A rise in food and gas costs drove a measure of wholesale prices in May. But outside those volatile categories, inflation was mild.
The Labor Department said the producer price index rose 0.5 percent in May from April, nearly offsetting a 0.7 percent decline in April from March. Gas prices rose 1.5 percent last month, and food costs increased 0.6 percent.
The index, which measures price changes before they reach the consumer, has increased just 1.7 percent in the 12 months ending in May. That’s up from a 0.6 percent year-over-year increase in April, the smallest in 10 months.
Core prices, which exclude the food and energy, rose just 0.1 percent in May. They are up 1.7 percent in the past year, below the Federal Reserve’s 2 percent inflation target.
U.S. employers added 175,000 jobs in May, steady hiring but below the more robust pace that took place during the fall and winter.
The Labor Department says the unemployment rate rose to 7.6 percent from 7.5 percent in April. The increase occurred because more people began looking for work, a good sign.
The government said the economy added 12,000 fewer jobs in April and March.
Employers have added an average of 155,000 jobs in past three months, below the average of 237,000 created from November through February.
The modest gains likely mean the Federal Reserve will continue its bond purchases. The Fed has said it will maintain its pace of bond purchases until the job market improves substantially. The purchases have helped drive down interest rates and boost stock prices.
Average U.S. rates on fixed mortgages fell to fresh record lows this week, a trend that is boosting home sales and aiding the housing recovery.
Mortgage buyer Freddie Mac said Wednesday that the average rate on the 30-year loan dipped to 3.31 percent, the lowest on records dating back to 1971. That’s down from 3.34 percent last week, the previous record low.
The average on the 15-year fixed mortgage also dropped to 2.63 percent. That’s down from 2.65 percent last week and also a new record.
The average rate on the 30-year loan has been below 4 percent all year. It has fallen further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.
Home sales and construction are rising, providing a much-needed boost to the economy. Home prices are also increasing, which makes consumers feel wealthier and more likely to spend.
Lower rates have also persuaded more people to refinance. That usually leads to lower monthly mortgage payments and more spending. Consumer spending drives nearly 70 percent of economic activity.
Still, the housing market has a long way to a full recovery. And many people are unable to take advantage of the low rates, either because they can’t qualify for stricter lending rules or they can’t afford the larger down payments that many banks require.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans also remained at 0.7 point.
The average rate on a one-year adjustable-rate mortgage ticked up to 2.56 percent from 2.55 percent. The fee for one-year adjustable-rate loans rose two-tenths to 0.5 point.
The average rate on a five-year adjustable-rate mortgage 2.74 percent, the same as the previous week. The fee was unchanged at 0.6 point.
Federal authorities in Philadelphia say an airport baggage handler has been charged with stealing $20,000 in a new type of $100 bill never released to the public.
Prosecutors say Alex Price was working Oct. 11 when a US Airways flight arrived from Dallas carrying millions of dollars in the new $100 bill. The theft of $20,000 was reported after the shipment arrived at the Federal Reserve facility in East Rutherford, N.J.
An FBI agent alleges in court documents the 25-year-old Price said he was the only handler with direct access to the cash. The FBI says after a polygraph examination Tuesday he confessed and led authorities to the missing money hidden in his car.
No listed telephone number for Price can be found. It’s unclear if Price has an attorney.
Federal authorities have arrested a man they say was plotting to blow up the Federal Reserve building in New York City, just blocks from the World Trade Center site.
Authorities say 21-year-old Quazi Nafis was arrested Wednesday morning after a sting operation that involved the FBI and New York Police Department. The suspect parked a van filled with what he believed were explosives outside the building and tried to detonate it.
But his associates were actually undercover officers who arrested him at the scene — and the bomb was not real.
Federal prosecutors say the man was monitored closely by the FBI in New York and members of the Joint Terrorism Task Force, and the public was never in danger.
The House voted Wednesday to give Congress greater scrutiny over the monetary policy decisions of the Federal Reserve, approving legislation sponsored by longtime Fed nemesis Rep. Ron Paul.
The 76-year-old Texas Republican, who is retiring at end of this session, has made a career of trying to do away with the Fed, which he blames for the growth of government and the rising federal deficit. Failing to accomplish that, he has pushed to make the independent central bank’s operations more transparent.
“I know when people talk about independence and having this privacy of the central bank, it means they want secrecy, and secrecy is not good,” Paul said.
“Congress has rightly insulated the Fed from short-term political pressures,” Rep. Steny Hoyer of Maryland, the House’s second-ranked Democrat, said in opposing the legislation. “This bill increases the likelihood that the Fed will make decisions based on political rather than economic considerations, and that is not a recipe for sound monetary policy.”
The legislation, which passed 327-98, would require the Government Accountability Office, the investigative arm of Congress, to carry out comprehensive audits of the Fed’s Board of Governors and 12 regional banks.
The Fed is subject to annual financial statement audits and the Dodd-Frank Act passed after the 2008 Wall Street meltdown does have provisions, backed by Paul, for auditing certain Fed activities. But the new legislation goes further in requiring inspections of the bank’s monetary policy decision-making, including its agreements with foreign central banks and Foreign Open Market Committee directives.
Fed Chairman Ben Bernanke, in an exchange with Paul last week at a House Financial Services Committee hearing, objected to the legislation, saying it threatens the Fed’s independence because it would allow Congress to request documents supporting changes in interest rates. He said that could make some Fed policymakers hesitant to support changes and “that is very concerning.”
