Fed Acts to Fix Jobs Market
Wall Street Journal
(09/14/12) Jon Hilsenrath; Kristina Peterson
The Federal Reserve on Thursday launched an aggressive program to spur the economy and boost employment through open-ended commitments to buy mortgage-backed securities and a promise to keep interest rates low for years. The most significant of its new moves entails the central bank purchasing $40 billion of mortgage-backed securities every month and continuing to buy them until the job market improves—an unusually strong commitment by the Fed. “If the outlook for the labor market does not improve substantially, the [Fed] will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ other policy tools as appropriate until such improvement is achieved in a context of price stability,” the Fed said in its postmeeting statement.
That statement was unusual in that it explicitly linked future decisions to improvement in the job market. Bernanke noted Thursday that the longer people are out of work, the more difficult it can be to return to the job market.
Economists polled by the Wall Street Journal
prior to the Fed’s decision said that a theoretical $500 billion Fed bond-buying program would cut the 8.1% unemployment rate by just 0.1 percentage point in a year’s time. Bernanke acknowledged the point and provided a comprehensive response. “I personally don’t think [the bond-buying program] is a panacea,” he said. “I personally don’t think it is going to solve the problem” of weak growth and high unemployment. But, he said, the Fed could help to “nudge the economy in the right direction” with its program.
Fed: Unemployment Won’t Reach 7% Until 2014
(09/13/12) Steve Goldstein
The U.S. Federal Reserve is forecasting the unemployment rate will fall to a range of 7.6% to 7.9% in 2013 and to a range of 6.7% to 7.3% in 2014, from 8.1% in August. The Fed also for the first time forecast 2015 levels, when it sees the unemployment rate falling to a range of 6% to 6.8%. Federal Reserve members have shifted their thinking of when the first rate hike would be appropriate to 2015, according to the latest assessments released Thursday. There are now 12 of the 19 Federal Open Market Committee members who think the first hike will be in 2015; in June, only six felt 2015 was the correct time.
Airbus Parent EADS and BAE in Talks
Wall Street Journal
(09/13/12) Daniel Michaels; Dana Cimilluca
Airbus parent company European Aeronautic Defence & Space Co. and BAE Systems are in merger talks to create the world’s largest aerospace company. The two European defense giants say a deal makes financial sense because of their synergy and collaboration on a broad array of projects. The potential merger would have wide-sweeping effects across the defense industry, especially for such larger defense contractors as Lockheed Martin Corp. and Northrop Grumman Corp., as BAE and EADS have divisions in the U.S. and often vie for U.S. defense work. In the days to come, the Pentagon will definitely be weighing the benefits of an enlarged global rival to a shrinking pool of domestic contractors with the national security issues that arise when overseas companies attempt to expand in the world’s biggest military market. For jet maker Boeing Co., meanwhile, the threat of the parent of rival Airbus bulking up raises the question of whether it might restart talks with BAE Systems or expand its own defense business via a long-rumored tie with Northrop Grumman.
Rival Gang Members Hired by Same Temporary Staffing Firm Fight on Break
CBS 2 Chicago
Members of rival gangs hired by the same temporary staffing firm were involved in a shooting Tuesday night while they were on break from their job at a coffee company warehouse. When the warehouse supervisor discovered what had transpired he called the police. Seven individuals were taken into custody.
Industrial Production Slumps 1.2% in August
(09/14/12) Steve Goldstein
Industrial production fell 1.2% in August, the largest one-month percentage drop since March 2009, the U.S. Federal Reserve reported today. Hurricane Isaac’s impact on Gulf Coast region output was responsible for 0.3 percentage points of the drop, the Fed said. Economists polled by MarketWatch had expected a 0.3% drop for August. July’s growth was revised down to 0.5% growth from a previously estimated 0.6% rise.
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