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Jobs Number to Be Revised Upward MoneyNews
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The mainstream media seems intent on trumpeting economic news that makes President Bush look politically vulnerable. Consider recent coverage of U.S. economic growth for the fourth quarter. At 1.1%, it was nothing to write home about. But papers like The New York Times and Washington Post, and all three major broadcast networks played up the sluggish Q4 economic performance.
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This was after months of minimal coverage of the economy's booming economic growth and the continued downward slide in the U.S. unemployment rate. Reuters' jobs number headline called job growth "disappointing" despite the addition of 193,000 jobs and a reduction in the unemployment rate to 4.7%. Now the Federal Reserve is already saying that the Q4 numbers will likely be revised upward.
"I would not be surprised if GDP were revised upward when we take a more definitive look at the fourth quarter," Dallas Federal Reserve President Richard Fisher said in a speech to the London-based Institute of Economic Affairs on Monday. "As long as the Federal Reserve does its job of holding inflation at bay, and as long as our political leaders resist protectionism and other forms of interference with creative destruction, we will remain a productive economic machine," he said. Fisher was also less worried about the U.S. housing market, which some economists say is in peril after a drop in consumer spending during the past few months. A slow-growth home-sales market would further crimp consumer spending, economists say. But Fisher told the audience that the high number of American homeowners who have fixed-rate mortgages would cushion any damage inflicted upon the housing market by rising interest rates. He also said that riskier variable-rate mortgages were only a "small fraction" of the U.S. consumer home loan market. "It is not unreasonable to think the (housing) situation is manageable, albeit worth watching closely," he said. Editor's Note:
2. Jobs Number to Be Revised Upward It seems this week's issue of BusinessWeek attempts to shake the American public out of its downcast outlook on the economy by examining the U.S. job picture. The magazine concludes that the 193,000 jobs posted in January – a figure that was, as we mentioned above, derided in the mainstream media for not hitting economists' forecasts of 240,000 jobs – will surely be revised upward. In an article titled "The Mixed Messages on Jobs," the newsweekly states that "although the 193,000 jobs gain in January was disappointing at first glance, the overall report is stronger than the headline suggests. "The October and November job gains were revised up to 354,000 and 140,000, respectively, from 305,000 and 108,000, which means the three-month gain was near expectations. Over the last 12 months, the U.S. economy has added a very healthy 2.051 million new jobs." BusinessWeek also points out that the January jobs number was impacted by unique factors. "There were many unusual factors in January. Construction jobs rose by 46,000, but that mostly reflects the unusually good weather after a cold December. Manufacturing added only 7,000 jobs, however, and retail continued to be weak, dropping 1,500 jobs in January despite the strong gain in chain-store sales reported last week."
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MoneyNews has already discussed the downward slide of U.S. home sales, which fell 3% in the last month, according to the National Association of Realtors. But across the Atlantic, UK home prices are on the way up, increasing at their fastest rate since July 2004. The UK's Nationwide Building Society reports the average cost of a home in Great Britain grew by 1.4% during January to (GBP)158,478. That's up from a 0.5% hike in December. The NBS also says that the annual price of a home in the UK was up by 4.4%. BusinessWeek Online quotes Fionnuala Earley, Nationwide's group economist, as saying that three-quarters of that increase came over the past four months. "The price spike in October may have been a result of high demand following interest rate cuts in August and improved buyer confidence in the market, Nationwide said. "The group also said it expected further growth in the next couple of months, but this may not continue, as the market remains fragile." Earley told BusinessWeek: "There are already indications that consumers' appetite for further unsecured debt may be diminishing and that the amount of extra borrowing against property has slowed."
There is both good and bad news on the retirement-planning front. Individual Retirement Accounts (IRAs) can provide a big boost to Americans' retirement-planning fortunes – but apparently most people don't use them.
That's the conclusion of a study released this week by the Washington-based Investment Company Institute. It says that in 2005, U.S. households that owned IRAs for 10 or more years and contributed to them in tax-year 2004 had average IRA assets of $116,000. By comparison, three-quarters of all U.S. households had total household financial assets of less than $100,000 in 2001. Americans don't seem to be comprehending that. According to the ICI study, the majority of American households currently do not take advantage of IRAs – only 41% own one. And most households do not make annual contributions to IRAs – less than 20% put anything into IRAs in tax-year 2004, and very few eligible households made "catch-up" contributions. Editor's Note
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