Thanks for nothing, Corporate America

But this is hardly cause for celebration. The surge in profits isn't doing much to boost the economy.

Gross domestic product rose at just a 2.5% annualized clip in the third quarter. The good news is that's better than an earlier estimate of 2%. The bad news is that this level of growth is still subpar, especially coming off a series of gigantic quarterly declines in GDP in 2008 and 2009.

What's more, the labor market is far from being healthy. Sure, initial claims are at their lowest level in about two and a half years.

But the unemployment rate has been stuck at 9.6% for the past three months and few expect it to fall below 9% anytime soon. Heck, the Federal Reserve even indicated Tuesday that unemployment is unlikely to return to a more normal rate of around 7% until 2013.

This is, to put it mildly, troubling.

It will be difficult for the economy to improve in a meaningful way until there are fewer people out of work. Unemployed consumers clearly need to watch their budgets. And even people with a steady paycheck are not likely to spend a lot if they are worried about their own job security.

0:00/2:40Slow economic incline ahead

But companies won't feel compelled to add to their payrolls until they are confident that consumers are going to spend a lot more -- which probably won't happen until the job market improves.

So Corporate America faces the proverbial chicken vs. egg conundrum.

They can continue to cut expenses to the bone and work existing employees even harder. Hooray for productivity gains!

Or companies can start hiring more people with the hopes that more gainfully employed Americans eventually will lead to higher demand for their products and services. Good luck with that.

The real problem: income inequality

Companies can point to the fact that demand isn't robust enough to add more staff. According to estimates from Thomson Baseline, revenues for companies in the S&P 500 are expected to increase, on average, by 9% in 2010. But sales growth is forecast to slip to 7% next year.

"Revenue growth is still sluggish so companies think the lack of hiring is a rational response," said Peter Cohan, president of Peter S. Cohan and Associates, a venture capital and management consulting firm in Marlborough, Mass.

"Companies are going to squeeze more out of their existing work force. The pressure is on workers since unemployment is so high. People have to grin and bear it," Cohan said.

Jason Tyler, senior vice president and director of research operations at Ariel Investments in Chicago, agrees.

Tyler points out that as long as the average American worker is nervous about the economy, spending won't rebound strongly enough to make companies consider major headcount expansions.

"I don't think that we are going to see hiring coming back fast. It will take a long time to get back to what everyone will consider a good job market," he said.

"It's not just the fact that about 9.5% of people are out of work but the effect it has on people that are employed. Spending is so dramatically reduced by fears of losing a job and not being able to replace it," he added.

So is there any good news about the job market and economy to be gleamed from record profits? Yes. Cohan said one reason companies are doing well is because of stronger demand from emerging markets like China, India and Brazil.

Cohan said companies will need to hire more people if they want to continue expanding in those hotter growth markets. The catch, of course, is that many of the jobs will be in those local markets.

But if U.S.-based multinationals are going to make a bigger effort to sell their wares abroad, surely they will need some people in the United States. And if a couple of big firms start hiring more workers, other companies could soon do the same.

"If you notice anything about how corporations work, it's that businesses do have a certain herd mentality," said Cohan. "If one company does something, others quickly follow. That's usually what happens."

Tyler isn't so sure. He said that companies are likely to remain enamored with their expanding earnings and will be unwilling to spend a lot more on new employees until they're certain the economy is really on the mend.

"Earnings can keep growing at a good rate longer than people think. Small revenue gains can lead to dramatic profit gains," he said. "The reason is that companies are still so shell-shocked because of the recession. Nobody wants to add a lot of expenses," he said.

"Profit growth is going to be a lot faster than GDP growth for a long time," Tyler added.

In other words, corporate executives can count their blessings this holiday season. And they probably will again next year. Too bad it may be at the expense of the rest of us.

Gobble gobble gobble. Have a Happy Thanksgiving, everyone. The Buzz will be back on Tuesday, November 30.

- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney.com, and Abbott Laboratories, La Monica does not own positions in any individual stocks.  

Hospitals reach out to suburbs for outpatient dollarsTemp hiring is back. Is a jobs recovery next?

Huge drop in unemployment claims

"For the 80% of America that is participating in this recovery, it's time to take out the champagne and have a very nice holiday, because things are improving," said John Silvia, Wells Fargo chief economist.

Economists surveyed by Briefing.com had expected initial claims to rise slightly to 442,000.

The weekly measure has been stuck in a rut since last year, hovering in the mid to upper 400,000s and even ticking slightly above 500,000 in mid-August. Economists usually say the number needs to drop below 400,000 before the stubbornly high unemployment rate -- which currently stands at 9.6% -- can drop significantly.

A number as low as 407,000 is as close to that level that the data has gotten since July 2008, when there were 405,000 initial claims.

"The level is getting close to breaking the 400,000 barrier, and that's a breakthrough in terms of the trend," Silvia said.

Silvia also rules out the idea that the report could be just an upbeat blip in the data. For four of the last five weeks, the number has stayed below 440,000, and many economists are taking that as a sign that the job market is showing consistent improvement.

The four-week moving average, calculated to smooth out volatility, totaled 436,000, down from the previous week's revised average of 443,500.

Silvia also said Wednesday's data is positive enough to cause economists to significantly raise their estimates for the government's closely-watched monthly jobs report, due out next Friday.

The report showed the U.S. economy created 151,000 jobs in October, and economists are hoping even more were created in November.

0:00/5:24The unemployed get jobs

The number of people continuing to file unemployment claims for a second week or more fell to 4,182,000 during the week ended Nov. 13, the most recent data available. That's down a whopping 142,000 from a revised 4,324,000 the week before, and the first time in two years that the number has slipped below the 4.2 million mark.

The report comes a day after Federal Reserve officials offered little hope for the job market going forward. The central bank said the unemployment rate will likely remain high between 8.9% to 9.1% in 2011. 

Layoffs are slowing but jobs growth still weakJobless claims fall below 450,000

Job Growth

"It's maybe an indication that we're starting to turn the corner," said Stephen Bronars, senior economist with Welch Consulting. "It's a small step, but at least we're going in the right direction. Things are definitely not going to get worse."

Businesses continued to hire for the tenth month in a row, following nearly two straight years of private sector losses. Companies added 159,000 jobs to their payrolls in October, much stronger than the 92,000 jobs economists had predicted for the sector.

But the government continued to slash jobs, shedding 8,000 workers in the month.

Only a handful of census workers were cut from government payrolls in October -- nearly the last of the temporary census jobs that have dragged down public sector job growth for the last four months.

And upward revisions for August and September showed there were 110,000 additional job gains in those months than previously reported.

0:00/2:58Business etiquette helps job search

The unemployment rate, which is calculated in a separate survey, remained unchanged at 9.6%, the government said Friday.

President Obama praised the numbers in an address following the announcement, but emphasized that more improvement is needed.

"We've now seen four months of private-sector job growth above 100,000, which is the first time we've seen this kind of increase in over four years," he said. "That's not good enough. The unemployment rate is still unacceptably high and we've got a lot of work to do."

Americans still struggling

While the report was a generally positive sign, the job market is still very fragile. The labor market needs about 150,000 jobs per month just to keep pace with population growth, and at least 300,000 per month to make a dent in unemployment, Bronars said.

Unemployment is likely to remain high for some time. The rate doesn't include 1.2 million discouraged workers who've stopped looking for a job.

"There are still a lot of people who have stopped looking for work because there weren't as many hires, and as they come back in, it's going to keep that unemployment rate high for a while," Bronars said.

