"The Fed is largely out of bullets"

The mistake being made should be obvious. The focus on consumer demand is not working. Neither is the deficit spending to save government jobs.

Every government job saved or created takes away from the private sector in the form of taxes or federal borrowing. Creating consumer demand is a good policy if we are trying to stimulate China. China exports more to the US and the spending is created by borrowing more money from China.

Policy should be job creation in the private sector. That can be done by doing less: less regulation, less taxes and less government meddling.

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Aug. 8, 2010, 7:00 p.m. EDT
Fed may resist market pressure for bond buys
Will seek to jawbone market that it is alert to downside risks

By Greg Robb, MarketWatch
WASHINGTON (MarketWatch)

Confronted with a U.S. economy that appears to be decelerating, the Federal Reserve may ratchet up cautionary language but many expect the central bank will refrain from buying more bonds to bolster growth.

"I am sure they are going to do nothing," said Bill Cheney, chief economist at John Hancock in Boston.

"The whole question" will surround the language of the statement, he said, where the central bank will want to stress it is "on the job and aware of downside potential," Cheney said.

The Federal Reserve is due to announce its decision from its one-day meeting on Tuesday at 2:15 p.m. Eastern.

The pace of the recovery has been slowing, putting pressure on the Fed to act to ward off a double-dip recession and falling consumer prices known as deflation.

Gross domestic product grew at a 2.4% annual rate in the second quarter, down from a 3.7% rate in the first three months of the year. The labor market seems stuck in second gear with the private sector adding fewer than 100,000 jobs per month since May. See full story.

After the weak job report for July on Friday, pressure for the Fed to take action mounted in financial markets, said John Canally, economist at LPL Financial Corp. in Boston. Economists at Goldman Sachs said Friday they expect the central bank to reinvest the income from mortgage-backed securities it holds back into the bond market - a "baby step," in their words, in the direction of unconventional easing.

But many Fed watchers believe the Fed is still forecasting a slower expansion rather than new danger emerging.

"I don't know they are really prepared to panic about this," said James Glassman, economist at J.P. Morgan Chase.

Many analysts said the July job data did not seal the deal for an easing.

Last month, Federal Reserve Board Chairman Ben Bernanke stressed the central bank was "ready" to take further steps to stimulate the U.S. economy if growth turns out to be weaker than expected.

"We are ready and we will act if the economy does not continue to improve -- if we don't see the kind of improvements in the labor market that we are hoping for and expecting," Bernanke told Congress.

Bernanke listed the options he said that the Fed is open to considering.

• The first option would be to signal to markets that rates are on hold for a very-long "extended period."
• The second would be to reduce the interest rate on excess reserves.
• And the final option would be adjusting the balance sheet by not letting maturing housing-related securities run off.

"That may sound good but the Fed is largely out of bullets," said Joel Naroff, president of Naroff Economic Advisers.

Many analysts are not impressed with these options and argue the Fed is about out of ammunition, with interest rates barely above zero and having bought $1.7 trillion in housing-related assets.

"It does feel the Fed is at point of pushing on a string. They can pump out more money but all that does is pump up bank reserves," Cheney said.

"If low interest rates were going to get the economy humming it would be humming already," Cheney said.

Some economists said the Fed will not reach a consensus on Tuesday.

"I would be surprised if they make up their mind what to do yet," said Glassman.

Time for a Million Man March on Washington

It is past time for the US construction industry to get off their collective ass and take a million man march to Washington and demand that no more money be shoveled over to the bankers and Wall Street. No more growing of government.

There are 2.15 million government workers and in two years alone, 1.8 million civilian US construction jobs have been lost.

For all of 2009, construction spending plummeted a record 12.4% to $939.1 billion from $1.07 trillion. That's the biggest, one-year decline since the Commerce Department started keeping records in 1964. Focus on that number $131 billion. Let me repeat $113 billion.

The US Government shoveled $183 billion into AIG alone and under the Obama Administration has put next to nothing into construction.

Schools, bridges, hospitals, highways, historic structures, research facilities and factories can all be built or refurbished and will all have a payoff in the future.

No industry can create jobs, wealth and prosperity better than construction, yet this administration has done next to nothing.

Lace up your Timberlands, Grab your hard hat. Get in your pickups and get to Washington. Let them know who is boss.

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From Associated General Contractors of America:

Developer-financed categories recorded especially large declines, including lodging (down 46 per cent); retail, warehouse and farm (down 37 per cent); and office (down 35 per cent).
In contrast, publicly-funded construction increased by 1.0 per cent between December 2008 and 2009.



Construction Spending Drops to Lowest Level in Six Years
EC&M
Feb 2, 2010 2:28 PM

Construction employment grew in only four out of 337 metropolitan areas in 2009 as spending on construction projects dropped by $100 billion in December to a 6-yr low of $903 billion, according to a recent analysis by the Associated General Contractors of America (AGC) of federal figures released on February 1.

“The impact of the stimulus is clearly being overshadowed by the sweeping downturn in overall construction demand,” says Ken Simonson, the association’s chief economist. “Without those public investments, however, a bad employment situation will only get worse during 2010.”

Simonson noted new Census Bureau figures released on February 1 show that private non-residential spending dropped 18% compared to December 2008. He added that only power construction increased from year-ago levels, by 14%. Developer-financed categories recorded especially large declines, including lodging (down 46%); retail, warehouse and farm (down 37%); and office (down 35%).

In contrast, publicly funded construction increased by 1% between December 2008 and 2009, Simonson notes. He adds that stimulus spending helped boost highway and street construction by 3.7%, making it the largest public category. Educational construction, however, dropped 4% during the year. Private residential construction dropped 11% for the year as multi-family construction tumbled, although spending on single-family housing has increased for seven months in a row.

Simonson says the declines in construction spending were leading to layoffs in almost every community in America. Leominster-Fitchburg, Mass., lost a larger percentage of its construction work force (38%) during 2009 than any other metropolitan area according to the latest Bureau of Labor Statistics figures. The agency includes mining and logging with construction in most metro areas to prevent disclosure about industries with few employees. Other areas experiencing sharp declines in construction employment during the year include El Centro, Calif. (36%); and Santa Fe, N.M.; Pocatello, Idaho; and Kokomo, Ind. (all 29%). Meanwhile, the Houston, Texas, area lost the most construction jobs (25,500) between December 2008 and 2009.

Of the four metropolitan areas with an increase in construction employment during the past 12 months, only two areas had gains of more than 100 jobs: Harrisburg-Carlisle, Pa. (1,500 jobs, 13% gain) and Tulsa, Okla. (700 jobs, 3% gain). Two metro areas had gains of 100 jobs each in construction: Springfield, Ohio, (8%) and Columbus, Ind. (5%).

Association officials caution that, without new investments in infrastructure projects, construction employment will only get worse. They noted that the fiscal year 2011 budget request released by President Obama outlines some important new infrastructure investments, including establishing a national infrastructure fund and boosting investments in high-speed rail and new air-traffic control facilities. Many of those new investments, however, were offset by cuts for new water infrastructure projects and levee projects, for example.

Source: Associated General Contractors of America