Facebook revenue increases by 60%, Advertisers unhappy

Written by Nina Thomas

 Facebook has revolutionized the way the average person goes through a normal day.   Posting, commenting, liking and uploading has become commonplace.  But after going public at $38 per share and then dropping to $18, this stock proved to be less successful that anticipated, especially because of such high hopes places on Facebook.  This initial IPO dropped so low that it set a low standard for Facebook as a publicly traded company.  Since this time, Facebook’s revenue has increased by 60%, beating investor expectations.  It is now valued at $48.71.  However, the question now is whether advertisers are satisfied with the way Facebook is positioning their ads to generate such a drastic increase in profit.

This radical increase in revenue for Facebook came after broadening access to its mobile audience instead of focusing primarily on desktops.  Nearly 89% of revenue coming in from Facebook comes from advertisements as of now rising from 88% not too long ago.  Revenue rose from $1,262 in September 2012 to $5,286 in September 2013 (in millions).

Despite this major increase in revenue, hope for Facebook was low at first.  CEO Marke Zuckerberg had waited to make Facebook a public company, “We’re going public for our employees and our investors. We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment. As we become a public company, we’re making a similar commitment to our new investors and we will work just as hard to fulfill it.”  After announcing its IPO, Facebook was under a lot of skepticism about being able to generate profits from advertising or other forms.  As mentioned earlier, Facebook dropped to $18 and later flattened to $20.  This why an increase to $48.71 is shocking to investors.

This large increase is largely attributed to Facebook changing it advertising strategy.  However, many advertisers are still unsatisfied with Facebook ads compared to other large companies such as: Google, LinkedIn and Twitter.  The reason for this being that many advertisers are unhappy with how their advertisements appear on Facebook pages as well as the number of advertisements.

Much of Facebook’s revenue jumped from 14% coming from mobile sales, to 41% this past year.  This is one reason why Facebook’s stock has performing so much better recently.  This increase in mobile sales also means that many advertisements from advertisers are also shifting from desktop ads to mobile ones.  This shows a shift in Facebook from earning money from desktop computers to mobile phones instead.

With this new quarter of revenue for Facebook, the company is excited about what is still to come.  “The strong results we achieved this quarter show that we’re prepared for the next phase of our company, as we work to bring the next five billion people online and into the knowledge economy.” Said CEO Mark Zuckerberg in a statement concerning third quarter 2013 results.

This same stock that was hovering in July just over $25 now rose to $50.23 by October.  “Congrats to the people who had to guts to hang on.” Said Jon Weiner concerning the extreme rise in Facebook’s stock.  Many investors now regret not holding on to Facebook’s stock back when it had dropped.

Now that Facebook’s stock is in a good place, they continue to make changes and implement new things.  Facebook has recently showed how advertisements will be looking like on Instagram, spreading its influence even farther.  The question now is whether advertisers will be satisfied with the advertisements available on Facebook and Instagram.

Books Will Always Be Needed

Barnes and Nobles (also known as BN) is traded on the New York Stock Exchange under BKS, and it is an investment that you should take. Last year Barnes and Nobles made a bold move, moving it’s nook out of its walls and into Walmart stores. But a bigger statement was made when barnes and nobles nook replaced amazons kindle. A surprise? It shouldn’t be considering that the nook is proven to have better features like it’s longer battery life and reader friendlier screen, as well as a continuous list of quality. Of course Barnes and Nobles is still taking hits from Google and Apple, who are hands down in the top 2 spots (for now atleast), but Barnes and Nobles will not take the path of the Borders company and other book stores that gave up and eventually retreated to defeat. The fact that Barnes and Nobles is still here, is a major statement itself, just remember people will always need books, and students will always need what to study from.

Reports from Barnes and Noble’s q10 show cash flow from operations to have gone down, but a 16% increase in earnings before interest, taxes and other fees. When the operations statement goes down, this is usually an indication of something that took a hit. However last year was a boom from their launch of the nook. With the launch of competitors new products that came out and affected the sales of Barnes and Noble’s nook, such as the iPad 3, Windows 8, and the iPhone 5, it is clear that the innovation and taste for the nook is still here, but with the economy the way it is people are still limited to the #1 and #2 tech product spots.