The number of Americans who are involuntarily working part-time, fell to 9.2 million in October but still remains just shy of record highs. This category includes workers who are stuck in part-time jobs because either their hours have been cut or they can't find full-time work.

The so-called underemployment rate, which counts both discouraged workers and involuntarily part-time workers, slipped to 17% from 17.1% in September. That means more than one in six adults are still without the job they want or need. 

Job GrowthLaid-off workers pick up hot skills

Home Prices

It was, said David Blitzer, spokesman, "a disappointing report ... indicating that the housing market continues to bounce along the recent lows."

The year-over-year rise fell short of expert expectations as put together by Briefing.com, who predicted a 2% year-over-year rise.

12 cities: Where to buy vs. rent

One city that bucked the trend was Las Vegas, where prices inched up 0.1% month-over-month. However, it continued to be the worst performer compared to last year, with prices down 4.5%. Prices in Sin City are down 57% from their peak, which was reached in August, 2006.

Detroit scored the best monthly gain, up 0.5%; San Francisco was up 7.8% year-over-year, the most of any city.

Dallas had the worst month of any of the 20 metro areas: Prices fell 1.1% there. 

Home PricesFed’s hand strengthens on tame inflation data

GOP ready to fight over global warming

Shimkus is now one of four contenders to head the House Committee on Energy and Commerce when the Republicans take the reins in January.

Also vying for the leadership post: Rep. Joe Barton of Texas, who apologized to BP for what he called a White House "shakedown" when it agreed to establishing the $20 billion Gulf oil spill trust fund; Rep. Cliff Stearns of Florida, who wants to open up Alaska's wildlife refuge to drilling; and Michigan's Fred Upton.

Upton is considered the front-runner and probably the most moderate of the bunch. He has vowed to eliminate an offshoot of the committee, the House Select Committee on Energy Independence and Global Warming.

"The American people do not need Congress to spend millions of dollars to write reports and fly around the world," Upton wrote in a recent editorial. "We must terminate this wasteful committee."

The new Congress is not expected to do much on the energy front. A broad plan to regulate greenhouse gas emissions and use the revenue to fund alternative energy -- known as cap-and-trade -- is dead.

A spokesman for presumed Speaker of the House John Boehner said Republicans support all forms of energy development, including renewables and nuclear power. But he said any money for them must come from expanded domestic oil and gas drilling -- a prospect that also looks dim given the concerns raised by the BP spill.

Target: EPA

But there is one thing the newly empowered Republicans are sure to go after: the Environmental Protection Agency.

When Obama was pushing his cap-and-trade plan last year, the EPA was quietly working on the sidelines to draft up rules to limit greenhouse gas emissions. Heavily targeted would be power plants, refineries, and heavy industries such as steel and concrete.

The EPA was under court order to do so, having lost a Supreme Court challenge by the state of Massachusetts under the Bush administration. The high court said that if EPA classified greenhouse gases as a public health threat, which it did, then it must regulate them.

0:00/5:58NRG plugs into electric cars

Obama and his advisers claimed they didn't want EPA to regulate greenhouse gases, preferring instead to get the job done with a Congress-approved cap-and-trade plan. But many analysts saw EPA's moves as an implicit threat to lawmakers: pass cap-and-trade or else deal with EPA.

But cap-and-trade failed. Now the Republicans -- along with many coal-state Democrats -- are scrambling to stop the "or else" part of that equation.

"Unquestionably, there will be more oversight of the EPA," said Roger Patrick, an environmental lawyer at Mayer Brown. "The president might even sign a bill to limit EPA's authority."

Republican lawmakers have made their intent clear.

"The EPA is working on a regulatory train wreck," wrote Upton. "If the EPA continues unabated, jobs will be shipped to China and India as energy costs skyrocket."

Obama has been a bit more ambiguous.

In a speech following the big Democratic losses this past election day, the president said, "I think EPA wants help from the legislature on this. I don't think that, you know, the desire is to somehow be protective of their powers here."

But others question just how much interference from Congress Obama wants.

"The administration will not want to open up a major rift with liberals and environmentalists over this, particularly as it seeks to energize its base looking ahead to 2012," said Divya Reddy, an energy policy analyst at the Eurasia Group, a political risk consultancy.

Just last week, EPA issued guidelines for greenhouse gas emissions that will take effect this January. The guidelines were not particularly strict, which analysts took as a sign that the agency was willing to work with industry, but also as a sign that it plans on pressing ahead with its plan to regulate these gases

It seems that dealing with EPA is becoming a reality.  

No money, no nukesCar regulators aim for higher fuel economy

Flying for the holidays won't be cheap

The days of cheap holiday plane tickets are over, he said. Airlines have been cutting capacity in the last couple years in response to the lower demand. They've been cutting costs by offering fewer flights, and therefore fewer seats, meaning fewer choices for travelers as demand picks back up.

Opinions differ as to the severity of the fare increases. Genevieve Shaw Brown, senior editor for Travelocity, said that domestic air fares are higher by 5% for the December-January season, averaging $421 round trip. She said that international flights are up by 11%, for a round-trip average of $894.

Seaney's estimate is much higher. He said that fares are up by 17% for the December-January holiday season compared to last year. He based that calculation on 1,200 routes through the 50 busiest airports in the U.S.

Holiday travel tips - CNN

Seaney said the increase is so dramatic because air fares are recovering from a 2009 bottom caused by slumping demand from the ongoing recession.

Air fares and travel volume are also higher for the Thanksgiving holiday, according to forecasts. The Air Transport Association forecasts an increase of 3.5% in travel volume for the Thanksgiving period, compared to last year. AAA said that Thanksgiving air fares are up 4% from 2009.

0:00/3:29Holiday travel just got pricier

As a result of the lower capacity and packed flights, Brown of Travelocity said that the old trick of holding out for last-minute deals no longer applies. Airlines are unlikely to have empty seats in need of filling, she said.

"Over peak holiday travel, it doesn't make much sense to roll the dice and wait to book your tickets," she said. "It's just very unlikely that prices will drop over a high demand period.It's really just in your best interest to book as far ahead as possible for the holidays."  

Black Friday 2010: Slashing prices like crazyHoliday airfares climb higher

Consumer Confidence

High unemployment and unfavorable business conditions have dragged the index down to a painfully low level, far below 90 -- the level which indicates a stable economy. Overall, the index has been volatile, not trending in any one direction for more than three months in a row this year.

"Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels," Lynn Franco, director of The Conference Board Consumer Research Center said in a release.

Economists surveyed by Briefing.com had expected the index to barely tick up to 49, so the news was a bit better than expected.

In October, the number of consumers calling business conditions "bad" outweighed those saying conditions are "good" by nearly five to one, slightly better than the month before, when that ratio was six to one.

0:00/3:54Why companies aren't hiring

Those saying jobs are "hard to get" rose, still far outnumbering those who say jobs are "plentiful."

Consumers continued to have a predominantly gloomy attitude about both future employment prospects and business conditions, but were slightly more optimistic on those fronts than last month.

The consumer confidence index is based on a survey of 5,000 U.S. households and is closely monitored because consumer spending drives two-thirds of the nation's economic activity.

A reading of 100 or greater would indicate strong growth, and the index has not reached that level since mid 2007.  

Fed’s hand strengthens on tame inflation dataConsumer Confidence

China raises reserve requirement again

But China's central bank didn't touch interest rates. There has been much speculation around the world about a possible rate hike by China, and that has some investors on edge.

The reserve ratio increases are one method China can use to keep its strong economy from overheating.

But China's tightening comes as the Federal Reserve plans for more quantitative easing. The Fed plans to inject money into the economy by buying $600 billion in long-term Treasuries over the next eight months.

