In the aftermath of the government shutdown that lasted through the first two weeks of October, economists are doing their best to update the world in news regarding economic changes and trends within the past month.

According to The Bureau of Labor Statistics, the unemployment rate has dropped down last month a minuscule 0.1% from 7.3% to 7.2% by the end of September. These numbers are in no way fantastic but compared to how the economy has been the last few years, this is a blessing and a good start for a brighter economic future. But still many companies are reluctant to hire people due to the fragility of the economy. A 0.1% increase is not by any stretch a good enough number for economists to once again feel confident about the future of the economy but being optimistic is the best they can do.

But how can such a small decrease in unemployment cause such optimism for the future of the economy? When you lay it in comparison to how the economy has been the last  few years since the recession began in 2007, it is fair to say that a change as small as this one can hold a great impact in the long run. Seeing that in the beginning of the year unemployment was at 7.9% and even at the beginning of last year January 2012 with unemployment being as high as 8.3%, any minor drop can be significant.

This slow moving away from an economic sinkhole, however, is considered disappointing at best, economists say. The Federal Reserve’s stimulus will probably not be cut back due to the slight improvement in the unemployment field even when the results aren’t moving as fast as expected.

Economist Sun Wong Sohn from California State University said “The latest job numbers indicate that the economy is growing at a modest pace at best.” In contrast to what is happening right now with the stimulus plan in action by the Feds in order to help the economy re-surge,  he feels “the economy is too fragile for the Federal Reserve to touch”.

So what can we expect from the economy in the next few years? Of course, we can all agree the economy has come a long way since its bleak era a few years back when the unemployment rate was in the double digits. So a small decimal decrease in a month isn’t disastrous.

According to Bloomberg.com, unemployment is predicted to drop an entire percent by the end of next year to as low as 6.5%. The Feds plan on increasing their federal funds rate in order to achieve this number. Of course these numbers are just predictions and with an economy such as this one, even the best economists can be wrong. But still confidence and optimism remains constant throughout the minds of many.

Other economic indicators such as inflation rate and GDP are expected to improve throughout the following months as well, according to MarketWatch.

Sources:

http://data.bls.gov/timeseries/LNS14000000

http://money.cnn.com/2013/10/22/news/economy/september-jobs-report/

http://www.marketwatch.com/story/fed-much-more-upbeat-about-outlook-2013-06-19?link=MW_pulse

http://www.bloomberg.com/news/2013-06-19/fed-sees-u-s-jobless-rate-as-low-as-6-5-threshold-by-end-2014.html

By: Ari Goldstein

Given the recent government shutdown, the much-expected results of the unemployment rate, which were due Friday October 4th, were finally released on Tuesday October 22^nd.

The numbers offer mixed feelings as to the health of the US economy. The unemployment rate dipped slightly from 7.3 percent to 7.2 percent but the economy only added 148,000 jobs. This number is disappointing after a promising start this year. From April through June, the economy was adding jobs at an average pace of 182,000 a month, and from January to March an average of 207,000.

“This unemployment report showed that the economy was in mediocre condition,” says Doug Handler, chief US economist at IHS Global Insight in Lexington, Mass. Economist view job growth under 200,000 a month as a stagnating economy, and anything more as a sign of a robust healthy growing one.

Yet Tuesday’s results bear some optimism. First, the slight dip to 7.2 percent is the lowest since November 2008 and a reduction of 2.8 percent from the peak of unemployment in November 2010.

Secondly, August revisions that added 24,000 jobs and caused a one percent drop in the unemployment rate, were somewhat distorted. The August results were not convincing when put into proportion to the labor force participation rate. The unemployment rate is calculated by dividing the number of employed workers, by the labor force, which is the population working or looking for work. The labor force participation rate fell to 63.2 percent, which means workers were either discouraged so stopped looking for work, or went into early retirement. The rate fell two percent from July’s 63.4 percent and is the lowest since 1978. September’s participation rate remained the same at 63.2 percent and still trickled down one percent, a sign that the reduction in the unemployment rate is from real jobs being created rather than the population leaving the job market.

