Energy boom begins to ripple through US economy

John W. Schoen , NBC News Mar 25, 2013

The boom in new oil and natural gas flowing through U.S. pipelines is beginning to ripple through the wider American economy…

In September, Smith traded temp agency jobs for full-time employment with Baltimore-based Marlin Steel Wire Products, which makes wire baskets for industrial customers. An experienced machinist, Smith is now expanding his skills by learning to set up and operate factory robots…

Smith’s hiring was just one of thousands of openings created indirectly by a new boom in domestic oil and natural gas drilling – a bounty so rich that it has even caught energy industry insiders by surprise. In part 2 of our four-part “Power Shift” special report, we examine how the explosion in drilling in places like North Dakota and West Texas is spreading through the general economy – despite controversy over the potential environmental impact of the new industry practices…

Since the first gusher of oil spewed from of the ground above the Spindletop salt dome outside Beaumont, Texas, more than a century ago, the U.S. energy industry has enjoyed its share of booms and busts. After peaking in the early 1970s, U.S. oil and gas production began to decline as thousands of depleted wells were shut down. The U.S. rapidly became dependent on foreign suppliers to fuel its economy.

About a decade ago, advanced oilfield production technologies like hydraulic fracturing, or “fracking,” and horizontal drilling began to reverse that trend. Many of the now-bountiful fields being brought back on line were mothballed long ago when the remaining “tight” oil and gas deposits were considered too costly or technically difficult to produce…

Increased U.S. oil and natural gas production also promises to help rebalance the long-running trade gaps that have weakened the dollar. If the U.S. moves from a net importer to a net exporter of energy over the next decade, as some experts project, oil will flip from being a source of trade deficits to an important contributor on the positive side of the ledger. With China’s energy-hungry economy expected to continue to rely on imported oil, some analysts believe Beijing may soon begin swapping its huge pile of U.S. Treasury bonds for barrels of West Texas crude.

America’s growing energy independence also has been fueled by gains in efficiency: U.S. vehicles are squeezing more mileage from every gallon of fuel, and high-tech heating and cooling units and green building techniques and materials have cut energy bills for commercial and residential buildings by 10 percent since 2005.

Consumers Will Keep Spending as U.S. Hurdles Fade: Economy

By Alex Kowalski, Bloomberg, March 25, 2013

American consumers, who kept shopping through rising fuel costs and delayed tax refunds, will probably continue buoying the world’s largest economy as these hurdles dissipate…

Economists are boosting spending estimates as retailers from Darden Restaurants Inc. to Ross Stores Inc. say industry sales are picking up. Employment gains, the drop in energy costs, rising stock prices and reduced debt mean households have the wherewithal to overcome a payroll-tax increase that took an additional 2 percent out of take-home pay this year…

The payroll-tax increase is the one headwind that is not temporary, leading some economists to project spending will eventually slow…

Additionally, the tax increase also represents a bigger hit to lower-income workers, “all the more reason we should have seen a big spending hit,” said [Michael Englund, chief economist at Action Economics LLC]. Purchases will grow at “a slow grind” in the second and third quarters as Americans deal with the repercussions of smaller take-home pay, he said…

Is The ‘Great American Job Creation Machine’ About To Rev Up?

By Joseph Lazzaro, International Business Times, March 25 2013

The U.S. economy, which has been growing for about four years, is showing signs of an increase in the pace of commercial activity.

Corporate profits, housing, manufacturing, auto sales and jobless claims suggest that, while the current economic expansion is hardly robust, the sum of the recent, positive reports suggests a recovery that’s beginning to gain its sea legs.

Further, the Dow’s four-month staircase up to 14,500 is one expression by institutional investors that they see an improving economy and that better quarters are ahead for corporate earnings.

Still, throughout the recovery, business executives and certainly job seekers—despite adequate corporate earnings growth—have lamented the fact that the economic recovery has not been as strong as typical recoveries, with below-average job growth, consuming spending and household formation, among other key economic metrics.

Further, although the sub-normal recovery may puzzle some, the reason is crystal clear to economists and public policy professionals: The current recovery’s path is typical for expansions following a financial crisis, with classic factors constraining both U.S. GDP growth and job growth.

U.S. economy shows signs of strengthening

Robert J. Samuelson, Opinion Writer Washington Post, March 24, 2013

Is the recession over? Has the recovery started?

One lesson of the last few years is that some of our traditional economic labels have lost meaning. According to the National Bureau of Economic Research — the group of academic economists who set dates for the beginning and end of business cycles — the U.S. economy has been in a recovery since mid-2009. That’s when the recession that began in late 2007 is deemed to have ended. But for many Americans, if not most, it hasn’t felt like a “recovery.”

Despite indisputable evidence that the economy is expanding — producing more goods and services, which is the basic test for recovery — economic conditions have been dismal.