The Fed's plan has been attacked by many politicians and economists as a program that effectively undermines the value of the dollar. At the same time, U.S. officials have also been critical of China for keeping its own currency, the yuan, artificially low.  

Trade gap widens on record deficit with ChinaAfter election, market faces rare trifecta

Bernanke: Fed's right on stimulus, China

While praising the global coordination that helped pull the world's economies back from the brink of collapse, Bernanke said the sense of common purpose that resulted has "waned" and that tensions among nations have "intensified."

Bernanke's principal complaint is that officials in emerging markets have prevented the appreciation of their currencies to the detriment of developed economies -- the same argument employed by Obama administration officials in recent weeks in criticisms of China.

"The strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy," Bernanke said.

The new global economy

Bernanke also defended the Fed's decision earlier this month to pump $600 billion into the financial system by purchasing U.S. Treasuries. Central bank officials from many U.S. trading partners, including Germany, have criticized the plan for potentially dangerous side effects.

Bernanke acknowledged the rancor, but argued that additional stimulus is necessary given persistently high levels of unemployment in the United States, particularly among those who have been out of work for long periods of time.

"In taking that action, the Committee seeks to support the economic recovery, promote a faster pace of job creation, and reduce the risk of a further decline in inflation that would prove damaging to the recovery," he said.

Bernanke stressed that the Fed has the tools to drain money from the economy if necessary. He also noted that the Fed purchased Treasuries and other assets "on a large scale" during the financial crisis, which he said "appears to have been quite successful in helping to stabilize the economy and support the recovery during that period."

Bernanke argued that the Fed's action is rooted in conventional monetary policy.

"Even the asset purchases, the quantitative easing, done by the British, the Americans, the Japanese has some pretty classic roots to it," he said during the question and answer portion of the conference.

Some developing nations have blasted the United States for labeling China a currency manipulator, while also pursuing a policy that effectively undermines the value of the dollar. In response, Bernanke said the dollar's recent decline was a reflection of its safe-haven appeal in the currency markets, adding that fostering economic growth will eventually restore the currency's strength.

0:00/2:38Bernanke: Fed buys improved economy

Bernanke also acknowledged criticism from officials in developing countries such as Brazil, who worry that the extra liquidity being pumped into the system will inflate asset bubbles in emerging markets.

He noted that there has been a recent increase in capital inflows to such nations but suggested that it was due more to differences in currency exchange rates, particularly among nations that devalue their currencies.

To that end, Bernanke also discussed the challenges created by the "two-speed nature" of the global economic recovery, in which emerging markets are growing much faster than established ones.

The "bifurcated" recovery is making it difficult to coordinate economic policies, he said, and is fueling tensions between nations that have large deficits and those that are running surpluses.

While world leaders were united by a common cause during the global financial crisis, Bernanke warned "that sense of common purpose has waned" as the world economy has recovered at an uneven pace.

"Tensions among nations over economic policies have emerged and intensified, potentially threatening our ability to find global solutions to global problems," he noted. 

What is currency manipulation?China currency report delayed

Wagoner had to go, but did Rattner have to save GM?

In the other corner is former auto czar Steve Rattner. He insists the government was right to fire Wagoner in 2009 as part of the U.S.'s $50 billion bailout of the automaker. In his book "Overhaul" he presents GM's market-share erosion, its $82 billion in financial losses and Ford Motor Co.'s (F, Fortune 500) turnaround sans government assistance as proof that GM management under Wagoner was a bust.

Without the Obama administration's timely actions, Rattner has asserted, GM likely would have been liquidated and the entire U.S. auto industry might have imploded as parts suppliers dependent on GM failed.

To both corners I say: Nonsense.

As someone who has covered GM for more than 25 years, I can only say that its eventual failure had been predicted by analysts, journalists (including Fortune's Carol Loomis), lenders and suppliers for at least a decade. Wagoner was just the latest in a series of GM CEOs who lacked the fortitude and resolve to confront dangers that long threatened the automaker's existence.

Chief among those issues was a bloated cost structure. By 2007 GM was manufacturing several impressive and competitive vehicles, such as the Chevrolet Malibu. But in today's market, even a few great cars can't overcome horrendous health care obligations, duplicative engineering expenses and, quite simply, too many people collecting too much in salaries and benefits.

Wagoner understood the numbers all too well. We discussed them on at least one occasion in 2003 that I remember vividly, because he confessed to me -- with startling candor -- that he didn't know what to do about them.

As management guru Peter Drucker used to preach, the first priority of the corporation is survival. Wagoner and his generation of GM executives either didn't get that or couldn't bring themselves to take the harsh measures they should have in the 1990s that might have forestalled the insolvency of 2008.

How Wagoner might've saved GM; how the government might've avoided owning it

For starters Wagoner could have drawn a line in the sand with the United Auto Workers union early in his tenure. Yes, I know, a prolonged UAW strike might have wrecked the company. But superior diplomacy, such as one has the right to expect from a CEO, might have made all GM stakeholders understand that the automaker was barreling toward a cliff with no brakes.

By the spring of 2009, Wagoner's presence at the helm of GM had become a travesty. Once the automaker was forced to seek a government bailout, his exit -- and that of the GM board -- was essential: GM self-evidently required new leadership.

The government's decision to sponsor bankruptcy and to refinance GM were predicated on the belief that it would be liquidated in bankruptcy, with a loss of a million jobs, the resultant collapse of U.S. auto-parts companies and a downward spiral for the U.S. to economic depression.

An equally logical case can be made that a bankruptcy without government intervention might have attracted investors, creditors or other car companies to bid on the the Chevrolet division, its Chinese operations, GM Europe and many other valuable assets. Weak suppliers might have merged to form stronger units.

But we'll never know. The mythology, per Rattner's telling, is borne out by the fact that the administration's policy to prop up GM directly worked. In a sense he can't be refuted because GM is operating profitably and is back on its feet, albeit with government ownership.

Rattner's argument, however, doesn't prove that a liquidation and restructuring couldn't have "worked," too. GM might have looked quite different than it does today.

Let's not forget that the new GM is still a young company with an uncertain future. If it remains solidly profitable and hangs on to its share of the market, we'll be able to praise the U.S. for the GM bailout with much more credibility than we can today. 

GM raises share priceBankruptcy filings jump 14% in 2010

China battles rising prices

"The authorities should adjust prices promptly and moderately, keep natural gas prices stable and impose temporary price controls on important daily necessities and production materials when necessary," said the statement.

The statement said the government would also strengthen market supervision and crack down on hoarding or speculation in major agricultural products.

Overall, consumer prices have risen 4.4% in the 12 months ending in October, the highest level of inflation since the global financial crisis hit two years ago. That was led by a 10.1% rise in food prices over the same period.

0:00/3:49Chanos: China's treadmill to hell

That pace of price increases is up from 3.6% overall and 8% for food in September. And it stands in stark contrast to weak prices in much of the developed world, which is still struggling with slow growth.

For example, overall prices rose only 1.2% in the United States during the same period, the Labor Department announced Wednesday. When stripping out the increases in volatile food and energy prices, the so-called core inflation posted the smallest rise on record.

The Shanghai composite stock index closed down 2% Wednesday, while the Hang Seng in Hong Kong lost 2%. But markets in Europe and the United States, which fell sharply Tuesday on worries about China taking steps to slow economic growth, were slightly higher in Wednesday trading. 

China hikes interest ratesFed’s hand strengthens on tame inflation data

Massachusetts has the best economy

The index is based on measures of how global, IT-driven and entrepreneurial each state is, as well as how much their economies are based on knowledge and innovation.

