New Households Sprout Up: As Recession Era Fears Ease, Confident Consumers Take Steps to Rent or Buy by Robbie Whelan, November 7, 2012, Section 1 Page 3, www.wsj.com Americans are renting or buying homes at the fastest rate in more than six years indicating recession anxiety is subsiding. The U.S. added 1.15 million households over the past year according to the Census Bureau's September report. Household information is tied tightly to employment growth which means more students are finding jobs post college graduation, more adult children are leaving their parent's homes, and more couples feel confident about their future to get married and purchase a home. However, the overall growth rate is due mainly to renters, mostly recent college graduates. The number of homes lived in by renters has increased by more than five million since 2006 to 39.6 million.
Focus Shits to "Fiscal Cliff": After Obama Victory, Political Leaders Strike Conciliatory Tone; Dow Falls 312 by Naftali Bendavid, Damian Paletta, and David Wessel, November 8, 2012, Section 1 Page 1 www.wsj.com With the election behind us, focus has shifted to the "fiscal cliff" - automatic federal-spending cuts and tax increases - which will hit in January unless congress and President Obama can agree on another way to reduce the budget deficit. There is great concern over the fiscal cliff because if these spending cuts and tax increases are implemented, many economists and investors fear it will lead the U.S. back into a recession and would intensify anxiety about the functionality of the U.S. political system. Uncertainty over political turmoil could lead to more stock market trouble which we saw on Wednesday when the Dow Jones Industrial Average fell 312.95 points, or 2.4%. This was the largest decline in both points and percentage terms since June. It shows how investors are still weary about trusting the markets.
Greek Lawmakers Pass Austerity Deal by Alkman Granitsas and Gordon Fairclough, November 8, 2012, Section 1 Page 16, www.wsj.com Greek lawmakers narrowly passed a multibillion-euro austerity package this past Thursday with a 153-128 vote. The package is an effort to win more bailout funds from the European Union but these measures also threaten deepening the country's already severe recession. Controversy surrounded the austerity package which would cut pensions and public-sector wages, forcing federal businesses to lay off thousands of civil servants. Less people in the work force will discourage people from spending money either out of fear of being laid off or those who already have been laid off and no longer have a source of income.
Blue Chips Finish in the Black by Alexandra Scaggs, November 9, 2012, online, www.wsj.com The Dow Jones Industrial average made investors and business nervous earlier in the week when it dropped 312.95 points, or 2.4% after the conclusion of the election. This was the largest decline in both points and percentage terms since June. However, the Dow rose 4.07 points, less than 0.1% throughout the week to finish on the positive end. President Obama has said there will be a conclusion about the fiscal cliff by the year end, but any deal would result in higher taxes on high-income households. Despite the fluctuating markets, the rest of the economy looks promising with high consumer confidence and positive readings on wholesale inventories indicating a spike in spending during the holiday months.
Fed Releases "Stress Test" Instructions by Dan Fitzpatrick, November 10, 2012, Section 2 Page 2, www.wsj.com On Friday, the Federal Reserve began the next round of annual "stress tests" for big banks. These test began in 2009 at the peak of the financial crisis. This process allows the Fed to supervise the "health" of the nation's largest banks in order to insure they are not investing in toxic investments. The new round of stress tests also included is a new opportunity for banks to change their proposals to pay dividends of buyback shares before the Fed decides to approve or reject their capital plans. After the Fed conducts these tests they will release summary results - including capital rations, losses and revenues - for the nation's 19 largest banks. This information will allow investors to see where their investment bank stands an whether or not it is healthily investing, forcing banks to hold themselves accountable as to not loose clients.
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