccine maker Sanofi Pasteur had received $1.4 billion in stimulus funds from the Department of Health and Human Services. The company topped the site's list titled "Largest federal contracts in U.S."
When CNNMoney.com first asked about the contract on Thursday, a spokeswoman from Sanofi Pasteur suspected the $1.4 billion figure was a mistake. HHS spokeswoman Vicki Rivas-Vazquez said the number on recovery.gov was erroneous and the actual amount was $10.4 million.
Sanofi Pasteur said Friday that $10.4 million is the correct figure.
"We anticipated errors in the reporting and so informed many reporters beforehand," said Edward Pound, spokesman for the Recovery Board. "This is the first time this kind of reporting is being done. These reports are being reviewed by federal agencies and recipients to catch any errors or problems."
The Recovery Board has the tall task of compiling all of the data, and is spending $18 million revamping its Web site to manage all of the information.
OMB Watch said its review yielded "really weird job numbers," including many discrepancies within the reports themselves. For instance, Jennings said OMB Watch found that many companies said in a narrative portion of their reports that it was able to retain several employees because of stimulus funds, but the "jobs created" column read "zero."
The Recovery Board aggregates its jobs data from the "jobs created" column to display the total number of jobs saved or created. Jennings speculated that recipients might have been confused about the scope of the term "created."
"I would not stake any sort of claims on those job numbers," said Jennings. "We don't know what's going on there."
Even the job figures that are input correctly do not always reflect the true number of positions created by stimulus funds.
For instance, UT-Battelle received a $338.7 million contract, listed as the fourth largest on the recovery.gov site. So far, the company, which manages Oak Ridge National Laboratory in Tennessee for the Department of Energy, has spent $13 million and created 41 jobs, mostly related to the oversight of subcontractors.
But the funding is actually creating many more jobs, said Thom Mason, UT-Battelle's CEO. Among the firm's first stimulus projects is the building of a chemistry and new materials research lab, which will employ 150 construction workers. None of these positions will appear on UT-Battelle's reports to the federal government.
"It's important that everyone reports on a consistent basis," said Mason, who expects to hire up to 4,000 subcontractors with stimulus funds. "The difficulty is that it gives you a number that's not really a realistic reflection of how many jobs are created."
Friday, September 25, 2009
Three-peat: Stocks fall again
Stocks fell for the third straight session on Friday, ending lower for the week, after weaker-than-expected reports on durable goods orders and new home sales sparked concerns about the strength of any recovery.
The Dow Jones industrial average (INDU) lost 42 points, or 0.4%. The S&P 500 (SPX) index lost 6 points, or 0.6%. The Nasdaq composite (COMP) fell 17 points, or 0.8%.
Stocks slid in the previous two sessions after having ended Tuesday at one-year highs. Investors reacted negatively to Wednesday's Federal Reserve meeting and Thursday's weaker existing home sales report and oil slump.
The mix of economic news Friday gave investors another reason to retreat after the recent advance. An attempt at stabilizing in the last hour of trading gave out near the close.
"Today is the third day that we are seeing selling on higher volume," said Curtis Lyman, managing director at HighTower Advisors. "It's indicative that the market is consolidating after the very nice recovery we've seen."
Stocks have seen a huge spike over the last 6-1/2 months. Since bottoming at a 12-year low March 9, the S&P 500 has gained 54.4% and the Dow has gained 47.6%, as of Friday's close. After hitting a six-year low, the Nasdaq has gained 64.8%.
This week's retreat has left Wall Street at what could be a key inflection point, said Brian Peardon, wealth advisor at Harrison Financial Group
"We could see a new push higher or a much more substantial selloff," Peardon said. "It's just a matter of all the cash on the sidelines and whether the (buy on the) dip buyers decide to come in."
He said that a continued move higher is more likely than a big selloff at this point, but that the upcoming quarterly earnings reporting period will be critical in terms of whether the rally gets another leg up.
Economy: New home sales rose 0.7% in August to a 429,000 unit annual rate from a 426,000 unit rate in July, according to a government report released Friday morning. It was the fifth consecutive month of rising sales.
The results were shy of the 440,000 unit annualized rate economists were expecting, according to a survey by Briefing.com.
