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quinta-feira, 21 de junho de 2012

Fed projects lower economic growth for 2012

See it on TV? Check here. AP  by MARTIN CRUTSINGERWASHINGTON -- The Federal Reserve has sharply lowered its outlook for U.S. economic growth and doesn't expect the unemployment rate to fall much further this year.

In an updated forecast, the Fed says it expects the economy will grow no faster than 2.4 percent this year. That's much slower than the Fed's April forecast, which projected growth as fast as 2.9 percent. And it is not much better than the 1.9 percent annual pace from the first three months of the year.

The Fed also predicts the unemployment rate will fall no lower than 8 percent by the end of the year. It currently stands at 8.2 percent. In April, the Fed said the rate could be as low as 7.8 percent at year's end.

The central bank is forecasting lower inflation. At its highest, it expects inflation to rise 1.7 percent this year, well below its 2 percent target. The decline is largely because of a steep drop in gas prices.

Most economic reports since the Fed's last meeting have pointed to a sharp slowdown in the economy. Job growth averaged only 73,000 in April and May, after average gains of 226,000 per month in the first three months of the year.

The number of people seeking unemployment benefits has risen about 5 percent in the past six weeks, and employers posted sharply fewer job openings in April compared to the previous month.

With job growth weaker and the unemployment rate still high, consumers have pulled back on spending. Retail sales have fallen for the past two months. Part of that is due to falling gas costs, but even excluding gas stations, spending barely rose in May and fell in April.

Businesses also appear to be less confident about the economy's health. They are placing fewer orders at factories, which has slowed manufacturing output. A measure of companies' investment spending has dropped for two straight months.

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quinta-feira, 17 de maio de 2012

Despite growth, still millions of Facebook holdouts

AP  ANICK JESDANUNNEW YORK -- Don't try to friend MaLi Arwood on Facebook. You won't find her there.

You won't find Thomas Chin, either. Or Kariann Goldschmitt. Or Jake Edelstein.

More than 900 million people worldwide check their Facebook accounts at least once a month, but millions more are Facebook holdouts.

INTERACTION: WHAT ARE POSITIVES AND NEGATIVES OF FACEBOOK?

They say they don't want Facebook. They insist they don't need Facebook. They say they're living life just fine without the long-forgotten acquaintances that the world's largest social network sometimes resurrects.

They are the resisters.

"I'm absolutely in touch with everyone in my life that I want to be in touch with," Arwood says. "I don't need to share triviality with someone that I might have known for six months 12 years ago."

Even without people like Arwood, Facebook is one of the biggest business success stories in history. The site had 1 million users by the end of 2004, the year Mark Zuckerberg started it in his Harvard dorm room. Two years later, it had 12 million. Facebook had 500 million by summer 2010 and 901 million as of March 31, according to the company.

That staggering rise in popularity is one reason why Facebook Inc.'s initial public offering is one of the most hotly anticipated in years. The company's shares are expected to begin trading on the Nasdaq Stock Market on Friday under the ticker symbol "FB". Facebook is likely to have an estimated market valuation of some $100 billion, making it worth more than Kraft Foods, Ford or Disney.

Facebook still has plenty of room to grow, particularly in developing countries where people are only starting to get Internet access. As it is, about 80 percent of its users are outside U.S. and Canada.

But if Facebook is to live up to its pre-IPO hype and reward the investors who are clamoring for its stock this week, it needs to convince some of the resisters to join. Two out of every five American adults have not joined Facebook, according to a recent Associated Press-CNBC poll. Among those who are not on Facebook, a third cited a lack of interest or need.

If all those people continue to shun Facebook, the social network could become akin to a postal system that only delivers mail to houses on one side of the street. The system isn't as useful, and people aren't apt to spend as much time with it. That means fewer opportunities for Facebook to sell ads.

Lee Rainie, director of the Pew Internet & American Life Project, says that new communications channels - from the telephone to radio, TV and personal computers - often breed a cadre of holdouts in their early days.

"It's disorienting because people have different relationships with others depending on the media they use," Rainie says. "But we've been through this before. As each new communications media comes to prominence, there is a period of adoption."

Len Kleinrock, 77, says Facebook is fine for his grandchildren, but it's not for him.

"I do not want more distractions," he says. "As it is, I am deluged with email. My friends and colleagues have ready access to me and I don't really want another service that I would feel obliged to check into on a frequent basis."

Kleinrock says his resistance is generational, but discomfort with technology isn't a factor.

After all, Kleinrock is arguably the world's first Internet user. The University of California, Los Angeles professor was part of the team that invented the Internet. His lab was where researchers gathered in 1969 to send test data between two bulky computers -the beginnings of the Arpanet network, which morphed into the Internet we know today.

"I'm having a 'been-there, done-that' feeling," Kleinrock says. "There's not a need on my part for reaching out and finding new social groups to interact with. I have trouble keeping up with those I'm involved with now."

Thomas Chin, 35, who works at an advertising and media planning company in New York, says he may be missing out on what friends-of-friends-of-friends are doing, but he doesn't need Facebook to connect with family and closer acquaintances.

"If we're going to go out to do stuff, we organize it (outside) of Facebook," he says.