As for BN’s stock, we need to understand that Barnes and Nobles is a physical attribute, why? Look at the Amazon company that does not have revenue and has run on deficits at times, it is all about the hype and like they say, stocks trade ahead of themselves. In the past year the stock has traded at 12.59 – 23.71 which is more than modest and conservative. Also noteworthy is the high 70 million copies sold of “fifty shades of grey”, and other records that the store is producing.

Let’s look at some advantages that Barnes and Nobles has currently. It’s return has been pretty good so far this year, as compared to other companies, and it also has a debt to equity ratio better than Amazon (a top competitor). The time to invest is now, as it gets colder and the season is here the demand for getting cozy with a book in the magnificent Barnes and Nobles local stores is how it begins.

But getting back to its core, the nook, it does have a following. And the following is growing and this is key to establishing the book stores brand, which it has been doing.

And we need to realize one of the biggest assets to the company, as expressed in the real estate world: location, location, location. Barnes and Nobles has one of the prime hot spots of most areas that attracts and will always bring in its clientele. Companies online come and go and do not supply the physical coziness. This is a big beneficiary of Barnes and Nobles college bookstore partnerships, the division of Barnes and Nobles that works with college campuses to get books to students, a business that brings in billions of their revenues. Barnes and Nobles expressed in their annual report great aspects for the cornerstone of their industry, including a 1.1% increase in sales and opening of new locations to further their success.

There it is ladies and gentlemen, the overview of why barnes and nobles is a go to place for investments and a place where your future wants to be.

Moskowitz, Dan. “Buying Barnes & Noble’s Stock Here Be a Good Read?.” (2012): n. page. Print. <http://wallstcheatsheet.com/stocks/would-buying-barnes-nobles-stock-here-be-a-good-read.html/>.

“BN Form 10-Q Quarterly Report.” (2013): n. page. Print. <http://forinvestors.barnesandnobleinc.com/secfiling.cfm?filingID=1193125-13-358093>
Barnes Nobles, . “Barnes & Noble 2013 ANNUAL REPORT.” (2013): n. page. Web. 13 Nov. 2013. <http://www.barnesandnobleinc.com/for_investors/annual_reports/2013_bn_annual_report.pdf>.

A significant economic indicator that I’ve selected is Corporate profits. Corporate profits are “a component of the government measure of national income; the net revenues received by incorporated businesses before corporate income taxes are subtracted.”

Corporate penalties obtained by the SEC have increased over the years. This shows that some corporations are discouraging job growth. This has results in a decline in the stock market performance which deters investors.

Eliot Spitzer, Attorney General of New York has targeted some of these corruptions in Corporations. He has been said to have potential as an employee for the White House an could bring about positive change to the Nations Economy.

A specific corporation that reflects the economy is General Motors. Gm is selling more cars to China than it is to the U.S. Suv’s and CUV’s are doing very well with their sells to China. This offers jobs to Americans to process and make more vehicles. A Subcategory of Corporate Profits  is the Corporations inventions. If Gm had created a sufficient battery for motor vehicles, it would be a “turn of the century invention”. There would be a boost in consumer spending and investment. This would encourage job growth to make the batteries and vehicles. The invention has not happened yet, but if it did there would be a boost in the Economy like that of the computer. The reason for this is because such an invention would make a Corporation prosperous. It would out-due its competitors and other companies would be bought out.

In 1960, GM manufactured nearly 60% of the cars sold in America. Presently corporations have to “pay high healthcare and manufacturing cost, expensive union contracts,excessive capacity, poor quality and lackluster design. “Public image has gone bad for some companies”, and that is a sign of a poor corporation which hints a poor economy. “Analyst have speculated bankruptcy within some corporations”

Public endorsements are also beneficial. Investors Warren Buffett and David Einhorn “purchased 10 million shares of Gm”. They are currently ahead of the European Company Ford. When you compare the two Corporations you see why the U.S economy is doing better than the European.”There are profits in North America”. “Next GM will be introducing its next generation Chevrolet Silverado and GMC Sierra Pick ups. This shows good competition for select Nations who constantly upgrade their technology; which means they are ahead of others.

