On Thursday evening President Obama urged Congress to pass a $450 billion plan to boost jobs and the economy. Part of the plan encouraged a tax cut for small business owners on payroll taxes as well as the extension and lowering of payroll taxes on workers. Tax benefits were offered for small businesses hiring new workers. He also sought to extend unemployment benefits another year and, of course, to spur infrastructure building, as reported by the Associated Press. It is unclear how the speech was received but Asian markets are down on Friday.
Dow down 119 after Bernanke's speech
In a speech to the Economics Club of Minnesota on Thursday, Federal Reserve Chairman Ben Bernanke hinted at no new action regarding the economy, causing the markets to fall 119 points, closing at 11,295, according to the Wall Street Journal. Bernanke indicated the Fed will consider various options to spur the economy at its meeting on September 20-21. Additional bad news spurred the market including a lowered growth forecast issued by the European Central Bank for Eurozone countries which had caused the European markets to crash earlier in the day.
Consumer borrowing increases
The Federal Reserve indicated that consumer borrowing was up for the 10th straight month in July, rising $12 billion. The Associated Press indicates that much of the borrowing was related to school and auto loans. The seasonally adjusted annual level of consumer debt in the U.S. is currently $2.4 trillion.
Bank of America predicted to lay off 40,000
The Wall Street Journal predicts that Bank of America cutbacks will include the layoffs of 40,000 employees. Chairman Brian Moynihan is promising to lower quarterly expenses by $1.5 billion.
Mortgage rates lowest since 1950's
USA Today indicates that mortgage rates are currently similar to the rates seen in the 1950's with a 30 year fixed rate averaging 4.12%, last seen in 1971. A fifteen year fixed rate is at 3.3%. The challenge is that few individuals can qualify for the loans. Banks are requiring a 700 plus credit rating and 20% down for purchases.
China's inflation rate eases
China's inflation rate eased to 6.2% in August, down from 6.5% in July, according to the Associated Press. While this percentage is still higher than the 4% desired by the Chines government, it indicates that some of their austerity measures, such as increased interest rates, seem to be working. One of the Chinese inflation drivers is the cost of food. In August, however, food prices climbed only 13.8%, down from 14.8% in July.
Major power outage in Southwest
A power outage impacting the grid in the Southwest and Mexico has left 2-6 million households without power. The outage was caused by a transmission failure from a switching station in Arizona. A worker was replacing a faulty part. It is estimated that 1.4 million households will be out of power until sometime Friday.