A "lack of innovation-based vitality has contributed to our continuing recession," said Robert Litan, Kauffman's vice president of research and policy. States need to focus on "providing the entrepreneurial resources and access that are critical to boosting competitiveness within the global marketplace," he added.

Massachusetts has ranked No. 1 on the Index for the last five years it was produced. Second in the rankings this timeis Washington, cited for its strength in software and aviation -- think Microsoft and Boeing -- its use of digital technology, and its lively entrepreneurial activity in the Puget Sound region. Maryland ranks third -- for the third time running -- for its plethora of knowledge workers, many of them from the Washington, D.C., area. In fourth place is New Jersey followed by Connecticut.

I started a business in paradise!

At the bottom of the index are states with economies that depend on either natural resources or manufacturing. Mississippi is in last place -- it got low marks for workforce education and having relatively few workers in managerial, professional or tech jobs and workforce education. Rounding out the bottom 5 are West Virginia (No. 49), Arkansas (No. 48), Alabama (no. 47) and Wyoming (46).

Wyoming ranked low even though residents saw incomes rise rapidly in recent years. That's because that growth has been largely based on higher demand for and prices of natural resources in the state. "While yielding impressive performance in the short term, this is not a winning strategy for the long run," the report says, because the state's economy becomes too dependent on global price fluctuations.

States should focus on expanding broadband, supporting entrepreneurship, and investing in research, said Robert Atkinson, president of the Information Technology and Innovation Foundation and co-author of the Index. If they did that, he said, "they -- and the nation as a whole -- would be far more globally competitive." 

Car regulators aim for higher fuel economyOil and gas industry fires up drilling

Black Friday 2010: Slashing prices like crazy

The day after Thanksgiving, or Black Friday, is considered to be the unofficial start to the November-December holiday shopping season. Those two months can account for 50% or more of merchants' profits and sales for the full year.

Holiday sales are closely watched because they're a pretty accurate barometer of the health of the economy, since consumer spending fuels more than two-thirds of it.

Shop-till-you-drop? Not quite: The National Retail Federation estimates 2010 holiday sales will increase 2.3% to $447.1 billion, much improved from last year's 0.4% uptick and the dismal 3.9% sales decline in 2008.

Monthly retail sales have increased in four of the past five months and same-store sales, or sales at stores open at least a year, have been on the rise for 14 consecutive months.

Holiday 2010 shopping guide - CNN

"Consumers have endured two years of economic body blows, but have been slowly picking themselves off the mat since last year, despite the employment woes," said Craig Johnson, president Customer Growth Partners, a retail consultancy and research firm.

Marshal Cohen, chief retail analyst with market research firm NPD Group, agreed.

Wal-Mart's Black Friday 2010 ad: Electronics top deals

"More consumers have reconciled with a 10% unemployment rate," said Cohen. "For the 90% of Americans who still have their jobs, and have weathered the recession, they are not as concerned about their future as they were a year ago."

Who is willing to shop a little more freely? Affluent shoppers, men and "Millennials," or Gen X shoppers, said Candace Corlett, president of retail consulting firm WSL Strategic Retail.

But that optimism is tempered.

"Last year marked the beginning of the shrinking gift list," Cohen said. "If you were a distant relative, you got knocked off the list." That shortened list hasn't grown back this year, he said.

0:00/4:58Hot toys for the holidays

"Consumers are shopping with their brakes on," WSL's Corlett said. "They are sticking to stores they can afford and fit their economic situation."

To that end, millions of shoppers will head to discounters first for Black Friday.

Cut prices, and do it first: Merchants are tripping over each other to ensure they have the best and biggest deals -- and to be first.

Wal-Mart (WMT, Fortune 500), the world's largest retailer, is on a mission to dominate not just Black Friday, but the entire holiday shopping season.

Target trots out $3 appliances on Black Friday

For consumers, it's like hitting the jackpot on holiday deals because Wal-Mart's pricing moves are often matched by its competitors.

The retailer has already slashed prices on holiday favorites such as toys and electronics and is offering free online shipping on 60,000 holiday items.

Other retailers have countered by also offering Black Friday-like deals early. Some sellers, such as Toys R Us and Sears (SHLD, Fortune 500), are even opening their stores to bargain hunters on Thanksgiving this year

"A retailer has to become first in consumers' mind or they will lose the sale," Cohen said.

--Are you a Black Friday shopping fanatic? Tell us what you love -- and hate -- about Black Friday. Email your response to parija.bhatnagar@turner.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here . 

Retail SalesMeager increase forecast for holiday retail sales

Buffett to Uncle Sam: Thanks

After describing corporate America in September 2008 as a series of dominoes "ready to topple at lightning speed," Buffett paints the U.S. government as the backstop preventing collapse.

"Only one counterforce was available, and that was you, Uncle Sam," Buffett wrote. "Yes, you are often clumsy, even inept. But when businesses and people worldwide race to get liquid, you are the only party with the resources to take the other side of the transaction."

Members of both the Obama and Bush administrations earn specific praise from Buffett.

"In the darkest of days, Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair grasped the gravity of the situation and acted with courage and dispatch," Buffett writes. "And though I never voted for George W. Bush, I give him great credit for leading, even as Congress postured and squabbled."

And for critics who blame lax government oversight and regulation for the collapse of the housing market, Buffett again defends "Uncle Sam."

0:00/1:56Ask Buffett: Investment decisions

"In truth, almost all of the country became possessed by the idea that home prices could never fall significantly," Buffett said.

"That was a mass delusion, reinforced by rapidly rising prices that discredited the few skeptics who warned of trouble. Delusions, whether about tulips or Internet stocks, produce bubbles," he added.

Berkshire Hathaway (BRKA, Fortune 500), Buffett's company, might have been the last to fall, "but that distinction provided little solace," he said. 

Fed’s hand strengthens on tame inflation dataHome Prices

Home Prices

It was, said David Blitzer, spokesman, "a disappointing report ... indicating that the housing market continues to bounce along the recent lows."

The year-over-year rise fell short of expert expectations as put together by Briefing.com, who predicted a 2% year-over-year rise.

12 cities: Where to buy vs. rent

One city that bucked the trend was Las Vegas, where prices inched up 0.1% month-over-month. However, it continued to be the worst performer compared to last year, with prices down 4.5%. Prices in Sin City are down 57% from their peak, which was reached in August, 2006.

Detroit scored the best monthly gain, up 0.5%; San Francisco was up 7.8% year-over-year, the most of any city.

Dallas had the worst month of any of the 20 metro areas: Prices fell 1.1% there. 

Home PricesNashville area’s median home price is highest in 2 years

U.S. cap-and-trade exchange to shut down

This will effectively end the trading of emissions credits in North America. The exchange will, however, continue some activities until 2012, including the mitigating of emissions in farming and forestry through a crediting process, said McLaughlin.

IntercontinentalExchange (ICE), an Atlanta-based operator of exchanges and markets, confirmed that it is winding down the Chicago Climate Exchange, which is the American part of a larger, international company called Climate Exchange.

IntercontinentalExchange is closing the Chicago operations just months after paying nearly $600 million for Climate Exchange. But the company will continue to operate the Climate Exchange's markets for greenhouse gases in Europe, said spokeswoman Melanie Shale.

0:00/3:47China's coal emissions challenge

Shale said that emissions trading, also known as cap and trade, effectively ended in the U.S. when climate legislation died in the Senate. But it's still going strong overseas, she said.

"It has to do with the current administration and their outlook on the U.S. for cap and trade," said Shale. "Obviously it's a market that's moving forward in Europe."