Some people don't join the social network because they don't have a computer or Internet access, are concerned about privacy, or generally dislike Facebook. Those without a college education are less likely to be on Facebook, as are those with lower incomes. Women who choose to skip Facebook are more likely than men to cite privacy issues, while seniors are more likely than those 50-64 years old to cite computer issues, according the AP-CNBC poll.

About three-quarters of seniors are not on Facebook. By contrast, more than half of those under 35 use it every day.

The poll of 1,004 adults nationwide was conducted by GfK Roper Public Affairs and Corporate Communications May 3-7 and has a margin of sampling error of plus or minus 3.9 percentage points.

Steve Jones, a professor who studies online culture and communications at the University of Illinois at Chicago, says many resisters consider Facebook to be too much of a chore.

"We've added social networking to our lives. We haven't added any hours to our days," Jones says. "The decision to be online on Facebook is simultaneously a decision not to be doing something else."

Jones says many people on Facebook try to overcome that by multitasking, but they end up splitting their attention and engaging with others online only superficially.

Arwood, 47, a restaurant manager in Chicago, says she was surprised when colleagues on an English-teaching program in rural Spain in 2010 opted to spend their breaks checking Facebook.

"I spent my time on break trying to learn more about the Spanish culture, really taking advantage of it," she says. "I went on walks with some of the students and asked them questions."

Kariann Goldschmitt, 32, a music professor at New College of Florida in Sarasota, Fla., was on Facebook not long after its founding in 2004, but she quit in 2010. In part, it was because of growing concerns about her privacy and Facebook's ongoing encouragement of people to share more about themselves with the company, with marketers and with the world.

She says she's been much more productive since leaving.

"I was a typical user, on it once or twice a day," she says. "After a certain point, I sort of resented how it felt like an obligation rather than fun."

Besides Facebook resisters and quitters, there are those who take a break. In some cases, people quit temporarily as they apply for new jobs, so that potential employers won't stumble on photos of their wild nights out drinking. Although Facebook doesn't make it easy to find, it offers options for both deleting and suspending accounts.

Goldschmitt says it takes effort to stay in touch with friends and relatives without Facebook. For instance, she has to make mental notes of when her friends are expecting babies, knowing that they have become so used to Facebook "that they don't engage with us anymore."

"I'm like, 'Hmmm, when is nine months?' I have to remember to contact them since they won't remember to tell me when the baby's born."

Neil Robinson, 54, a government lawyer in Washington, says that when his nephew's son was born, pictures went up on Facebook almost immediately. As a Facebook holdout, he had to wait for someone to email photos.

After years of resisting, Robinson plans to join next month, mostly because he doesn't want to lose touch with younger relatives who choose Facebook as their primary means of communication.

But for every Robinson, there is an Edelstein, who has no desire for Facebook and prefers email and postcards.

"I prefer to keep my communications personal and targeted," says Jake Edelstein, 41, a pharmaceutical consultant in New York. "You're getting a message that's written for you. Clearly someone took the time to sit down to do it."

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Associated Press Deputy Director of Polling Jennifer Agiesta and News Survey Specialist Dennis Junius in Washington contributed this report.

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sábado, 28 de abril de 2012

Economic growth slows in the first quarter

AP  by CHRISTOPHER S. RUGABERWASHINGTON -- The U.S. economy grew more slowly in the first three months of this year. Governments spent less, and businesses cut back on investment. But consumers spent at the fastest pace in more than a year.

The result suggests that the economy will continue to expand, slowly but steadily.

The Commerce Department estimated Friday that the economy grew at an annual rate of 2.2 percent in the January-March quarter, compared with a 3 percent rate in the final quarter of 2011. But growth is expected to rebound to around 3 percent for all of 2012 as stronger job growth spurs more consumer spending.

Consumer spending accelerated to an annual rate of 2.9 percent in the first quarter. The strength came from a second robust quarter of growth in auto purchases.

Here's what The Associated Press' reporters are finding:

A GLASS HALF-FULL

Is the weaker first-quarter growth worth worrying about?

Not according to Sung Won Sohn, an economics professor at the Smith School of Business at California State University. He thinks the economy will be boosted this year by a more confident consumer as hiring grows and business investment strengthens.

Sohn expects growth this year of 2.5 percent, better than last year's 1.7 percent.

"The economy is firmly on a growth trajectory," Sohn says. "The first-quarter slowdown will be temporary."

SPENDING WARMS UP...

A warm winter probably pulled some consumer spending into the January-March quarter that would normally have occurred this quarter. Auto sales, for example, accounted for nearly 30 percent of growth last quarter. Many car buyers probably came out earlier than usual.

Without autos, growth would have been about 1.5 percent.

"The second quarter won't have the advantage of unseasonably warm weather that likely goosed auto sales," says Beata Caranci, deputy chief economist at TD Economics.

... ON THE OTHER HAND

The warmer weather also sapped strength from the economy: Americans spent less on utilities from January through March for a second straight quarter.

That reduced growth.

Perhaps a hot summer will add to growth later this year as Americans crank up their air conditioners.