When executives in Corporations retire they have negative impact on Corporation privfits like Mark Fields, retiree of Ford. This has resulted in a massive decline in Fords profit.

Sources

http://www.forbes.com/sites/joannmuller/2012/10/10/why-ford-is-lagging-gm-on-wall-street/

http://www.moneycrashers.com/leading-lagging-economic-indicators/

http://www.theatlantic.com/magazine/archive/2008/07/electro-shock-therapy/306871/

http://www.cnbc.com/id/100870316

http://www.forbes.com/sites/michaelbobelian/2012/01/23/despite-many-missteps-the-sec-has-made-progress-on-one-front-extracting-larger-payouts-at-least-compared-to-a-decade-ago/

http://www.forbes.com/sites/michaelbobelian/2012/04/11/the-secs-latest-revolution/

          What Do Our Retail Sales Say about the Economy?

Retail Sales are heavily monitored by economists and investors . The retail sales indicator follows the dollar value of merchandise sold within the retail trade making a sampling of companies involved in businesses of selling products. The retail sales report can cause a higher than average volatility. This indicator is a valid predictor to inflationary pressure which causes decreased cash flows in companies.

The Fed can curb possible inflation if, for instance, a dramatic increase in retail sales happens mid business cycle which can lead to a short term hike. Retail sales get publicity and are easy to understand in ways relatable to the average consumer. Valitile components of retail sales show underlying demand patterns .

According to a recent article, “Retail Sales, Consumer Confidence and Producer Prices Decline,” clothing sales have dropped by 0.5 % in September and department store sales were down 0.9%. Also in September, electronic sales and food and beverage sales increased 0.9%. General Merchandise had a 0.4% increase and Net retail sales rose in 9 of 13 major categories.

Partial blame to weak spending goes to the Government shutdown but Lindsay Piegza, chief economist at the investment firm Sterne Agee said that regardless of Washington debacle, the weak trend was already established due to a tepid job creation and minimal income growth.

The conference board has shown the consumer confidence index is down to 71.2 compared to 80.2 in September. The debt crisis and government shutdown has taken a serious toll to consumers’ expectations. Nonetheless similar declines in confidence, fiscal cliff discussions and the government  shutdown in 95′-96′,  confidence will remain volatile for the next several months. An article published back on September 13th says that the economy is on a slow pace by their review of retail sales. Augusts 0.2% retail sale increase was seen from automobile purchasing and goods such as furniture and electronics. All decreasing sales were the receipts for clothing, building materials and sporting goods.

Clothing store receipts decrease is the lowest in 1 1/2 years.  Food and energy costs were unchanged in August. Falling oil prices stemming from falling exports out of Libya and selling the commodity for profits show soft US economic data. Reuters said “crude prices shot up on Tuesday, exports from Libya dropped to approximately 250,000 barrels per day, down from an overall capacity of 1.25 million barrels per day, due to labor protests disrupting operations at major oilfields and ports.

Looking at the economic indicator of retail sales, June saw Americans buying cars and trucks at a pace not seen since 2007 which is a sign of consumers knowing how to spend as household wealth and the labor market improve. Summer declarations of economic improvement were optimistic in consumer spending. In regards to automobiles, the need to replace aging vehicles, attractive financing offers and steady employment will keep the car industry profitable. Economists in the summer were saying that economic indicators will continue to improve and consumer spending growth pace is slowly picking up. Factory growth, consumer price index and Costco Wholesale all saw gain this past June. This summer seemed to be a promising trend in our Economy, but after August things seemed to fall short, slow and stagnant.

http://www.bloomberg.com/news/2013-07-15/retail-sales-in-u-s-increased-less-than-forecast-in-june.html

http://www.reuters.com/article/2013/09/13/us-retail-sales-idUSBRE98C0IA20130913

http://www.reuters.com/article/2013/08/13/us-usa-economy-idUSBRE9770K220130813

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