World Week Ahead: Obama’s job plan awaited
By Timothy Moore
Sept. 5 (BusinessDesk) - Everyone is in a funk. Those with jobs, those without them and President Barack Obama has turned the spotlight on himself in a bold effort to retake control of the world’s biggest economy.
Later this week President Obama will detail a fresh effort to bolster the American labour market.
And it needs bolstering. The August numbers, released on Friday, showed that there was no change in nonfarm payrolls last month. On top of that, revisions to June and July eliminated 58,000 jobs.
While a Reuters survey sought a 75,000 increase in August, the day before the official data was released Goldman Sachs cut its forecast in half to 25,000. There’s no sign that the U.S. economy is doing anything at the moment. It’s stuck in neutral and will need a big push to get it moving forward.
The jobs numbers themselves are a bit irrelevant. The reality is that the Federal Reserve has done what it can, which Ben Bernanke and his regional counterparts have been saying in recent weeks in particular.
And there’s seems to be little incentive for American lawmakers to compromise, ahead of the 2012 presidential vote. Certainly Republican presidential candidates see little to gain from helping to shore up the economy, and their rival’s re-election chances.
President Obama, therefore, is on his own. The question is will he take the bull by the horns?
The White House is considering more infrastructure spending, tax incentives to spur hiring, a cut in the employer portion of the payroll tax credit and changes to unemployment insurance to subsidise worker retraining, Bloomberg reports.
Not exactly inspiring stuff.
“The problem is that rates have been low for three years now and that isn’t spurring people to buy,” John Silvia, chief economist at Wells Fargo in Charlotte, N.C., told Bloomberg. “Companies won’t hire unless demand is there. The Fed can lower the cost of credit, but it can’t force companies to create jobs.”
predicts the U.S. economy will grow at a 1% annual rate in
the second half of this year, little changed from the 0.7%
pace logged in the first six months, the weakest stretch
since the recovery began in June 2009.
What does this mean for investors? The certainty that there will be more uncertainty.
“We are into the ‘bumpy journey’ phase of our new normal where fear, lack of policy options and loss of control” can dominate, PIMCO Managing Director Bill Gross wrote in his September comment.
This week - shortened one day by North America’s Labor Day holiday - will bring fresh data on the U.S. services sector, the Fed’s Beige Book and balance of trade numbers.
Overseas, the European Central Bank will meet and at the weekend Group of Seven finance ministers and central bankers will gather in France. There’s diminishing confidence among investors that these officials can effect any change.
Perhaps that’s the key reason why gold is continuing to power ahead. The precious metal has surged almost one-third so far this year. And its lustre seems destined to be enhanced at least for another week.