She added that the Climate Exchange "was purchased for its bigger European business." 

1 big trade led to market plungeU.S.: Yuan still too cheap

Retail Sales

Consumer spending accounts for two-thirds of U.S. economic activity, and related reports such as retail sales are closely watched to gauge the strength of the economy.

Sales excluding autos and auto parts rose by 0.4% from August. Analysts expected sales ex-autos to jump 0.4%.

Strength in auto, electronics and online sales paced the September incline.

Auto and other motor vehicle dealers sales were up 1.6% over August and 19% over a year earlier. Electronics stores reported a 1.5% increase over August, while online stores ticked up by 1%.

"Overall this is a significantly stronger report than expected," Ian Shepherdson, an economist at High Frequency Economics wrote in a research note.

Strong retail sales are another indication that shoppers might be ending their hibernation at just the right time for retailers, who rely heavily on holiday shopping to boost profit.

"It is increasingly clear that we are seeing 'frugal fatigue' give way to 'calculated consumption,' " Marshal Cohen, chief industry analyst at NPD Group said in a statement.

0:00/1:04What do you splurge on?

In a separate report released last week, individual retailers reported strong sales results for September.

Thomson Reuters, which tracks same-store sales for a group of 28 national chains, said total sales for the group rose 2.8% in September.

An important gauge of a retailer's health, same-store sales have been on the rise for 13 months in a row, according to Thomson Reuters. 

Retail SalesTractor Supply income soars

New governors: Budget cuts not tax hikes

While left-leaning advocates fear that the vulnerable will lose their safety nets, their GOP counterparts see the Republican landslide as an opportunity to overhaul state services.

"We'll see sincere dialogue on the role and function of state government and what its priorities should be," said Patrick Gleason, director of state affairs for the Americans for Tax Reform. Governors will "have to make some tough cuts."

Not surprisingly, most winning candidates were long on promises but short on specifics. Many said they would rightsize state governments, but didn't explain how they'd do it.

And even if they've dispatched the Democrats standing in their way, they still have to deal with powerful public employee unions. Some bargaining groups are agreeing to concessions over salary and benefits. But others are not, which governors say force them to make layoffs and deeper budget cuts.

The tug-of-war between raising taxes or cutting spending has been waged for the past three years, as the Great Recession decimated tax revenues.

I spent a gazillion dollars and still lost the race

Since Democrats had control over 16 governor's mansions and statehouses in 2010, they favored raising taxes to spare devastating cuts to state programs. States have increased taxes by more than $32 billion over the past two years, said Todd Haggerty, policy associate at the National Conference of State Legislatures.

But Tuesday's election led to a stunning reversal of control. Republicans will now run 20 states, up from only nine. The GOP also captured more than 675 seats in state legislatures.

These newly elected officials, along with the incumbents, are staring at budget gaps totaling least $72 billion for fiscal 2012, which starts in July in most states, according to the state legislatures group.

Not only do tax revenues have yet to recover, but states must contend with the end of federal stimulus assistance for Medicaid, certain education expenses and other safety net programs.

What they want to do

Ohio Gov.-elect John Kasich pledged during his campaign that he would reduce taxes. His answer to solving the budget problem is to make the state more business-friendly, which will result in greater revenues.

Kasich also wants to reduce the size of the state government by reforming programs and shedding those that don't work, said his press secretary, Rob Nichols. Though he didn't provide many specifics, Nichols said everything would be examined.

The governor-elect said the election gave him a mandate to overhaul state services. He will have to tackle a budget gap is estimated to be between $4 billion and $10 billion.

"We took a step forward to shrinking government and making it better," Kasich said in his acceptance speech. "Ohio has said it wants to run our state in a new way."

In Pennsylvania, Gov-elect Tom Corbett has called for reducing state administrative operations by 10% and for cutting the state automotive fleet by 20%, which would save $140 million over 10 years. He also wants to eliminate per diems given to certain state workers and require all elected officials to contribute to their health care coverage.

0:00/5:26Texas governor fed up with D.C.

Republicans now control the governor's mansion and both houses, ousting Democrats who ran all three. They will have their work cut out for them since they are facing a budget gap of at least $2.4 billion and Corbett has promised not to raise taxes.

"We have the opportunity to bring fiscal discipline to Pennsylvania, to bring limited government and to bring free enterprise to Pennsylvania," Corbett said in his acceptance speech.

Republicans, however, aren't the only ones calling for a freeze in tax hikes. New York Gov.-elect Andrew Cuomo has also pledged not to raise corporate or personal taxes or sales taxes, even though the state is facing a $10 billion deficit. He also wants to put a ceiling on local property tax increases.

To get the Empire State's fiscal house in order, Cuomo said he would freeze salary increases for state employees and impose a cap on state spending. He would also reduce the number of state agencies, commissions and authorities by at least 20% through consolidation or elimination.

He also wants to take over the administration of Medicaid from the counties, in hopes of better controlling participants' use of the program. And Cuomo wants to reduce ever-escalating pension costs by providing less generous benefits to new hires.

The governor-elect also wants to boost job growth by providing a $3,000 tax break for companies who hire the unemployed and by reducing the cost of doing business in the state.

"We can't raise taxes because we will never attract jobs if New York is the tax capital of the nation," he said in a video address last week. 

GM raises share priceCalifornia to workers: It’s minimum wage for you

Consumer Confidence

High unemployment and unfavorable business conditions have dragged the index down to a painfully low level, far below 90 -- the level which indicates a stable economy. Overall, the index has been volatile, not trending in any one direction for more than three months in a row this year.

"Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels," Lynn Franco, director of The Conference Board Consumer Research Center said in a release.

Economists surveyed by Briefing.com had expected the index to barely tick up to 49, so the news was a bit better than expected.

In October, the number of consumers calling business conditions "bad" outweighed those saying conditions are "good" by nearly five to one, slightly better than the month before, when that ratio was six to one.

0:00/3:54Why companies aren't hiring

Those saying jobs are "hard to get" rose, still far outnumbering those who say jobs are "plentiful."

Consumers continued to have a predominantly gloomy attitude about both future employment prospects and business conditions, but were slightly more optimistic on those fronts than last month.

The consumer confidence index is based on a survey of 5,000 U.S. households and is closely monitored because consumer spending drives two-thirds of the nation's economic activity.

A reading of 100 or greater would indicate strong growth, and the index has not reached that level since mid 2007.  

Stocks retreat; Dow off by 37Consumer Confidence

Consumer Confidence

High unemployment and unfavorable business conditions have dragged the index down to a painfully low level, far below 90 -- the level which indicates a stable economy. Overall, the index has been volatile, not trending in any one direction for more than three months in a row this year.

"Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels," Lynn Franco, director of The Conference Board Consumer Research Center said in a release.

Economists surveyed by Briefing.com had expected the index to barely tick up to 49, so the news was a bit better than expected.

In October, the number of consumers calling business conditions "bad" outweighed those saying conditions are "good" by nearly five to one, slightly better than the month before, when that ratio was six to one.

0:00/3:54Why companies aren't hiring

Those saying jobs are "hard to get" rose, still far outnumbering those who say jobs are "plentiful."

Consumers continued to have a predominantly gloomy attitude about both future employment prospects and business conditions, but were slightly more optimistic on those fronts than last month.

The consumer confidence index is based on a survey of 5,000 U.S. households and is closely monitored because consumer spending drives two-thirds of the nation's economic activity.

A reading of 100 or greater would indicate strong growth, and the index has not reached that level since mid 2007.  