Additionally, jobs created in September came from a broad range of high and low paid industries, which is reflective on the overall health of economy. Construction companies added 20,000, although employment in the industry is still down by one to two million of pre-crisis trend levels; it is a sign of a slowly recovering housing market. Wholesale trade rose by 16,000 compared to an average of 7,000 over the past year. Transportation, and warehousing added 23,000, retailers 21,000, and even in an era of tight fiscal budgets, state, and local governments added 29,000 education jobs.

Since the government shutdown, markets have been eagerly waiting for the unemployment rate for two and a half weeks and reacted indifferent to the news. The Dow Jones and S&P 500 increased by about .4 percent on Tuesday and only one percent to finish the week. Investors keep a tight watch on the unemployment rate knowing that the Federal Reserve Bank bond-buying program of $85-billion a month is tightly linked with its results, and won’t be tapered until the Fed is confident that the economy will continue growing, and unemployment reduced without the stimulus.

President Barack Obama’s recent nomination of easy-money advocate Janet Yellen as the next chairman of the Fed, along with current chairman Ben Bernanke’s promise to continue the bond-buying until unemployment reaches 7 percent, gives investors confidence that tapering of the program won’t happen until at least the beginning of next year. The Fed was expected to begin tapering in September, but given weak results in the economy and unemployment rate, it did not. Wall Street analysts originally pushed the estimate to December, but now with September’s results out, they are pushing it back even further.

The Feds stimulus program “quantitative easing” or “printing money” as cynics would call it began in September 2012 and is meant to hold down long-term interest rates and stimulate growth. Low interest rates stimulate the economy by making it easy and cheap for businesses to borrow and increase demand for home sales with low mortgage rates.

The Fed’s reaction to the most recent reports is yet to be seen. The Fed is holding a conference on October 29-30; the conference is shadowed by October’s employment situation, which will be released November 8^th. October’s results will stomach the short-term consequences of the government shutdown, which many economists say cut $25 billion out of the economy and will lower job gains by about 30,000. The much-anticipated meeting will clarify its policies going forward.

Economic Indicator: Consumer Price Index: Inflation

Consumer Prices rise as the cost of living in the U.S. goes up as projected in October.

By: Alan Gutierrez, October 31, 2013

 According to the latest Consumer Price Index Report The CPI increased 0.2 percent, matching the median forecast of 86 economists surveyed by Bloomberg, after rising 0.1 percent the prior month, Labor Department data showed today in Washington. Stripping out volatile food and fuel, the so-called core measure climbed 0.1 percent for a second month, less than projected.

Food: As commodities costs rise, some companies are taking steps to regain pricing power sapped during the recession. McDonald’s, the world’s largest restaurant chain, is introducing products onto its Dollar Menu that cost $2 versus $1.

According to McDonald’s CEO Don Thompson he states during an Oct. 21 conference call “While abandoning the low-cost menu is not “part of our affordability strategy, particularly not at a time like this,” adding products at double the price “is one of the ways that we can maintain the Dollar Menu in the face of rising commodities and labor pressures.”

The CPI report states that the food index was unchanged in September after rising in each of the three previous months. The index for food at home was unchanged, as declines in the indexes for fruits and vegetables and nonalcoholic beverages offset advances in the other major grocery store food group indexes.

Energy: The Labor Department which stated on Oct 23^rd “The cost of goods imported into the U.S. rose in September, reflecting higher fuel charges. The import-price gauge climbed 0.2 percent for a second month.”

The report states that the energy index rose 0.8 percent in September after declining in August. All the major energy component indexes increased in September. The gasoline index, which declined slightly in August, rose 0.8 percent.

All items less food and energy: The CPI report as of October, 30 2013 also suggested the estimated monthly payment for retired workers receiving Social Security benefits will rise 1.5 percent in 2014. It’s up to the Social Security Administration to issue the official figures based on the data.

Within wage earnings the CPI report did have some positive results because Hourly earnings adjusted for inflation were unchanged last month after a 0.2 percent increase in August. Earnings were up 0.9 percent during the past year.

