Created in 1913 with the enactment of the Federal Reserve Act, the Federal Reserve (the Fed) is the central banking system of the U.S. The Fed functions as the bank of the U.S. government, overseeing the nation’s financial institutions. As the central bank, the Fed safeguards and manages the U.S. economy and its money supply with its economic and monetary policies, which makes it a very powerful global player. Ben Bernanke is the current chairman of the Federal Reserve.
Auto sales in the U.S. economy look solid on the surface. According to Autodata, in November, the annual rate of auto sales in the U.S. economy was 16.41 million units. In October, the annual rate of auto sales was reported to be 15.23 million and in the same period a year ago (November 2012), it was 15.32 million. (Source: Autodata web site, last accessed December 10, 2013.) Cleary, auto sales are increasing.
By looking at the auto sales numbers, one could be easily tempted to suggest consumer spending is increasing. But this is not the case. A deeper look at the numbers reveals a large increase in subprime lending to finance consumer auto purchases.
According to Experian, an information services company, loans issued for new vehicles to nonprime, subprime, and deep subprime borrowers made up 26.04% of all auto loans in the third quarter of this year. In the same period a year ago, this number was 24.84%. For used vehicles, loans issued to nonprime, subprime, and deep subprime borrowers made up an astonishing 54.95% of all auto loans in the third quarter. (Source: Experian, December 4, 2013.)
But this is not all. We are also seeing more and more consumers interested in buying vehicles on credit. For example, in its “Household Debt and Credit Developments” report for the third quarter of 2013, the Federal Reserve Bank of New York reported that in the third quarter, 168 million inquires for auto loans were made. In the second quarter of 2012, that number was only 159 million. (Source: Federal Reserve Bank of New York, November 2013.)
All of this shouldn’t be … Read More
Finally some good news in the U.S. jobs market?
The Bureau of Labor Statistics (BLS) reported Friday that, in November, 203,000 jobs were added to the U.S. jobs market. As a result, the unemployment rate went down to 7.0% from 7.3% in October. In addition to this, the BLS also revised the job numbers from October and September, saying 20,000 more jobs were created than previously reported. (Source: Bureau of Labor Statistics, December 6, 2013.)
Yes, the jobs market report for November is a step in the right direction. And, while I’m certain the politicians and the mainstream will have a field day with this news, the underlying statistics in the jobs market are not improving.
The underemployment rate, which includes people who have given up looking for work and those who have part-time jobs that want full-time jobs, still sits at 13.2%.
In addition, the number of long-term unemployed, those who are out of work for more than six months, made up 37.3% of all unemployed in November! There are 4.4 million long-term unemployed people in the U.S. and the longer they stay out of work, the harder it will be for them to get back into the market.
Finally, the majority of jobs created in the U.S. economy continue to be created in the low-wage-paying sectors.
The bottom line here is that the “official” unemployment numbers do not reflect what’s really going on in the jobs market. But the official rate is going in the right direction…and moving close to the point (6.5% unemployment) where the Federal Reserve said it would start pulling back on its money … Read More
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