Stocks retreat; Dow off by 37Consumer Confidence

Manufacturing (ISM)

Growth in new orders improved significantly in October to 58.9 from 51.1. The employment index increased to 57.7 from 56.5, notching the 11th straight month of gains.

Economist Paul Dales of Capital Economics called the report "very encouraging."

"The chance that the economy is heading back into a recession has receded," he said.

However, he added, "the economy is not growing fast enough to reduce the unemployment rate or boost inflation."

0:00/:52China stocks soar on manufacturing data

Any reading above 50 signals growth. The October report marked the 15th straight month of expansion.

Dales said Monday's ISM figures will not prevent the Federal Reserve from announcing more quantitative easing on Wednesday, but increases the chances that a fairly modest package will be announced.

Stocks got a boost after the report's release, with the Dow Jones industrial average up about 100 points on the day before pulling back. 

China currency report delayedManufacturing (ISM)

Job Growth

"It's maybe an indication that we're starting to turn the corner," said Stephen Bronars, senior economist with Welch Consulting. "It's a small step, but at least we're going in the right direction. Things are definitely not going to get worse."

Businesses continued to hire for the tenth month in a row, following nearly two straight years of private sector losses. Companies added 159,000 jobs to their payrolls in October, much stronger than the 92,000 jobs economists had predicted for the sector.

But the government continued to slash jobs, shedding 8,000 workers in the month.

Only a handful of census workers were cut from government payrolls in October -- nearly the last of the temporary census jobs that have dragged down public sector job growth for the last four months.

And upward revisions for August and September showed there were 110,000 additional job gains in those months than previously reported.

0:00/2:58Business etiquette helps job search

The unemployment rate, which is calculated in a separate survey, remained unchanged at 9.6%, the government said Friday.

President Obama praised the numbers in an address following the announcement, but emphasized that more improvement is needed.

"We've now seen four months of private-sector job growth above 100,000, which is the first time we've seen this kind of increase in over four years," he said. "That's not good enough. The unemployment rate is still unacceptably high and we've got a lot of work to do."

Americans still struggling

While the report was a generally positive sign, the job market is still very fragile. The labor market needs about 150,000 jobs per month just to keep pace with population growth, and at least 300,000 per month to make a dent in unemployment, Bronars said.

Unemployment is likely to remain high for some time. The rate doesn't include 1.2 million discouraged workers who've stopped looking for a job.

"There are still a lot of people who have stopped looking for work because there weren't as many hires, and as they come back in, it's going to keep that unemployment rate high for a while," Bronars said.

The number of Americans who are involuntarily working part-time, fell to 9.2 million in October but still remains just shy of record highs. This category includes workers who are stuck in part-time jobs because either their hours have been cut or they can't find full-time work.

The so-called underemployment rate, which counts both discouraged workers and involuntarily part-time workers, slipped to 17% from 17.1% in September. That means more than one in six adults are still without the job they want or need. 

Laid-off workers pick up hot skillsJob Growth

Democrats to push for $250 Social Security payment

The bill -- with a total cost of roughly $14 billion -- is designed to make up for another year without an increase in Social Security benefits.

In October, the federal government announced that Social Security beneficiaries will see no increase in their benefit checks in 2011. That will mark the second year in a row with no increase.

Social Security debate: Take the quiz

The last time there was an inflation adjustment was in 2009: Social Security beneficiaries got a higher-than-normal 5.8% increase because of a temporary spike in energy prices in the third quarter of 2008.

Soon after, however, energy prices plummeted. Then the bottom fell out of the economy and prices still haven't fully recovered. As a result, seniors haven't seen a boost in their benefits for two years.

By law, the Social Security Administration is required to track inflation using the most recent third quarter that led to an adjustment. But critics argue that by using only one quarter of data, the change in benefits is more volatile than necessary.

Advocates for the bill say it would help the economy as well as individual recipients.

"This relief will put money in the pockets of millions of older Americans struggling to make ends meet -- money likely to be injected directly into our fragile economy," AARP Senior Vice President Drew Nannis said in a prepared statement.

Earlier this year, the Senate rejected a bill similar to Pomeroy's that would have resulted in a one-time $250 payment to compensate for last year's stagnant Social Security benefit rate.

Republicans and deficit conscious Democrats combined to bring the bill down, and if this year's version passes in the House, it would face the same challenge in the Senate. 

Stocks retreat; Dow off by 37Social Security: No 2011 increase

Bush tax cuts: What nobody is talking about

The starting points in the negotiations are well known: President Obama wants to make the tax cuts permanent on income up to $250,000 and let the cuts on income higher than $250,000 expire. The Republicans want to the tax cuts to be made permanent for everyone. (The Washington Punch List: Track the money issues)

Many tax policy watchers are nevertheless convinced that ultimately lawmakers will opt for a temporary one- or two-year extension for everyone.

If they're right -- or if lawmakers adopt any other type of extension for high-income households -- they'll have another big fight on their hands: how to pay for the cost.

0:00/6:34Cutting through the tax haze

"This is one of a handful of things that can tie-up or slow-down an across-the-board extension," said Sean West, a U.S. policy analyst for the Eurasia Group.

Under rules passed earlier this year, lawmakers are obligated to pay for any extension of the Bush tax cuts that apply to higher income households.

Those budget rules can be waived, however, if the extension is deemed "emergency spending." That's because lawmakers don't have to "pay" for emergency spending -- it just gets added to the deficit.

And that's exactly what Clint Stretch, managing principal of tax policy at Deloitte Tax, expects will happen.

"The argument made for extending the cuts for everyone is that the economy is in a whole heap of hurt, and how can we afford to raise anyone's taxes now?" Stretch said.

Since there's no actual tax-cut extension legislation written yet, there's no formal estimate of how much it would cost to extend the upper-income tax cuts for a year or two.

But the cost is likely to range between $70 billion and $140 billion. A permanent extension would cost $700 billion over 10 years, according to Treasury Department estimates.

"I don't see any way to pay for it," said Anne Mathias, director of research at MF Global's Washington Research Group.

That's because there is no appetite on the part of Republicans to find that kind of revenue elsewhere in the budget -- or any desire by most Democrats to cut government spending during a tepid economic recovery.

Even if the endgame is to add the cost of high-income tax cut extensions to the deficit, that doesn't mean there won't be a lot of negotiating in the run-up to that decision.

Think you're smart about deficits? Try this

"There will be lots of noise about the need to pay for any upper-end extension from Democrats and perhaps the White House; Republicans will insist tax breaks don't need to be paid for," West said.

But expect a very loud silence from both sides of the aisle on a much pricier decision: No one is pushing to pay for the far greater cost of extending the cuts for the middle class, which are automatically exempt from pay-go rules.

If lawmakers opt to make the middle class tax cuts permanent that will add an estimated $3 trillion to the country's debt over 10 years. A two-year extension could cost roughly $383 billion. 

Jobless benefits extension is mired in political bickeringTax cuts: Obama wants a deal

Commodities fall off a cliff

Investors are concerned the Chinese government could raise interest rates, as a way to slow down staggering inflation. And because China is a major consumer of raw materials, that could lead to less demand for commodities across the board.

Precious metals plunged as a result. Coming off nearly daily record highs, gold fell $37.80, or 2.7%, to settle at $1,365.50 an ounce on Friday. Silver, which had been hitting 30-year highs, dived 5.3% to $25.94 an ounce. And copper, which was also rallying to multi-month highs, fell 2.8% to $3.91 an ounce.

Oil nears $90. Thanks a lot Fed

Meanwhile oil, which has recently neared $90 a barrel in the all-out commodities rally, fell $2.93, or 3.3% to settle at $84.88 a barrel.

