Good Morning — 

 

Not a positive sign in a struggling economy: “Top U.S. executives have less confidence in the business outlook now than at any time in the past three years – and a key reason is fear of gridlock in Washington over the fiscal deficit and tax policy.” Reuters goes on to report that “some 34 percent of U.S. CEOs plan to cut jobs in the United States over the next six months, up from 20 percent a quarter ago, according to a Business Roundtable survey released on Wednesday.” The survey also found that “the group’s index of CEO confidence fell to its lowest point since the third quarter of 2009.” 

 

This morning at 8:30 AM, new data from the Commerce Department on orders for U.S. durable goods. According to Bloomberg, orders “probably plunged in August, reflecting a slump in demand for aircraft and slowing business investment.” 

 

Also this morning, weekly jobless claims at 8:30 AM. 

 

 

Spain’s fiscal distress, Spain’s banking distress, and (perhaps especially) German banks’ exposure to Spain’s banks are again in the headlines.  Often this is accompanied by reports of efforts to impose “austerity” as part of the solution to these problems.  American pundits often disdain these moves as economically wrong –headed for countries that are either contracting or growing quite slowly — and argue that the U.S. should take this lesson to heart and defer any federal budget tightening.  But there is no reason why sensible budgetary reform has to involve austerity. Consider, for example, Social Security. Currently it is kept “solvent” by the promise of an across-the-board 25 percent cut in retirees’ benefits in the future.  Replacing that (disgraceful) plan with one that keeps Social Security solvent, and reduces future federal red ink would impose exactly zero austerity and have exactly zero near-term macroeconomic impact.  The casual equating of budget reform and austerity stems from a focus on annual discretionary spending instead of fundamental entitlement reform.  The latter takes longer, has little economic downside, and is the real source of red ink and needs to be addressed.

 

 

Big Firms Overhaul Health Coverage — Two big employers are planning a radical change in the way they provide health benefits to their workers, giving employees a fixed sum of money and allowing them to choose their medical coverage and insurer from an online marketplace. Sears Holdings Corp. and Darden Restaurants Inc. say the change isn’t designed to make workers pay a higher share of health-coverage costs. Instead they say it is supposed to put more control over health benefits in the hands of employees. (WSJ) 

 

Howard and Feyman: Obamacare will end Medicare as we know it — On the campaign trail, President Obama and Democrats continue to insist that the administration’s Affordable Care Act (the ACA, or Obamacare) does not hurt Medicare beneficiaries, rebutting the Republican charge that the ACA slashes $716 billion from the program. But as a new working paper from American Action Forum scholars Robert Book and Michael Ramlet demonstrates, the cuts are real and significant. (Washington Times) 

 

New home sales dip, but prices scale five-year high — New home sales held near two-year highs in august and prices vaulted to their highest level in more than five years, adding to signs of a broadening housing market recovery. The Commerce Department said on Wednesday sales slipped 0.3 percent to a seasonably adjusted 373,000-unit annual rate, but the decrease was from an upwardly revised 374,000-unit July pace that was the fastest since April 2010. From a year ago, sales were up 27.7 percent last month. (Reuters) 

 

One in Five Households Owe Student Debt — Nearly one in five households, or 19% owed student debt as of 2010, Pew found. That’s up from 15% in 2007. Among households headed by someone younger than 35 years old, 40% owed student debt in 2010. (WSJ) 

 

Spain Scare Roils Europe Markets nbsp;– Spain’s borrowing costs rose and its stock market fell sharply on the eve of Madrid’s announcement of new austerity measures, putting the shaky economy again at the center of Europe’s race to preserve its currency union. Spain’s benchmark IBEX-35 index fell 3.9% and other European exchanges posted losses as well. The government’s 10-year borrowing costs rose nearly one-third of a percentage point, to above 6%, placing renewed pressure on Madrid to find a way out of its debt crisis and appearing to crimp its prospects for avoiding a bailout from its euro-zone partners. (WSJ)

 

Germany’s jobless rate falls to 6.5 percent but adjusted figures see slight increase — Germany’s jobless rate fell to 6.5 percent
in September thanks to a traditionally seasonal improvement, official figures showed Thursday. Still, the underlying trend continued to drift higher, underling concerns that Europe’s biggest economy is slowing down as economic problems around the euro area dent demand for German exports. (WaPo) 

 

Beyond Wall St., Curbs on High-Speed Trades Proceed — After years of emulating the flashy United States markets, countries around the globe are now using America as a model for what they don’t want to look like. Industry leaders and regulators in several countries including Canada, Australia and Germany have adopted or proposed limits on high-speed trading and other technological developments that have come to define United States markets. (NYT)

 

 

Boom, Bust, and Beyond: A Look at Housing Market Data in California — The housing crisis resulted in a nearly unprecedented loss of household wealth that, while widespread, hit a handful of states particularly hard. In California, prices statewide fell 44.5 percent from the peak of the market in February 2006 to the trough in November 2011, according to Zillow. As a large, diverse state with over 37 million people, the pace of the recovery has varied among its many metropolitan areas. (Paper here)