Category: Economy

The Dow Jones Industrial Average is on its way to posting another triple-digit gain Monday, as more encouraging data on the housing market boost hopes that happy days are here again for the U.S. economy.

Tell that to state governments.

State tax revenues have been in a freefall over the last year -- the steepest drop in tax collections seen in more than 50 years. Overall state tax revenues dropped 10.7% in the third quarter, compared to the same period a year earlier, in the 44 states providing tax data to the Nelson A. Rockefeller Institute of Government at the State University of New York. (Find the complete report here.)

After meeting billionaire Richard Branson in the flesh for the first time on Thursday, a line of dialogue from the 1962 movie "Gypsy" comes to mind: "In this business, you either have it -- or you've had it."

The "it" is...charisma? Charm? Star Quality? In the best sense of the phrase, perhaps it's a "cult of personality" -- that ability of one individual to rally a group of people, all with their own opinions and personalities, and glue them together in a way that allows the achievement of seemingly impossible business goals.

Branson's name is usually mentioned in the same breath as another word: entrepreneur.

Official government data says consumer inflation has fallen .2% in the past year. I don't know about you, but it doesn't seem to me like prices are falling.

It came as a total surprise to me that grocery prices have fallen nearly 3 percent in the past year, one of the biggest category declines. I would have guessed prices at the supermarket were up.

But it turns out, prices for nearly every aisle have been coming down, including beef, milk, eggs and fruit. If you're curious about the exceptions, they're breakfast cereals, sugar and carbonated drinks.

Which brings us back to my question, why haven't shoppers noticed such widespread price declines?

Tales from my 20 years as a landlord: One former tenant phoned months after disappearing into the night -- and leaving a horrific mess -- to berate me for letting the city junk the broken-down car he'd abandoned out front.

Another tenant called to have me referee a dispute with a plumber. I could hear his wife and the plumber screaming so viciously in the background that I thought about calling 911.

And, of course, I had tenants who fell behind in the rent, racked up huge, unnecessary repair bills, clogged the toilet with latex objects, set up meth labs in the basement and used the disposal to get rid of dead bodies.

Okay, those last two weren't real -- just the stuff of my nightmares. Every single night.

Seems like every day there's new data out that suggest the U.S. economy is sputtering back to life, but one important driver of economic growth -- new home construction -- continues to hamper the recovery.

Housing starts tumbled 10.6% in October to a seasonally adjusted annual rate of 529,000 from a month earlier, the Commerce Department reported. The number startled economists, who'd forecast a 1.7% increase in new home groundbreakings. The disappointing October report followed September's 0.5% increase, which also came in well below economists expectations.

Why is new home construction so important to the economy? Historically, housing starts are among the first indicators to show strength in the early stages of an economic recovery. (Housing starts are the total number of new housing units -- single-family homes and multi-family apartment buildings -- that have begun to be built in any given period.)

Authored by Stephanie May, NBR Summer 2009 Intern

In keeping with last week's theme of wondering where in the world I'll end up upon my graduation, I have decided to be an adult and be proactive about the situation. I am embarking on a very long and tedious journey. Ladies and Gentleman, I have begun the job hunt. So far, it's not bad! I'm actually really excited as I come up with plans A to Z for my future. But as I do this, I have realized I'm going to have to face one of my absolute biggest fears -- writing cover letters.

You would think writing cover letters would be a breeze for your Fiscally Fit blogger, but on the contrary, I find them almost impossible. The more I want the position, the more I struggle. What can you possibly say within the confines of an 8x11 piece of paper to make your potential employers realize how absolutely perfect you are for the job? The pressure is unbelievable!

Apparently consumers are still willing to open their wallets, despite the fact so many are out of work. Retail sales in October rose 1.4%, outstripping the 0.9% increase economists had expected.

The retail-sales report reflects federal-government estimates of all receipts from retailers that sell durable goods (think cars, furniture, washer and dryers) and nondurable goods (your food, gasoline, party supplies, gardening materials). Today's U.S. Census Bureau report showed a surprising jump in auto sales last month, despite the expiration of the federal government's "Cash for Clunkers" stimulus program. Even more encouraging, if you exclude cars, retail sales were up 0.2% in October, rising for the third consecutive month.

Why do retails sales matter? Well, investors keep close tabs on retail sales because they have an immediate impact on stock prices. As I've noted in other blog posts, consumer spending makes up about 70% of the U.S. gross domestic product (GDP) -- the broadest measure of America's economy. Since consumer spending plays such a large role in GDP, retail-sales data help investors determine whether the economy is slowing down or picking up.

"World Tries to Buck Up Dollar" reads the headline in the Wall Street Journal.

Korea, Russia are buying up dollars to keep the greenback from falling. Are these nations concerned about our economic welfare? Do they believe supporting the dollar will stabilize the global economy?

No.

Simply put, countries that have sustained themselves by exporting to the US want to keep up the game. When the dollar falls, it makes our exports cheaper. It makes our imports more expensive. In other words, we can afford to buy less from the rest of the world.

When my son Dash was eight or nine, my wife and I took him to Puerto Rico for a winter vacation and we invented coffee eggs.

We were staying in a resort that charged about $35 for three breakfasts that were nothing to brag about. On the second day we bought eggs at a little grocery and boiled them in the coffee maker in our room, saving a couple of hundred dollars over the rest of the trip and missing nothing we cared about.

On another vacation we invented the Whopper Test. Was the $40 restaurant dinner 10 times better than a $4 Burger King Whopper? If the answer was "no," the Whopper was the better value. We apply the Whopper Test to everything.

The October unemployment data shows that we've topped 10 percent, with broader measures above 15 percent, even as GDP (thanks mostly to misguided government spending) grew in the third quarter. Unemployment has historically been a lagging indicator during recoveries, so it's not that much of a surprise to see trailing as other small signs of recovery seem present. However, there might be another explanation for unemployment being not only "slow to recover" but still rising: the health care debate.

The debate surrounding the future of health care in the US produces a great deal of uncertainty. Firms who see an even more competitive future in which they will have to be even more cost-conscious might be very hesitant to hire until they have a much clearer sense of what, if anything, will come out of the current debate and what its effects on the costs of hiring will be. With so many unknowns, most of which will matter for hiring, firms might be holding off. This is a version of the regime uncertainty problem that kept private investment low during the Great Depression (discussed in my last entry). In this case, it's affecting employment rather than investment.