The latest indicators show good results: the US economy is still growing at a rate of 1.7% as of last quarter. Except for the consumer sentiments, all of the other aspects of the economy have shown improvement. Factory orders are higher than expected. Personal income and spending have gone up while the savings rate has gone down. Seventy percent of the economy is dependent on household spending and at this rate, that huge percentage is seen in action.
On top of that, the energy choke collar has re-emerged so it is expected that consumers are more inclined towards energy efficiency. Gasoline and oil prices have gone up but because usage has decreased, Americans are able to have enough money to accommodate living expenses and with some extra cash on hand.
According to the Department of Labor, first-time jobless claims ballooned from 2000 to 374,000 in just two weeks. Most of the unemployed came from government agencies that have displaced workers due to the massive budget cuts. If the rise in oil prices is preventing fast economic growth, then more jobless claims will be expected in the coming weeks.
There is an expected addition of 163,000 jobs from the private sector by the last quarter of this year. However, the calculated gains on August will not be enough to compensate for the jobs lost earlier this year.
It appears that this year’s trend in unemployment follows the same pattern as the last 3 years. During those years, the employment rate surged during the first quarter of the year 2009 but fell during the summer because employers pulled back. The same trend happened in 2010 and 2011 and then again in 2012. If there is a way to understand why employers pull out during the summer, then the issue will be better addressed.
On Tax Collection
Meanwhile, the Daily Treasury Statement shows an increase in tax collection compared to last year’s records. It appears that the growing confidence of businesses have attributed to better economic activities leading to better tax generation.
A major part of these taxes come from the mushrooming of firms offering bad credit loans. These businesses have really taken flight the last couple of years because traditional institutions had to tighten their belts on the approval of loans. Credit score became an issue as more and more people have fallen below the creditworthiness line. But these nontraditional firms offer an immediate solution in the form of a bad credit loan without using the credit score as a requirement.
Since the taxes paid by an establishment are equivalent to a percentage of its value, more taxes are collected from firms earning billions of dollars each year. Lenders offering bad credit loans are one of the companies that earn billions because of the warm reception of the employed population.
On Consumer Spending
The ISCS is happy to report that sales for the month of August have gone up with a 1.5% gain. The 14-day daily average consumer spending is set at $75, which is better compared to last year’s $68 average. This will be the fifth straight week of continued increase in consumer spending.
The Mortgage Bankers’ Association has announced that the housing Purchase Index went up by about 1.4% from the prior week. Meanwhile, the Refinance Index fell by -5.7% because of the higher mortgage rates.
Warehouses and commercial-residential establishments are getting the most attention because of business growth. Meanwhile, residential houses are also in demand following the series of perks and tax adjustments offered by the federal government.
For now, the biggest concern that needs to be tackled before the 2013 elections would be the unemployment rate. This will be the first major concern that will greet the next elected president.