The index for all items less food and energy increased 1.7 percent for the 12 months ending September, a slightly smaller increase than the 1.8 percent figure for the 12 months ending August. Several components have exhibited very modest increases over the past 12 months, including apparel (0.8 percent), airline fares (0.8 percent), used cars and trucks (0.4 percent), and recreation (0.2 percent). The shelter index rose 0.2 percent for the fourth month in a row. The indexes for rent and owners’ equivalent rent both rose 0.2 percent while the index for lodging away from home fell 0.4 percent. The medical care index increased 0.3 percent in September after rising 0.6 percent in August.

Massive Inflation:

With inflation running below the Federal Reserve’s goal, the central bank has more flexibility to maintain its $85 billion-a-month bond buying program. So Faced with the fact that the Fed can never stop Quantitative Easing (QE). When the Fed is forced to stop their strategy of QE it will be hard to go cold-turkey. For seniors or anyone that is retired and on SS or you live on fixed income, every time you shop at a supermarket your buck buys less and less. We might be entering an era of economic Armageddon with massive inflation because despite the theory that gold has no more intrinsic value than $100 Federal Reserve notes, I think that when this is all over it will still buy whatever food and fuel remains in the ground that is left for the consumers.

References:

http://www.bloomberg.com/news/2013-10-30/consumer-prices-in-u-s-rise-as-forecast-on-gain-in-fuel-costs.html

http://www.bls.gov/news.release/cpi.nr0.htm

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Economic Indicator: Consumer Price Index: Inflation

Consumer Prices rise as the cost of living in the U.S. goes up as projected in October.

By: Alan Gutierrez, October 31, 2013

 According to the latest Consumer Price Index Report The CPI increased 0.2 percent, matching the median forecast of 86 economists surveyed by Bloomberg, after rising 0.1 percent the prior month, Labor Department data showed today in Washington. Stripping out volatile food and fuel, the so-called  core measure climbed 0.1 percent for a second month, less than projected.

Food: As commodities costs rise, some companies are taking steps to regain pricing power sapped during the recession. McDonald’s, the world’s largest restaurant chain, is introducing products onto its Dollar Menu that cost $2 versus $1.

According to McDonald’s CEO Don Thompson he states during an Oct. 21 conference call “While abandoning the low-cost menu is not “part of our affordability strategy, particularly not at a time like this,” adding products at double the price “is one of the ways that we can maintain the Dollar Menu in the face of rising commodities and labor pressures.”

The CPI report states that the food index was unchanged in September after rising in each of the three previous months. The index for food at home was unchanged, as declines in the indexes for fruits and vegetables and nonalcoholic beverages offset advances in the other major grocery store food group indexes.

Energy: The Labor Department which stated on Oct 23^rd “The cost of goods imported into the U.S. rose in September, reflecting higher fuel charges. The import-price gauge climbed 0.2 percent for a second month.”

The report states that the energy index rose 0.8 percent in September after declining in August. All the major energy component indexes increased in September. The gasoline index, which declined slightly in August, rose 0.8 percent.

All items less food and energy: The CPI report as of October, 30 2013 also suggested the estimated monthly payment for retired workers receiving Social Security benefits will rise 1.5 percent in 2014. It’s up to the Social Security Adminstration to issue the official figures based on the data.

Within wage earnings the CPI report did have some positive results because Hourly earnings adjusted for inflation were unchanged last month after a 0.2 percent increase in August. Earnings were up 0.9 percent during the past year.

The index for all items less food and energy increased 1.7 percent for the 12 months ending September, a slightly smaller increase than the 1.8 percent figure for the 12 months ending August. Several components have exhibited very modest increases over the past 12 months, including apparel (0.8 percent), airline fares (0.8 percent), used cars and trucks (0.4 percent), and recreation (0.2 percent). The shelter index rose 0.2 percent for the fourth month in a row. The indexes for rent and owners’ equivalent rent both rose 0.2 percent while the index for lodging away from home fell 0.4 percent. The medical care index increased 0.3 percent in September after rising 0.6 percent in August.