In general, the report added to other recent indications that the housing market has likely hit bottom. The housing market collapse and subsequent subprime mortgage meltdown were seen as sending the economy into recession in the first place, so a recovery in this area is critical for broader growth.
But not all signs point to improvement. A different report Thursday from the National Association of Realtors showed August sales of previously-owned homes fell 2.7% in August from July, after jumping in the previous month.
Another report released Friday showed that consumer sentiment rose more than expected in September. The University of Michigan's index rose to 73.5 from an initial reading of 70.2. Economists thought it would rise to 70.5.
An earlier report showed a surprise drop in durable goods orders last month. Orders for big-ticket items meant to last three years or more fell 2.4% in August versus forecasts for a rise of 0.4%, the Commerce Department reported. The surprise dip was largely due to a drop in commercial aircraft orders. Orders rose a better-than-expected 4.8% in July, including the impact of the Cash for Clunkers auto stimulus program.
Stripping out autos, August orders were flat versus forecasts for a rise of 1%. Orders excluding autos had risen 0.9% in July.
"We're seeing continued choppiness in the economic numbers, which points to the fact that the recovery is still in the early stages," Lyman said.
G-20 summit: The Group of 20 leading developed and emerging countries met for a second day in Pittsburgh. The Group has been meeting to discuss the financial crisis and how to prevent something like it from happening again.
On Thursday, the leaders agreed to make the group the new permanent council for international economic cooperation, essentially eclipsing the G-8, which doesn't include developing nations such as China, India or Brazil.
The G-8 will still meet on major security issues, but will be less influential.
Company news: Research in Motion (RIMM) reported a better-than-expected profit late Thursday, and also forecast third-quarter earnings in a range that includes analysts' estimates. But the BlackBerry maker also predicted third-quarter revenue would fall in a range that is short of analysts' current estimates. Shares slumped 17%.
After the close Thursday, Hewlett-Packard (HPQ, Fortune 500) issued a fiscal 2010 revenue forecast that is short of analysts' predictions and an earnings outlook in a range that could top analysts' expectations. On a broader level, the computer and printer maker said that the IT industry will return to growth next year and that the company will outpace the rest of the market. Shares were little changed.
In deal news, Unilever (UN) is buying Sara Lee (SLE, Fortune 500)'s personal care unit for $1.88 billion, the companies said Friday.
A number of retailers declined on concerns about the economy, including Wal-Mart Stores (WMT, Fortune 500).
0:00 /1:25The recovery checklist
World markets: Global markets were mostly lower. In Europe, London's FTSE 100 ended little changed, while France's CAC 40 and Germany's DAX both declined. Asian markets ended lower, with the exception of the Japanese Nikkei.
Currency and commodities: The dollar fell versus the euro and the yen. The greenback has repeatedly hit one-year lows against a basket of currencies over the last few weeks.
The weaker dollar had little impact on dollar-traded commodities, although it often moves in the opposite direction of oil and gold prices.
U.S. light crude oil for October delivery rose 13 cents to settle at $66.02 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery fell $7.30 to settle at $998.90 an ounce. Gold closed at a record high of $1,020.20 last week.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.32% from 3.36% late Tuesday. Treasury prices and yields move in opposite directions.
Market breadth was negative. On the New York Stock Exchange, losers topped winners eight to seven on volume of 1.20 billion shares. On the Nasdaq, decliners beat advancers five to four on volume of 2.39 billion shares.
The Dow Jones industrial average (INDU) lost 42 points, or 0.4%. The S&P 500 (SPX) index lost 6 points, or 0.6%. The Nasdaq composite (COMP) fell 17 points, or 0.8%.
Stocks slid in the previous two sessions after having ended Tuesday at one-year highs. Investors reacted negatively to Wednesday's Federal Reserve meeting and Thursday's weaker existing home sales report and oil slump.
The mix of economic news Friday gave investors another reason to retreat after the recent advance. An attempt at stabilizing in the last hour of trading gave out near the close.
"Today is the third day that we are seeing selling on higher volume," said Curtis Lyman, managing director at HighTower Advisors. "It's indicative that the market is consolidating after the very nice recovery we've seen."
Stocks have seen a huge spike over the last 6-1/2 months. Since bottoming at a 12-year low March 9, the S&P 500 has gained 54.4% and the Dow has gained 47.6%, as of Friday's close. After hitting a six-year low, the Nasdaq has gained 64.8%.