Treasure Island Trauma

By Paul Krugman, New York Times, March 21, 2013

A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.

One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began.

Bernanke Says Fed to Be Flexible on QE as Assets Rise

By Craig Torres & Steve Matthews, Bloomberg Businessweek, March 21, 2013

Chairman Ben S. Bernanke said the Federal Reserve would alter its monthly bond buying in response to gains in the job market, underscoring a need for flexibility as he expands Fed assets beyond a record $3 trillion.“We may adjust the flow rate of purchases month to month to appropriately calibrate the amount of accommodation we’re providing, given the outlook for the labor market,” Bernanke said yesterday at a press conference after a two-day meeting of the Federal Open Market Committee. The Fed will adjust buying in a “sensitive way” based on several measures, including payrolls, wages and jobless claims…

The majority of Fed officials don’t anticipate increasing the main interest rate until 2015, according to their estimates. They predict that unemployment will be 6 percent to 6.5 percent during the final three months of that year…

Central bank officials estimate that in 2015 economic growth will accelerate to 2.9 percent to 3.7 percent…

“Excluding the public sector, the economy is growing close to 3 percent right now,” said Ballew, a Fed economist from 1988 until 1995. “You are seeing more positive signals than they expected maybe six months ago,” [said Paul Ballew, chief global economist at Dun & Bradstreet Corp.]

Fed Flexibility: Bernanke’s Key to the Economy

By Josh Boak, The Fiscal Times, March 21, 2013

After the Federal Open Market Committee meeting on Wednesday afternoon, Bernanke said the nation’s central bank would continue to hold its existing pose. It will keep buying $85 billion worth of bonds each month and maintain its key interest rate near zero, in order to make the cost of borrowing cheaper and fuel growth.

The bond purchase program is known as “QE3” – and was outlined by Bernanke yesterday – it is all about flexibility right now.

The name refers to quantitative easing, a fancy term for when a central bank injects money into a lagging economy by buying assets from the private market such as mortgage-backed securities and Treasury’s…

In another bit of flexibility, Bernanke said the Fed would continue to assess the health of the economy through a range of factors, including payrolls, filings for unemployment insurance, wages and a host of other factors. So it’s not as though a drop in the 7.7 percent unemployment rate will cause a sudden change by the Fed. Its judgment will be based upon a set of factors that Bernanke did not fully specify, other than to emphasize that the improvements must be sustainable.

But for Bernanke, the potential benefits of whittling down the unemployment rate outweigh the risks. There are good reasons for him to want to stay limber, since the economy either seems to be on the verge of a solid comeback or of being sabotaged by a federal budget fiasco.

This is a sharp contrast from the rigid proclamations coming from Capitol Hill and the White House.

The House Republican majority insists that next year’s budget put the government on the path to a surplus in 10 years exclusively through sharp spending cuts and the repeal of Obamacare programs. President Obama said he will not implement reforms to trim entitlement spending in programs such as Medicare without accompanying tax increases.

US unemployment applications tick up to 336K, but monthly average falls to 5-year low

By PP, The Washington Post, March 21, 2013

The number of people seeking U.S. unemployment aid barely changed last week, while the average over the past month fell to a fresh five-year low…

Jennifer Lee, an economist at BMO Capital Markets, said the drop in the average number of unemployment applications over the past month suggests job gains in March could top 200,000.

Mood Darkens in Cyprus as Deadline Is Set for Bailout

By Liz Alderman, New York Times, March 21, 2013

Cyprus faces a hardened deadline of next Monday to secure a new agreement on an urgently needed bailout, after the European Central Bank said Thursday it would shut off access to crucial low-cost bank funding if an accord were not reached by that time…

Cypriot lawmakers voted down a bailout proposal on Tuesday containing a controversial tax on bank deposits that had been negotiated with Cyprus’s European Union partners over the weekend…

Fed says it will stick with aggressive stimulus

By Martin Crutsinger (AP), The Seattle Times, March 20,2013

The Federal Reserve on Wednesday stood by its efforts to keep borrowing costs at record lows, saying it isn’t yet convinced that the U.S. economy’s growth can accelerate without significant help from the central bank.
It wants to see sustained improvement. Fed officials reinforced their plan to keep short-term interest rates at rock-bottom levels at least until unemployment falls to 6.5 percent…

In its statement, the Fed noted that the U.S. job market has improved, consumer spending and business investment have increased and the housing market has strengthened. But its latest economic forecasts, also released Wednesday, show that the Fed still doesn’t expect unemployment to reach 6.5 percent until 2015…

Some economists say they fear the Fed has pumped so much money into the financial system that it could eventually ignite inflation, fuel speculative asset bubbles or destabilize markets once the Fed has to start raising rates or unloading its record $3 trillion investment portfolio…