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Consumer doubt, unemployment stall recovery claims

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November 25, 2009

ConsumersThe economy is not growing as fast as the government first thought and the recovery still faces significant obstacles, including households nervous about spending and rising unemployment.

Economists expect new reports Wednesday to give a better picture of how things are shaping up for the final three months of the year.

New filings for unemployment benefits likely will show a slight improvement while consumer spending should post a rebound in October after an auto-related plunge in September. Sales of new homes are expected to grow, propelled by first-time buyers taking advantage of a special tax credit.

Even with signs of strength, economists worry the recovery could falter if consumer spending, which makes up 70 percent of economic activity, drops in the face of unemployment that is already at the highest point in 26 years and is expected to keep rising.

Economists surveyed by Thomson Reuters expect that new applications for unemployment benefits dipped to 500,000 last week, from 505,000 the previous week. The four-week average for claims posted its 11th consecutive decline last week, falling to 514,000, the lowest level in a year.

The number of people receiving continuing claims is expected to fall slightly to 5.58 million for the week ended Nov. 14, from 5.61 million in the previous week.

Still, such slight improvements will not be enough to keep the unemployment rate from rising. The jobless rate hit 10.2 percent in October and many analysts believe it will keep rising to 10.5 percent or higher before starting to improve next summer.

Some employers are continuing to lay off workers. Struggling Internet company AOL last week said it plans to cut up to 2,500 jobs, more than a third of its work force, once it is spun off from the media conglomerate Time Warner Inc. And Hartford, Conn.-based health insurer Aetna Inc. said it will cut 625 jobs, or nearly 2 percent of its staff, and will make similar job cuts in the first quarter of 2010 due to the lagging economy and the potential impact of health care reform.

Federal Reserve policymakers said at their November meeting that the unfolding recovery likely will be gradual with the unemployment rate probably remaining elevated over the next several years, according to minutes of the discussions released Tuesday.

The weak jobs market, which is depressing incomes, is keeping a lid on consumer spending. Economists expect personal incomes rose 0.2 percent in October, better than the flat reading in September. They expect consumer spending to increase 0.5 percent in October, after falling 0.5 percent in September.

The spending rebound likely will reflect that car sales recovered last month after a plunge in September following the end of the government’s popular Cash for Clunkers sales incentives.

While a 0.5 percent rise in consumer spending would get the fourth quarter off to a solid start, economists worry such spending is unsustainable.

On the housing front, sales of new homes likely rose to an annual rate of 410,000 homes in October, from 402,000 in September, according to Thomson Reuters.

But like the rebound in consumer spending, the worry is that the strength in October reflects temporary factors that will fade in the months ahead. Sales of existing homes soared 10.1 percent to a seasonally adjusted annual rate of 6.1 million units in October, the National Association of Realtors reported Monday.

It was the biggest monthly increase in a decade but reflected a rush by first-time buyers to take advantage of a tax credit of up to $8,000 that had been scheduled to expire in November. Congress earlier this month extended the credit until next spring.

The overall economy grew at an annual rate of 2.8 percent in the July-September quarter, the Commerce Department reported Tuesday. That was down from an initial estimate of 3.5 percent growth in the third quarter, as consumer spending was weaker than initially estimated.

Many economists believe that growth will continue at around a 2.5 percent rate in the current quarter but will slip to perhaps 1.5 percent in the first half of next year as the impact from the government’s $787 billion stimulus program begins to fade.

8 Responses to Consumer doubt, unemployment stall recovery claims

  1. griff

    November 25, 2009 at 8:39 am

    That’s right, it’s the people’s fault. The fabled recovery is stalling because no one has any money to spend on cheap crap from China any more.

  2. woody188

    November 25, 2009 at 2:27 pm

    My sister-in-law works for Aetna.  Hope she still has a job by next year.

  3. Carl Nemo

    November 25, 2009 at 5:02 pm

    We’ve been hijacked by thieves, liars, knaves and worse…!