Massive Inflation:

With inflation running below the Fed’s goal, the central bank has more flexibility to maintain its $85 billion-a-month bond buying program. So Faced with the fact that the Fed can never stop Quantitative Easing (QE). When the Fed is forced to stop their strategy of QE it will be hard to go cold-turkey. For seniors or anyone that is retired and on SS or you live on fixed income, every time you shop at a supermarket your buck buys less and less. We might be entering an era of economic Armageddon with massive inflation because despite the theory that gold has no more intrinsic value than $100 Federal Reserve notes, I think that when this is all over it will still buy whatever food and fuel remains in the ground that is left for the consumers.

References:

http://www.bloomberg.com/news/2013-10-30/consumer-prices-in-u-s-rise-as-forecast-on-gain-in-fuel-costs.html

http://www.bls.gov/news.release/cpi.nr0.htm

Inflation below Fed target, CPI increases 0.1% in August

By Aleksandra Neizvestnaya

The Consumer Price Index (CPI) rose 0.1%, the Bureau of Labor Statistics announced, down from a 0.2% increase in July. Economists predicted a 0.2% for August.

The CPI is a measure of the average change in prices of a basket of consumer goods and services, and is directly related to inflation. CPI is used to adjust dollar value, which indicates the cost-of-living.

The consumer report states that increases in indexes for medical care and shelter are what accounted for most of the 0.1% increase of overall CPI.  Medical care services index increased 0.7%, medical care commodities index rose 0.4%, and shelter increased 0.2%.

Over the span of a year, the medical care index rose 2.3%, and the shelter index increased 2.4%. The energy index took a decrease of 0.3%, with natural gas declining 2.3%, electricity declining 0.1%, and energy services declining 0.7%. The food index increased 0.1% in August, and has increased 1.4% in the last year.

Within the items less food and energy, indices for tobacco, personal care, and apparel rose, while indices for airline fares, household furnishings and operations, and used cars and trucks declined. The new vehicles index remained unchanged in August, after it rose in June and July.

Compared to a year earlier, the index is only up 1.5%, which does not reach the Fed’s target of 2.0%. The Federal Open Market Committee has modeled that the inflation rate target of 2.0% is the most consistent over the longer run for stable investment and employment.

They released that in order to help ensure that inflation rate is most consistent with their model and to stimulate economic growth they will continue to purchase securities. The release stated that, “the Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” They recognize the inflation being persistently below the target, but anticipate it to stabilize.

With the Fed’s bond-buying attempt to stimulate the economy, there has been little growth.

“Despite the massive increase in money supply and the availability of credit brought about by the Federal Reserve, inflation has not occurred as has been feared by numerous people,” said Jeffrey H. Weiss, a Professor of Economics and Finance at Baruch College.

According to Kiplinger’s Economic Outlook, the unemployment rate is likely to remain high and wage increases modest, which will keep U.S. consumers cautious and companies not so eager to push for big price hikes.

Kiplinger forecasts a 1.75%-2.0% increase in CPI for all of 2013, and to many economists it looks as if inflation will remain tame well into 2014, or longer.

“No one in the economy, not workers or firms, has pricing power, that is, the ability to raise and keep prices higher,” Weiss adds. “Massive amounts of capital are also idle, holding down interest rates. And until these unemployed resources are employed there won’t be any significant inflation despite the fact that the Federal Reserve has been pumping money into the economy at historic rates.” The Federal Reserve continues to buy bonds at $85 billion a month.

Sources:

http://www.bls.gov/cpi/cpid1308.pdf

http://www.bls.gov/news.release/cpi.nr0.htm

http://federalreserve.gov/newsevents/press/monetary/20130918a.htm

October 31, 2013
Unemployment rate decreased but is of minimal change

By Timmy Wu
Unemployment rate has decreased recently by a small percentage but has not changed from this time a year earlier. Total non-farm payroll, employment is a compiled name for goods, construction and manufacturing companies rose by a small margin since they were hiring new employees to work.
The unemployment rate, at 7.2 percent, changed slightly in September but has declined by 0.4 percentage point since June. The number of unemployed persons, at 11.3 million, was also slightly changed over the month. However, unemployment has decreased by 522,000 since June of this year.
Reports from the U.S. Bureau of Labor Statistics reported total non-farm payroll employment rose by 148,000 in September. Employment increased in construction, wholesale trade, transportation and warehousing.