Agricultural futures also took a tumble: After surging to its highest level in 140 years of trading earlier this week, cotton fell 3.4% Friday. Sugar plunged 10.8%, and cocoa fell 3.6%.

Reining in the rally

Commodities have surged the last couple weeks, as investors bet the Federal Reserve's latest plan to stimulate the economy will drive asset prices higher.

The Fed's bond-buying policy, known as quantitative easing, is also expected to put further pressure on the U.S. dollar -- and since commodities are priced in the greenback, that would push prices higher.

Some traders speculate that Friday's pullback could mark a correction that's healthy for the commodities market.

"When things are this high, I'm pulling the reigns back for a lot of our clients, said Rich Ilczyszyn, a market strategist with futures broker Lind-Waldock. "The people in commodities in the last couple weeks have been having too much fun."

Ilczyszyn points to a saying among futures traders -- "Bear step up, elevator down" -- to illustrate his concerns that if commodities overheat, they could be in for a much deeper and more sudden drop later.

"You want the pullback to happen now in commodities, because if it doesn't, the pullback will be very painful later," he said.

David Nelson, a global strategist with Rabobank, a global bank focused on the food and agricultural sector, thinks the commodities rally may still have some steam left though.

0:00/1:32Your grocery bill is getting fatter

Euphoria about quantitative easing is not the only thing supporting the raw materials run-up, he said. Drought across Russia and Ukraine earlier this year, and weaker-than-expected corn crops in the U.S. have also lent some support to the surge -- at least in agricultural materials -- he said.

"Economic theory tells us that if prices really rise, then demand typically goes down. But we aren't seeing that this time, so prices will continue to go up, as we see people continue to buy more," he said. 

Home PricesStocks retreat; Dow off by 37

Blowing up the tax code

And that may also be the best indication that Erskine Bowles and Alan Simpson got something right.

The truth is, there's no escaping the need to make serious tradeoffs on taxes if the goal is to create a tax code that supports economic growth, provides enough revenue to fund everything Americans want their government to do, and achieves real deficit reduction when paired with spending cuts. (10 biggest cuts the co-chairmen recommend)

Of course, politicians aren't yet willing to acknowledge those tradeoffs. Most Republicans still cleave publicly to the idea that taxes are the devil's spawn and must be beaten back. And most Democrats think that only the wealthiest should ever have to pay more in taxes.

That doesn't mean there isn't something for them to like in the Bowles-Simpson proposal.

For one thing, the co-chairmen propose simplifying the tax code, while lowering rates. They would also eliminate the Alternative Minimum Tax (a.k.a. the crazy-making-calculate-your-taxes-twice-to-see-if-you-owe-more tax).

Think you're smart about the deficit? Try this

In exchange, their proposal calls for a reduction -- or the complete elimination -- of the hundreds of tax deductions, credits and exemptions in the code.

Tax breaks reduce the amount of revenue the government takes in by more than $1 trillion a year, much of which comes from just a few of the biggest and most popular ones like the mortgage interest deduction.

Many experts regard tax breaks as a stealth form of spending. That's because the lost revenue doesn't appear anywhere on the federal budget. And once a break is passed into law, it's rare that anybody reviews its effectiveness.

"They're unsustainable. They have no oversight. And they really cost this country a bundle," Simpson told CNN.

Still, as the co-chairmen know all too well, removing them will elicit all sorts of "shrieking," as the ever-tart-tongued Simpson has put it many times. Tax breaks are enjoyed by many powerful special interests -- to say nothing of many Americans.

Fewer breaks = lower rates

Bowles and Simpson offer two options that slash tax breaks. And by doing so, they can lower income tax rates.

In their "zero plan" option, breaks are eliminated altogether. Under that scenario, individual income tax rates -- which they reduce from six brackets to three -- can fall substantially.

For instance, the lowest two rates (10% and 15%) could fall to 8%. The middle two rates (25% and 28%) could drop to 14%. And the top two rates (33% and 35%) could drop to 23%.

The corporate rate, meanwhile, could drop to 26% from 35%, to make it more attractive for companies to invest in the United States.

0:00/2:44Bowles: 'Headed for disaster'

On the other hand, of course, lawmakers could choose to retain tax breaks. But the fewer they prune, the less rates can be lowered.

The second option from Simpson and Bowles, building on a bipartisan proposal in Congress, would reduce the mortgage interest deduction. The tax break would apply only to the first $500,000 of a loan on one's primary residence, about half of what counts today.

The second option would also repeal the state and local tax deduction and various other itemized deductions.

Individual tax rates under that plan would be 15%, 25% and 35%.

Another big proposed change under both reform plans would affect investment income. Capital gains and dividends, which are currently taxed at 15%, would be taxed as ordinary income -- that is, at higher rates.

More revenue on tap

The Simpson-Bowles tax reform options would raise an estimated $80 billion in additional revenue in 2015 and $160 billion by 2020. Their plan overall would cap federal revenue at 21% of GDP.

Who exactly will be paying in all that extra revenue? A specific break-out by income groups is still in the works.

It is likely that more people would end up with higher -- rather than lower -- tax bills, a commission staffer said. But he also noted that the revised tax code would probably be more progressive.

No one will like paying more, of course. But the staffer said the comparison shouldn't be to what someone is paying today but rather to what that person is likely to pay in the future if no changes to the tax code or to the federal balance sheet are made.

Translation: Taxes are going up one way or the other. The question is will those higher taxes be levied in a system that is widely considered to be outdated, overly complex and highly inefficient, or in a system that is simpler and smarter? 

Major anti-tax measures failTractor Supply income soars

Job Growth

"It's maybe an indication that we're starting to turn the corner," said Stephen Bronars, senior economist with Welch Consulting. "It's a small step, but at least we're going in the right direction. Things are definitely not going to get worse."

Businesses continued to hire for the tenth month in a row, following nearly two straight years of private sector losses. Companies added 159,000 jobs to their payrolls in October, much stronger than the 92,000 jobs economists had predicted for the sector.

But the government continued to slash jobs, shedding 8,000 workers in the month.

Only a handful of census workers were cut from government payrolls in October -- nearly the last of the temporary census jobs that have dragged down public sector job growth for the last four months.

And upward revisions for August and September showed there were 110,000 additional job gains in those months than previously reported.

0:00/2:58Business etiquette helps job search

The unemployment rate, which is calculated in a separate survey, remained unchanged at 9.6%, the government said Friday.

President Obama praised the numbers in an address following the announcement, but emphasized that more improvement is needed.

"We've now seen four months of private-sector job growth above 100,000, which is the first time we've seen this kind of increase in over four years," he said. "That's not good enough. The unemployment rate is still unacceptably high and we've got a lot of work to do."

Americans still struggling

While the report was a generally positive sign, the job market is still very fragile. The labor market needs about 150,000 jobs per month just to keep pace with population growth, and at least 300,000 per month to make a dent in unemployment, Bronars said.

Unemployment is likely to remain high for some time. The rate doesn't include 1.2 million discouraged workers who've stopped looking for a job.

"There are still a lot of people who have stopped looking for work because there weren't as many hires, and as they come back in, it's going to keep that unemployment rate high for a while," Bronars said.

The number of Americans who are involuntarily working part-time, fell to 9.2 million in October but still remains just shy of record highs. This category includes workers who are stuck in part-time jobs because either their hours have been cut or they can't find full-time work.

The so-called underemployment rate, which counts both discouraged workers and involuntarily part-time workers, slipped to 17% from 17.1% in September. That means more than one in six adults are still without the job they want or need. 