WEAK GROWTH, WEAK HIRING

How weak was the economy's 2.2 percent growth rate from January through March? It depends.

A growth rate of 2.5 percent or higher is good when the economy is healthy. But not at a time of high unemployment.

With 12.7 million people unemployed, today's economy needs much faster growth to boost hiring. Growth would have to be roughly 4 percent for a full year to lower the unemployment rate, now 8.2 percent, by 1 percentage point.

U.S. ECONOMY STILL TOPS

Even when growth is tepid, as it was last quarter, the dollar figure for the U.S. economy exceeds that of any other country's.

Adjusted for inflation and seasonal factors, first-quarter output weighed in at an annual rate of $13.5 trillion.

At its lowest point during the Great Recession, the figure was $12.6 trillion.

The size of the world's second-largest economy, China's, is roughly $11.3 trillion.

A DIFFERENT GAUGE OF GROWTH

The drop from a 3 percent growth rate in the October-December quarter to 2.2 percent last quarter partly reflected a slower pace of restocking by businesses.

Such inventory building had contributed more than half the growth in the final three months of 2011. But last quarter, it contributed less than one-third.

Many economists exclude inventories to better gauge the economy's underlying strength. By that measure, the output of goods and services grew at an annual rate of 1.6 percent last quarter - up from a 1.1 percent increase in the fourth quarter.

PRESSURE ON CONGRESS

There may be a bright side to the weaker-than-expected growth in the January-March quarter: It could push Congress to reach a budget deal before the end of the year.

Otherwise, automatic tax increases and spending cuts scheduled to start Jan. 1 would send the nation over a "fiscal cliff" and drastically weaken economic growth, according to Bank of America.

"Lawmakers need a reminder that they must reduce the fiscal drag," says Ryan Sweet, senior economist at Moody's Analytics.

SAVING LESS OF WHAT WE EARN

The increase in consumer spending comes with a caveat: People spent more in part because they socked away less.

After-tax income grew at an annual rate of 2.8 percent from January through March. That was about the same pace as in the final three months of last year.

But over the same period, the savings rate fell to 3.9 percent of after-tax income, down from 4.5 percent.

Economists worry that people won't keep spending more unless their income grows.

HOUSING PERKING UP

One surprising bright spot in the first quarter's data: housing.

Spending on home construction and renovations rose by the most in nearly two years. Some of that gain was likely fueled by the warm winter. Many construction projects are usually put on hold when building sites are covered with snow and ice. That didn't happen so much this winter.

Housing is expected to contribute to growth this year for the first time since 2005.

FIRST DRAFT OF HISTORY

Friday's GDP report is just the initial estimate for first-quarter economic output. As is customary, the government will update its estimate in May and June.

And then in July, the first-quarter numbers will be tweaked yet again. That's when the government will revise its estimates of growth from 2009 through the first quarter of this year.

Last year, figures on incomes and saving were revised to show that Americans earned and saved more than previously estimated. Some economists think the current numbers on savings and income will also be revised higher later this year.

BETTER THAN OVERSEAS

As disappointing as the first-quarter numbers were, the U.S. economy still looks a lot stronger than most of the rest of the developed world. It's expected to grow at least 2.5 percent for the full year.

By contrast, Britain's economy will only grow 0.8 percent and Japan's about 2 percent, according to forecasts from the International Monetary Fund. Things are even worse in Europe. The 17 countries that use the euro as their currency are expected to see growth shrink 0.3 percent.

"Growth is an increasingly rare commodity in the global economy, but the US has got it," says Jason Conibear of Cambridge Mercantile, which specializes in trading currencies.

NOT FAST ENOUGH

This was the 11th quarter since the Great Recession officially ended in June 2009. The fastest rate of economic growth has been 3.9 percent in the first quarter of 2010. Normally, a much bigger bounce would follow a deep recession like the one the United States sank into in December 2007.

When the economy emerged from the recession of 1981-1982, for instance, growth hit an 8 percent annual pace for four straight quarters in 1983 and 1984.

THE WEIGHT OF GOVERNMENT

Government spending cuts are weighing on the U.S. economy in a way that hasn't been seen in generations. Those cuts have reduced growth for six straight quarters - the longest stretch since 1955.

Reduced government spending subtracted 0.6 percentage point from the first quarter's growth.

That drag may ease the rest of this year. Defense spending fell sharply in the past two quarters, which isn't likely to continue. And state tax revenue is recovering, closing budget gaps.

"It's hard for the economy to accelerate when the government has its foot on the brake," said Joel Naroff, president of Naroff Economic Advisors.

WILL FED INTERVENE?

The Federal Reserve might have to rethink its forecasts and its policies, economists say. One economist thinks the Fed is now more likely to pursue a third round of bond purchases to try to push down long-term interest rates to stimulate the economy.

It's "back on the table," says Bernard Baumohl of the Economic Outlook Group.

WHY IT MATTERS

The U.S. gross domestic product is the bedrock of the economy. It measures the output of all goods and services produced in the United States, from cars to electricity to manicures. GDP growth drives job creation, pay, corporate profits and stock prices.

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AP Economics Writer Martin Crutsinger contributed to this report.

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