Employment in construction continued to show a small change as it has over the prior 6 months when it rose by 20,000 in September. Employment in wholesale trade rose by 16,000 in September. Over the prior 12 months, this industry added an average of 7,000 jobs per month. Transportation and warehousing added 23,000 jobs in September; 18,000 of the jobs increased transpired in transit and ground passenger transportation. In September, employment in professional and business services continued to increase offering 32,000 jobs and over the prior 12 months, employment growth in this industry averaged 52,000 per month.  Employment in temporary help services continued to drift up in September offering 20,000 jobs.
“At this rate, we’ll never reduce unemployment. The recovery has been postponed, again.” Justin Wolfers, an economist at the University of Pennsylvania shares his worries.

Although these numbers seems large, they still do not cover all the unemployed people of America. The unemployment rate also only tells us the percentage of people who are filing for unemployment which means they are actively looking. It does not consider the people who have given up looking and have left the workforce. The number that measures who is in the workforce, meaning they have a job or are looking for one, is called the Labor Force Participation Rate. The lower the Labor Force Participation Rate is, the scarcer Americans are working or anticipating to work. Our economy needs a moderately high Labor Force Participation Rate to endure it and, in many cases, provide for those who are not in the workforce.

Despite a declining unemployment rate in the summer this year, the Labor Force Participation Rate is not attractive. Since 2007, it has dropped from 66.4% to 63.4%. Nearly 90 million Americans are now out of the labor force.

The unemployment rate cannot keep declining slowly like it has been recently. It is essential that the unemployment rate decrease drastically because these small percentage drops are not making a large enough change. There needs to be more jobs offered to people so that they can come back into the Labor Force and start looking for jobs again. Without the jobs, there will be and endless loop of small unemployment rate declines and people leaving the Labor Force.

Source:
(Employment Situation Summary) http://www.bls.gov/news.release/empsit.nr0.htm
(Job Opening and Labor Turnover Summary) http://www.bls.gov/news.release/jolts.nr0.htm

       The shutdown, which already ended  late Wednesday night after 16 days had tremendous lost. Approximately  $24 billion out of the U.S. economy, and reduced projected fourth quarter GDP growth from 3 percent to 2.4 percent. The government had a huge impact in it GDP.  The unfortunate lost consist of; About $3.1 billion in lost government services, according to the research firm HIS $152 million per day in lost travel spending, according to the U.S. Travel Association $76 million per day lost because of National Parks being shut down; the National Park Service   $217 million per day in lost federal and contractor wages in the Washington D.C.                                                                                                                                                                       

 Thousands of federal workers bore the economic impact of the shutdown but small businesses also suffered from frozen government contracts and had to stop business loans. With the deal which only guarantee government funding through January 15, the situation could grow worse. “This is  real corrosion on the economy” says Mark Zandi, chief economist for Moody’s Analytics.

Before the shutdown The U.S. economy’s growth picked up in the second quarter, helped by a smaller-than-expected impact from federal budget cuts. According to the Commerce Department, Commercial real estate investment and a reported buildup in inventories by businesses were also major contributors to the quarter’s growth. In addition,  Building of new factories and offices climbed at a 6.8% annual pace. Inventory growth added 0.4% to the economy’s size, the department said.                                                                                                                                                                                                Consumer spending was held back partly by the increase in payroll taxes at the beginning of the year. The largest part of the economy, it rose at a 1.8% annual clip, down from 2.3% in the first quarter.                

 Ultimately, the economic growth and it GDP illustrates have a large effect on nearly everyone within that economy. The U.S economy grew at an annual pace of 1.7% between April and June, Commerce said. The government revised down its estimate of first-quarter growth to 1.1% from 1.8% annual rate it had reported. The average for the past 12 months remained at 1.4%.

 Price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.2 percent in the second quarter, 0.1 percentage point less than the second estimate; this index increased 1.2 percent in the first quarter.  Excluding food and energy prices, the price index for gross domestic purchases increased 0.8 percent in the second quarter, compared with an increase of 1.4 percent in the first.

