Tag Archives: economic news

January 2012 Unemployment Down in 45 States–Has the Long Anticipated Recovery Begun?

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In an economic news release published earlier today, the Bureau of Labor Statistics reported that unemployment fell in 45 states in January 2012.  In January, unemployment was down again in California—10.9% in January compared to 11.1% in December 2011 and 12.1% in January 2011. This marks the sixth straight month that unemployment has fallen in the state; a promising sign after years of economic stagnation. In an earlier post we noted how important the California economy is to the United States on the whole.  As we explained in that post, the reason we focus on California is that California is responsible for a full 12% of the country’s Gross Domestic product, the largest contributor of all the states and what happens in California gives economists a good idea where the country is headed as a whole.

Last month, we saw positive signs in California’s unemployment rate and this month, as we anticipated, the positive news has spread to 44 other states.  Perhaps the best news in this report is that there are signs of improvement in states where the employment situation had been abysmal through much of the recession.  For example, in Nevada unemployment was down to 12.7% in January 2012 from 13% in December 2011 and down from 13.8% in January 2012; Mississippi down to 9.9% from 10.4% the month before and 10.5% in January 2012; and, finally, Michigan, the poster child for the recession, was down 0.3% from December 2011 landing at 9% in January 2011 down nearly 2% from January 2011’s 10.9% rate. Taken together, these numbers show that the recovery that is underway is not a regional phenomenon, but truly occurring across the country.

Gas Prices: Is the Sky Really the Limit?

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As we noted in our earlier post last week, there was another mix of good and potentially bad economic news. While the Dow Jones Industrial Average (DJIA) broke through 13,000 for the first time since May 2008, gas prices were projected to approach levels not seen since the spring of 2008. Although actual gas prices are still below even those of May 2011 when gas reached $4.02 per gallon, this is undoubtedly bad news in a nation that consumes more energy than any other nation on earth.

The factors driving this latest rise are the same as those that drive any market: supply and demand. Basically, gas prices are up because supplies are (at least potentially) down. In 2008, surging gas prices were the result of two factors: decreased supply due to U.S. refinery problems, and surging crude oil prices. While there was little to be done about the latter (other than consumer behavior decreasing demand), the U.S. was able to get refinery capacity back and, as the graph below shows, gas prices decreased steadily after that. As for the current rise in gas prices, the primary factor is once again supply, or more correctly, the fear of diminishing supply and a little international political intrigue that is driving that fear.

In recent days, Iran placed an oil embargo on France and Britain and considered extending that embargo to other European Countries. While this does not directly affect the United States, which has banned the import of Iranian Oil since the Hostage Crisis of 1979, it does introduce new buyers competing for oil normally purchased by the U.S. However, it is unlikely that a supply shortage will actually occur. For that to happen, Iran would have to stop supplying oil to the world market and, given that oil is Iran’s main source of income, it is doubtful that will happen.

We are interested in your thoughts on this. Did you know gas is actually less expensive now than it was in May 2011 or July 2008? Join the discussion below or let us know via Twitter or Facebook.

Back to the Future: A Surging Dow Lifts All IRAs?

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This week there was another mix of good and potentially bad economic news.  While the Dow Jones Industrial Average (DJIA) broke through 13,000 for the first time since May 2008, gas prices also rose.   While we will discuss rising gas prices in another post, here we focus on the milestone for the Dow. The rising DJIA is important because it means that for significant parts of the U.S. population who have their wealth in retirement accounts invested in the stock market, retirement wealth is increasing, making retiring or living in retirement easier.

The factors driving this latest rise are the same as those that drive any market: supply and demand.  While it is easy to understand how this works in the market for commodities like gas or corn, it is a little more nuanced for stocks.  People buying stocks, like the mutual fund managers who manage your 401(k) for you, are in the market to share in company profits.  As company profits increase, company stock values generally increase either because of the prospect of a dividend or because the competition to hold stocks in profitable companies is fierce.

Recent earnings reports for DJIA companies like General Motors have shown that profits are up.  This is generally true across the board for DJIA companies, which is most likely creating the demand for those stocks and thus driving prices up.

We are interested in your thoughts on this, do you see evidence of a recovery?  Join the discussion below or let us know via Twitter or Facebook.

Graph of DJIA 2008 to February 2012