    How can millions of jobs that have disappeared permanently over the past 15+ years due to offshoring of manufacturing, outsourcing of job functions, an endless supply of H1-B visas, the incursion of low wage earning illegal immigrants along with the systematic destruction of our nation to produce the basics of everyday life somehow create a positive job search environment? It can’t!

    The bankers, mega-insurers, along with the “Great White’s” that control the crooked casino known as Wall Street has raped this nation of at least 86 billion dollars that will never be repaid…ever!  This has been done with the approval of our now criminally disposed Fed~U.S. Treasury axis of financial evil that is now printing U.S. dollars until its devaluation forces “We the people into hyperinflative oblivion!

    I’m going to supply a link to “Money and Markets” a free online source for some of the most incisive, spot-on financial news you’ll find anywhere on the www. The article is titled “The Biggest Rip-off of All Time” by Martin Weiss. I highly recommend that CHB readers take the time to read the horrifying details of where our tax ‘debt’ dollars went via the bailout ‘loan’ to AIG which degenerated to basically a “front company” for what I’d consider to be one of the finest examples of a mafia front company scam for ripping off America as a whole.

    Read it and weep as I have:

    http://www.moneyandmarkets.com/the-biggest-rip-off-of-all-time-4-36542

     

    Carl Nemo **==

     

  4. griff

    November 25, 2009 at 5:18 pm

    Don’t hold back now, Carl. Tell us what you really think.

  5. Carl Nemo

    November 25, 2009 at 7:07 pm

    Ha…!

    What we need is massive strikes, work slowdowns, no shows along with massive non-stop picketing in D.C. which virtually forces the mechanism of government to a standstill until they listen to the will of the people.

    No one is listening because our Congressional traitors are smugly entrenched;  only threatened every 2 or 6 years.  Their respective state offices need to have the same; ie., non-stop picketing no different than if they were abortion clinics.  Hell, they are all engaged in the process of aborting the United States of America while we sit idly by and witness their ongoing crimes in high places. 

    Thanks to Prozac and its newer analogs we have a nation of drugged out “what me worry?”  serfs who seem content with the order of things as long as they can shop until they drop, have access to plastic based credit  and an endless supply of entertainment; ie., UFC fights, NASCAR races, Dancing with the Stars etc. , along with endless, mind-numbing programming on their unpaid for HDTV’s…! 

    If roundups of people that are tagged as enemies of the state should occur these aforementioned braindead serfs will simply say “it shor is nice maw that our gov’mint is roundin’ up those dad gummed terrists!  They’s threatin’n our way of life fo shor.   I see thars goin’ to be some good bargins at Walmart day after Thanksgivin’ one of them ‘Black Friday’ sales.  We best git up early so’s to latch on to sum of them bargins.”

    We’re friggin’ doomed! : |

    Carl Nemo **==

     

  6. griff

    November 25, 2009 at 11:46 pm

    Ha – Sorry I asked…Although I already knew the answer.

  7. woody188

    November 26, 2009 at 1:01 am

    Snuffy Smith popped right into my head.

  8. Carl Nemo

    November 26, 2009 at 2:51 am

    You inferrin’ I’m a rebellious hillbilly at heart Woody?!  I shor hope so. : )  They’re the luckiest people on earth, livin’ in the backwoods of Tennessee in the heart of Appalachia in “tight nit” hollers.  Outsiders including the Feds aren’t welcome! : ) 

    To be a senior citizen such as myself; ie., being one uv’em kicked back on my land grant 160 acres in a small cabin with a coal fired stove along with many years of moonshine money and gold coins stashed about my ‘propity'; sippin’ corn likker while young Missy Sue’s from the town come a checkin’ on the ol’ senior; ie., me with some fresh made bread or grub plus some good T&A visuals sounds mighty fine to me…! :))

    Carl Nemo **==