 GDP is probably the best measure of the overall state of the economy because it includes the output of all sectors of the economy. Based on the Bureau of Economic Analysis, the output of goods and services produced by labor and property  in the United States increased at an annual rate of 2.5 percent in the second quarter of 2013

Read more: http://www.businessinsider.com/government-shutdown-impact-on-gdp-growth-2013-10#ixzz2jI6MVVbm

Government Shutdown Cost $24 Billion, According to Standard & Poor’s | TIME.com

http://swampland.time.com/2013/10/17/heres-what-the-government-shutdown-cost-the-economy/#ixzz2jHtc9WII

Read more: http://www.businessinsider.com/government-shutdown-impact-on-gdp-growth-2013-10#ixzz2jI2mzUZm

Read more: http://www.businessinsider.com/government-shutdown-impact-on-gdp-growth-2013-10#ixzz2jI4yJEFi

Unemployment Decreased By 522,000 Since June 2013

Written by Ashley Bazile

New York – In September, the United States government added 148,000 jobs and the unemployment dropped to 7.2 percent.

On October 22^nd, 2013, the Bureau of Labor Statistics (BLS) released “The Employment Situation – September 2013”. In this news release, the BLS reported that as of October, unemployment has decreased by 522,000 since June 2013.

As the percentage has dwindled down since September 2011 to September 2013, it can only be expected that the unemployment rate will continue to decrease over the coming years.

Overall, the statistics that go into formulating the unemployment rate have changed. These statistics include people who have been unemployed for 27 weeks or longer continually to people who were employed partially. Both groups of people had their numbers decreased. The long term unemployed group had their decreased by 725,000 from 4.1 million.

The Federal Reserve released a statement that it would continue with its stimulus campaign. Within the stimulus campaign, the Federal Reserve is purchasing assets and providing low interest rates. They believe to be “growing underlying strength in the broader economy.” Their reasoning behind the decision is explained through their “taking into account the extent of federal fiscal retrenchment over the past year, the committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy,” the Federal Open Market Committee said.

Thanks to the retail industry, there were more than 350,000 jobs introduced within the last year. According to BLS, dining (restaurants and bars) also added 12,000 jobs, and electronic and appliances industry added another 4,000 jobs. The healthcare industry provided an additional 33,000 jobs.

Overall, the amount of jobs being created has grown to 148,000. If the pattern continues, the Federal Reserve will have made the right decision. Even though it is a rather slow progression, it is a progression nonetheless.

Sources: http://www.bls.gov/news.release/pdf/empsit.pdf, http://www.bls.gov, http://www.federalreserve.gov/newsevents/press/monetary/20131030a.htm

Released on October 16 just two weeks before the United States Federal Reserve Bank’s next policy meeting, the most recent edition of the Beige Book has painted an anecdotal picture of the nation’s economy, on both a nationwide scale and by individual district.

Reporting on information gathered up to and including October 7, this latest Beige Book provides data and reports leading up to and during the recent government shutdown.  Both the Boston and Richmond districts cited the shutdown as having negative effects on tourism, especially because the Richmond district encompasses Washington, D.C.  The shutdown led to the closing of national parks and federally run museums, two things that make major contributions to the tourism industries of the Boston and Richmond districts.

The Wall Street Journal’s Market Watch reports that BMO Capital Markets’ senior economist Jennifer Lee said, “Hopefully the damage and hurt [from the shutdown] has been generally contained.”

Such seems to be the case across other districts.  The Beige Book reported that Atlanta, Boston and New York actually experienced a “particularly upbeat” trend in tourism.  Also, Dallas’ report noted a slowing of airline ticket demands but was able to attribute that to being typical of the season, yet stronger than the demands experienced in the same period last year.

Despite fearing the negative repercussions for Richmond’s tourism industry, hotels reported a lack of reservation cancellations.  This simply slowed expansion of the district’s tourism and travel industry, rather than halting or even shrinking it.

Of all the twelve Federal Reserve Bank districts, the Beige Book reported that Kansas City experienced the most of a slow down.  However, this lower travel trend can undoubtedly be attributed to Colorado’s recent flooding.

Colorado saw the cancellations of a multitude of flights, halting travel to and from the area.  According to the Colorado Department of Transportation, there are still roadways and highways that continue to be shutdown as a result of the flooding, contributing to the difficulties experienced by those attempting to travel throughout the state.  Landmarks experienced closures during both the floods and the shutdowns, slamming the District with back-to-back hardships for the tourism and travel industries.

