Deller's two cents: other than a bleak housing market, nearly all economic indicators are up....recession? what recession?
Economic Week in Review: Reasons to be thankful November 26, 2010
As Americans paused to count their blessings this week, there was news to be thankful for on the economic front: The latest figures on GDP growth were revised upward substantially, and far fewer people filed for first-time unemployment benefits than had been expected. For the week ending November 26, the S&P 500 Index fell 0.9% to 1,189 (for a year-to-date total return of about 8.4%). The yield of the 10-year U.S. Treasury note fell 1 basis point to 2.87% (for a year-to-date decrease of 98 basis points).
Quickening recovery?
Fears of a "double-dip" recession eased a bit this week, as the economy seemed to have performed considerably better than originally thought in the third quarter. Revised data from the Commerce Department showed a 2.5% annualized GDP increase for the July-September period, up from an early estimate of 2.0%. Upward revisions in consumer spending and exports were cited, along with increased public-sector spending and a big boost in corporate profits.
"Recent leading economic indicators are showing us that the risks to the U.S. recovery are becoming much more balanced now," said Vanguard economist Roger Aliaga-Díaz, "and this upward revision to the third-quarter GDP number is consistent with those signals. Based on these data, we're now projecting a 20-25% probability of negative GDP growth over the next couple of quarters, down from the one-in-three chance we were estimating last summer."
Unemployment claims drop sharply
First-time claims for unemployment compensation fell in the week ending November 20, dropping to 407,000-the lowest level since July 2008. Continuing benefit claims also declined, with the rolling four-week average falling 142,000, to 4.3 million. The employment picture was brightest in California, Pennsylvania, and North Carolina.
While economists advise against reading much into one week's jobs numbers, analysts generally were pleased by the latest data. However, with federal funding for benefit extensions set to expire, the Labor Department projects that as many as 2 million unemployed Americans will have exhausted their benefits in the next several weeks.
Boost in personal income
Consumers earned more, spent more, and saved more in October. Personal incomes rose a bigger-than-expected 0.5%, while spending was up 0.4%, buoyed by demand for durable goods. The personal savings rate also inched upward, rising a tenth of a percent to 5.7%. Inflation posed little threat, with prices up just 1.3% from October 2009 (and up 0.9% with volatile food and energy prices factored out).
Disappointing numbers for the housing market
The news wasn't all good this week. The long-beleaguered housing market continued to suffer in October, with sales dropping yet again.
Realtors reported a 2.2% decline in purchases of existing homes, to 4.4 million units on an annualized basis. The median price of an existing home dipped to approximately $170,000-a decrease of just under 1% over the past year. Compared with October 2009, monthly sales were down a staggering 26%, though the since-expired tax credit for first-time home buyers helped distort the data.
For new homes, the picture was even bleaker. Sales dropped 8.1% to an annualized 283,000 units, shattering consensus expectations of a healthy increase. Demand was softest in the Midwest and West. The median price of a new home fell to $194,900, down from $215,100 in October 2009.
Unexpected drop in durable-goods demand
Advance orders for durable manufactured goods tumbled 3.3% in October, weighed down by weak demand for electronics and transportation equipment. Consensus estimates had pointed to unchanged demand or even a modest gain. Inventories rose for the tenth consecutive month.
The economic week ahead
Economists won't have much time to start their holiday shopping next week. Among the reports on tap are the Conference Board's index of consumer confidence (Tuesday), the Federal Reserve's "Beige Book" and the ISM Index (both Wednesday), and the Labor Department's monthly assessment of the employment situation (Friday).
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Steven C. Deller
Professor and Community Development Economist Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension Madison, WI 53706
608-263-6251
"I started out with nothing and I have most of it left."
Seasick Steve