Paul rejected that argument, asking when “did we get into a situation where Congress has nothing to say about trillions and trillions of dollars?”
Paul, a libertarian and three-time president for Congress, opened that hearing by saying the “loose monetary policy” of the Fed was largely responsible for destroying the nation’s work ethic by creating a dependence on government largesse, allowing the government to engage in wars around the world and subjecting Americans to a mammoth bureaucracy that grinds away at personal rights.
“If Congress were really serious about limiting the size of government it would eliminate the most important enabler of government profligacy by ending the Fed,” he said in a statement.
The bill faces an uncertain future in the Senate. The sponsor of the Senate’s companion bill is Paul’s son, tea party favorite Sen. Rand Paul, R-Ky.
Futures are mixed as investors overlooked a bevy of ugly quarterly earnings on the growing belief that the Federal Reserve will soon step in to revitalize the economy.
Dow Jones industrial futures are up 108 points to 12,632 and the broader S&P futures have added 6.3 points at 1,335.80. Tech heavy Nasdaq futures are down 7.75 points at 2,540.75 after surprisingly weak earnings from Apple and Netflix.
Apple shares fell more than 4 percent in premarket trading Wednesday after the company revealed in its earnings report that consumers, leery of the course of the economy, are buying lower end versions of iPads and iPhones.
It was Apple’s slowest growth in two years and also a rare miss as it fell short of Wall Street expectations.
U.S. industrial production rose in June as factories made more cars, machines and business equipment, the Federal Reserve said Tuesday. Factory output recovered to levels reached earlier this spring but appears to be leveling off.
Factory output rose 0.7 percent last month, after falling by the same amount in May, the Fed said. Factories produced more machines and vehicles used by businesses. Production of consumer goods edged higher. Auto production rebounded after its first decline of the year.
Overall industrial production, which includes mining and utilities, rose 0.4 percent in June. Mining activity increased 0.7 percent, while utility output fell 1.9 percent.
June’s strong results follow a period of shaky growth for the factory sector, which is a crucial contributor to economic expansion. Factory output fell in two of the past four months.
“The trend has downshifted,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “I wouldn’t extrapolate the rebound in June as a sign that momentum is picking up again.” Factory growth slowed in the second quarter to an annual rate of 1.4 percent, after leaping 9.8 percent in the first quarter, O’Sullivan noted.
Other indicators of factory output also have weakened. A manufacturing survey by the Institute for Supply Management fell in June for the first time in nearly three years. Indexes for exports, production and new orders all softened.
Demand for exports has weakened in recent months as Europe battles a deep recession and China’s economy grows more slowly.
U.S. consumers are spending sluggishly, creating less new demand for factory goods. Americans spent less at retail businesses in June for the third straight month, the Commerce Department said Monday. It was the first three-month decline for retail sales since the height of the financial crisis.
Most other economic data also weakened in the April-to-June quarter. Job growth slowed to a crawl in part because manufacturers hired fewer new workers.
U.S. industry was operating at 78.9 percent of its total capacity, the same level as April. It dipped to 78.7 percent in May.
Factory output has increased 15.5 percent since its recession-era low, reached in June 2009. It remains 2.9 percent below its pre-recession peak, reached in June 2007.
SAN FRANCISCO (Reuters) – The U.S. Federal Reserve is prepared to pull back on its super-easy monetary policy when the time is right, keeping inflation under control as it has during the tepid recovery,
See all stories on this topic »
The number of people seeking U.S. unemployment benefits fell last week, but the level of applications remains too high to signal a pickup in hiring.
The Labor Department said Thursday that weekly applications fell to a seasonally adjusted 386,000. That’s down from 392,000 the previous week, which was revised up. The four-week average, which smooths week-to-week fluctuations, was mostly unchanged at 386,750.
Applications are a measure of the pace of layoffs. When applications rise above 375,000, it generally means that hiring isn’t strong enough to rapidly lower the unemployment rate.
Applications fell steadily over the winter, and monthly job gains soared. But since then applications have edged up and hiring has slowed, raising concerns about the recovery.
Employers added an average of only 73,000 jobs per month in April and May. That’s much lower than the average of 226,000 added in the first three months of this year.
Other recent indicators have painted a mixed picture of the economy.
A closely watched private survey released this week showed consumer confidence fell in June for the fourth straight month. The Conference Board said worries about the job market outweighed lower gas prices and steady improvement in the housing market.
And U.S. manufacturing activity, which has helped drive growth since the recession ended three years ago, has weakened. Factories produced less in May than April, the Federal Reserve said this month. Automakers cut back on output for the first time in six months. In June, manufacturing activity barely grew in the New York region and contracted sharply in the Philadelphia area, according to surveys by regional Federal Reserve banks.
Also affecting the U.S. economy is Europe’s debt crisis, which has dampened demand for American exports. And consumers barely increased their retail spending in April and May.
But there have been hopeful signs.
U.S. factories received more orders for long-lasting manufactured goods in May, while a key measure of business investment plans rose.
And the housing market is looking a little better. Home sales are up from last year, home prices are rising in most cities and homebuilders are planning to break ground on more projects in the next 12 months.
Still, the Federal Reserve has cut its forecast for the year. It now expects growth of just 1.9 percent to 2.4 percent for 2012. That’s half a percentage point lower than the range it estimated in April. The Fed also says unemployment won’t fall much further this year than it has.