It is, however, important to note that autumn isn’t typically one of the busier travel seasons for Colorado.  The Denver Post spoke with the Colorado Tourism Office director Al White, who said, “Typically only 8 percent of our tourism dollars are collected during the fall.  And it’s primarily a function of foliage viewers, and maybe it’s in conjunction with people going into the park and listening to the elk bugle, but that area is just a small portion of what Colorado has to offer.”  Therefore, as autumn turns into winter and ski season is upon us, Colorado should be able to make up this travel lag within the Kansas City district.

All in all, the twelve districts of the Federal Reserve Bank had generally positive reports when it came to the tourism and travel industries.  Despite the difficult challenges of Mother Nature’s wrath and the government shutdown, the economy seems to still be chugging along for this edition of the Beige Book.

Sources:

http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201310.htm?summary

http://www.businessweek.com/news/2013-10-16/u-dot-s-dot-federal-reserve-oct-dot-beige-book-summary-text

http://www.usatoday.com/story/money/business/2013/10/16/beige-book-september/2994307/

http://www.ibtimes.com/us-government-shutdown-2013-fed-beige-book-offers-clues-us-economy-1428880

http://www.marketwatch.com/story/fed-beige-book-detects-some-slower-growth-2013-10-16

http://www.coloradodot.info/travel/colorado-flood-highway-updates

http://www.denverpost.com/travel/ci_24109065/colorado-visitors-can-find-plenty-fall-foliage-untouched

Looming fiscal uncertainty leads to marginal increases in revised GDP

Recent government shutdown, budget battles and debt ceiling negotiations take its toll on economic growth.

By Choong Ming Ye

New York, NY – In a revised second quarter report from April through June, the nation’s gross domestic product rose 2.5% from the first quarter’s 1.1%; earlier versions of the second quarter report put the percentage at 1.7%.

In the latest report issued by the Bureau of Labor Statistics, nominal increases in consumer expenditure, exports and an increase of state and local government spending  gave the GDP a fractional boost. According to Paul Ashworth of Capital Economics with initial jobless claims falling to 331,000, “it points to a further gradual improvement in the labor market.” This has been the lowest level recorded in more than five years.

With government expenditure decreases, real estate and local government expenditures have increased a total of 0.4%, according to the Bureau of Economic Analysis, further buoying the GDP.

In spite of the all the fiscal uncertainty of late, consumer expenditure has continued to increase this quarter. Consumer spending has been historically one of the most important factors of GDP growth.  The BEA’s most recent report in September showed that real disposable personal income increased a total of 0.3% in August, which was a dismal zero percent in June, followed by real consumer spending at 0.2%.

While the increases are minimal, it means that consumers are still spending amid all the fiscal turmoil. With a little more disposable income, consumers will add some points to the fourth quarter GDP. Consumer confidence is measured by the Consumer Confidence Index which can directly survey real households; currently it is at 73.2 — down from a peak of 85.1 in August.

Nonetheless, “it’s very difficult to feel confident in December given we’re going to repeat part of what just took place in Washington,” said Charles Evans of the Federal Reserve Bank of Chicago in an interview with CNBC.

The upward boost was also aided by an increase in private investments of 0.41%, on top of the first quarter’s 0.91%. Millan Mulraine of TD Securities explained that the “fiscally induced soft-patch in the first half of 2013 may have been more shallow than previously thought.”

Whether it was shallow or not, the recent government shutdown will nonetheless take its toll on any upward percentage treks. The 2.5% increase reported in the latest GDP report was initially projected at 2.6% to 3% according to an estimated from Standard & Poor’s. A further analysis by S&P’s financial services shows that the government shutdown cost the economy an estimated $24 billion or a cut of nearly 0.6% off the projected inflation-adjusted GDP in the fourth quarter.

With the looming cloud of uncertainty, the Fed has recently announced it will maintain its monthly pace of bond purchases in order to help the economy. These bonds will include longer-term government debt and mortgage-backed securities adding up to $85 billion a month.