This week's retreat has left Wall Street at what could be a key inflection point, said Brian Peardon, wealth advisor at Harrison Financial Group
"We could see a new push higher or a much more substantial selloff," Peardon said. "It's just a matter of all the cash on the sidelines and whether the (buy on the) dip buyers decide to come in."
He said that a continued move higher is more likely than a big selloff at this point, but that the upcoming quarterly earnings reporting period will be critical in terms of whether the rally gets another leg up.
Economy: New home sales rose 0.7% in August to a 429,000 unit annual rate from a 426,000 unit rate in July, according to a government report released Friday morning. It was the fifth consecutive month of rising sales.
The results were shy of the 440,000 unit annualized rate economists were expecting, according to a survey by Briefing.com.
In general, the report added to other recent indications that the housing market has likely hit bottom. The housing market collapse and subsequent subprime mortgage meltdown were seen as sending the economy into recession in the first place, so a recovery in this area is critical for broader growth.
But not all signs point to improvement. A different report Thursday from the National Association of Realtors showed August sales of previously-owned homes fell 2.7% in August from July, after jumping in the previous month.
Another report released Friday showed that consumer sentiment rose more than expected in September. The University of Michigan's index rose to 73.5 from an initial reading of 70.2. Economists thought it would rise to 70.5.
An earlier report showed a surprise drop in durable goods orders last month. Orders for big-ticket items meant to last three years or more fell 2.4% in August versus forecasts for a rise of 0.4%, the Commerce Department reported. The surprise dip was largely due to a drop in commercial aircraft orders. Orders rose a better-than-expected 4.8% in July, including the impact of the Cash for Clunkers auto stimulus program.
Stripping out autos, August orders were flat versus forecasts for a rise of 1%. Orders excluding autos had risen 0.9% in July.
"We're seeing continued choppiness in the economic numbers, which points to the fact that the recovery is still in the early stages," Lyman said.
G-20 summit: The Group of 20 leading developed and emerging countries met for a second day in Pittsburgh. The Group has been meeting to discuss the financial crisis and how to prevent something like it from happening again.
On Thursday, the leaders agreed to make the group the new permanent council for international economic cooperation, essentially eclipsing the G-8, which doesn't include developing nations such as China, India or Brazil.
The G-8 will still meet on major security issues, but will be less influential.
Company news: Research in Motion (RIMM) reported a better-than-expected profit late Thursday, and also forecast third-quarter earnings in a range that includes analysts' estimates. But the BlackBerry maker also predicted third-quarter revenue would fall in a range that is short of analysts' current estimates. Shares slumped 17%.
After the close Thursday, Hewlett-Packard (HPQ, Fortune 500) issued a fiscal 2010 revenue forecast that is short of analysts' predictions and an earnings outlook in a range that could top analysts' expectations. On a broader level, the computer and printer maker said that the IT industry will return to growth next year and that the company will outpace the rest of the market. Shares were little changed.
In deal news, Unilever (UN) is buying Sara Lee (SLE, Fortune 500)'s personal care unit for $1.88 billion, the companies said Friday.
A number of retailers declined on concerns about the economy, including Wal-Mart Stores (WMT, Fortune 500).
0:00 /1:25The recovery checklist
World markets: Global markets were mostly lower. In Europe, London's FTSE 100 ended little changed, while France's CAC 40 and Germany's DAX both declined. Asian markets ended lower, with the exception of the Japanese Nikkei.
Currency and commodities: The dollar fell versus the euro and the yen. The greenback has repeatedly hit one-year lows against a basket of currencies over the last few weeks.
The weaker dollar had little impact on dollar-traded commodities, although it often moves in the opposite direction of oil and gold prices.
U.S. light crude oil for October delivery rose 13 cents to settle at $66.02 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery fell $7.30 to settle at $998.90 an ounce. Gold closed at a record high of $1,020.20 last week.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.32% from 3.36% late Tuesday. Treasury prices and yields move in opposite directions.
Market breadth was negative. On the New York Stock Exchange, losers topped winners eight to seven on volume of 1.20 billion shares. On the Nasdaq, decliners beat advancers five to four on volume of 2.39 billion shares.
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