Job GrowthLaid-off workers pick up hot skills

Consumer Confidence

High unemployment and unfavorable business conditions have dragged the index down to a painfully low level, far below 90 -- the level which indicates a stable economy. Overall, the index has been volatile, not trending in any one direction for more than three months in a row this year.

"Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels," Lynn Franco, director of The Conference Board Consumer Research Center said in a release.

Economists surveyed by Briefing.com had expected the index to barely tick up to 49, so the news was a bit better than expected.

In October, the number of consumers calling business conditions "bad" outweighed those saying conditions are "good" by nearly five to one, slightly better than the month before, when that ratio was six to one.

0:00/3:54Why companies aren't hiring

Those saying jobs are "hard to get" rose, still far outnumbering those who say jobs are "plentiful."

Consumers continued to have a predominantly gloomy attitude about both future employment prospects and business conditions, but were slightly more optimistic on those fronts than last month.

The consumer confidence index is based on a survey of 5,000 U.S. households and is closely monitored because consumer spending drives two-thirds of the nation's economic activity.

A reading of 100 or greater would indicate strong growth, and the index has not reached that level since mid 2007.  

Stocks retreat; Dow off by 37Consumer Confidence

Bernanke's worst nightmare: Ron Paul

With the Republicans coming to power, Paul, who would like to abolish the Fed and the nation's current monetary system, will become the chairman of the House Subcommittee on Domestic Monetary Policy.

If you've never heard of the committee before, you're not alone. But Paul promises you'll be hearing a lot more from it.

"It's basically been a committee that's dealt with commemorative coins. I'm going to deal with monetary policy," he said.

Paul doesn't think he'll be able to move his proposal to eliminate the Fed, or to allow Americans to use gold instead of paper money as currency. But he said he does intend to use his new position as "a mini-bully pulpit" to criticize Fed policy and call more attention to what he sees as its negative consequences. And he's confident that American voters are ready to delve into those monetary policy questions.

"Five years ago they wouldn't have listened. Now they will," he said. "We've gained a lot of credibility in making the Federal Reserve an issue since the market collapse."

And Paul vows to try again to authorize Congressional audits of the Fed's decisions on the economy, a proposal that passed the House last year but was essentially gutted from the final version of the financial regulatory overhaul legislation.

"It will never be easy; the Fed has a lot of influence," he said of the audit legislation. "But there's a lot of life to it. We got further along than I ever expected."

One way that Paul will bring pressure on Bernanke and his Fed allies is to hold hearings to give greater voice to Fed members -- like Kansas City Fed President Thomas Hoenig -- who disagree with the current monetary policy.

"Just getting someone there willing to discuss their viewpoint and why they might dissent, I think that would be interesting," Paul said.

A Fed spokesman did not respond to a request for comment for this story.

Some economists worry that Paul having that kind of pulpit will hurt the Fed, and diminish its ability to fix an economy that still needs help.

"From Ron Paul's standpoint, the Fed can't do anything right," said Lyle Gramley, a former Fed governor who is now senior economic advisor to the Potomac Research Group. "He can cause the Fed to lose a lot of public support. But it needs public support to do what it needs to do."

While the Fed policymakers will try to resist pressure from Paul, they won't be able to ignore it, said John Silvia, chief economist for Wells Fargo Securities. And he said there's a potential for that pressure to influence Fed policy.

"The Fed has a more balanced, nuanced position on its dual mandate to promote growth and keep prices stable," he said. "Ron Paul probably doesn't."

But other Fed watchers say Bernanke already faces plenty of criticism and doesn't have too much to worry about from Paul having control of an oversight committee.

"I think that Bernanke has been pretty cool under fire up to now. I can't imagine Ron Paul being someone who could shake him up," said Michael Bordo, a professor of economics at Rutgers University.

Paul also rejects the idea that he's Bernanke's greatest concern.

"He probably just thinks I'm a nuisance rather than a nightmare," he said.

And Paul doesn't think he'll be able to reverse Fed policy or force Bernanke to resign, as much as he would like to.

"I think psychologically, Bernanke is incapable of changing his mind," he said. "It's probably unlikely [Bernanke will resign] under today's circumstances. But you don't know what it will be like a year or two from now."

Paul argues the Fed is making a serious mistake by pumping more money into the economy to try to spur more spending and growth. He predicts it will only lead to further declines in value of the dollar, inflation and higher interest rates rather than the lower rates the Fed is shooting for.

Paul thinks that will bring about another economic crisis that will eventually force Bernanke to resign from office.

"That's more likely to happen than for Bernanke to think, 'Well, I guess I made a mistake for 35 years. I've misunderstood the Depression, and I'm going to change my policy.'" 

Chrysler adds more cars to return policyRead the Nov. 3 Fed statement

Does Ford have a Cadillac strategy for Lincoln?

But Ford turned an important corner in the third quarter. The automaker is generating record-setting profits and enough cash to pay down substantial debt. Debtholder fears of Ford landing in bankruptcy court, like GM and Chrysler sem to have dried up. So, will Ford now spend on Lincoln? And more importantly, how much?

Asked in the November 8 edition of Automotive News , a trade publication, whether he envisions "unique" Lincoln platforms, Mulally answered: "They'll be completely differentiated vehicles. This is a commitment to a completely differentiated Lincoln lineup, not a warmed-over rebadged Ford Escape."

Unintentionally, perhaps, Mulally was offering a retort to critics of Lincoln's current lineup who say it's a warmed-over, rebadged series of Ford models with better upholstery and fancier buttons and knobs.

Ford's strategy for creating new and exciting Lincoln models is of critical importance to the nation's 1,200 Lincoln franchisees because the automaker is demanding that franchisees invest aggressively -- as much as $1 million in some cases -- to upgrade their showrooms and properties.

Yet, Ford has told dealers they won't see any new Lincoln models for two years. And when those models arrive, it's still not clear whether they'll have been sufficiently upgraded to be competitive with Cadillac, much less BMW, Audi, Mercedes, Lexus or Infiniti.

Meanwhile, Lincoln continues to lose market share to its rivals in the luxury field. Lincoln sales are up 6.3 percent in the U.S. on a unit basis through October, versus a 10.6 percent rise for the industry. Hence, Lincoln has lost a tenth of a point of share, putting it at 0.7 percent of the market. Mercedes-Benz, with 1.9 percent of the luxury market in the U.S., is the leader of the pack, slightly ahead of Lexus.

Owning a strong luxury brand is a big part of being a successful car company, because luxury vehicles are disproportionately profitable. Luxury models also are a means of introducing advanced technology, such as stability control, which eventually makes its way to more pedestrian vehicles. Toyota's success as an automaker rests in part on the prestige of its Lexus brand worldwide. Likewise, Volkswagen has prospered partly because it has taken a European luxury brand, Audi, and expanded its success in China and, increasingly, in the U.S.

Volkswagen, rather than GM, may prove to be a better model for Ford's remake of the Lincoln brand. While VW has bought luxury brands such as Bentley and Bugatti for their presence in the minds of high-end consumers, they used many of the same engines and components from their Audi and VW lineups, thus saving costs.

In the past decade GM may have spent $5 billion, by some estimates, on trying to make Cadillac a competitive luxury brand. They began with a new bold design theme which led to the creation of the CTS sedan, built on an all-new rear-wheel-drive platform meant to be an American version of the German BMW 3-Series. But Cadillac, with just 1.2 percent of the market through October, is still struggling to match the competition in terms of sales and prestige.

Having watched GM, Ford's designers and engineers no doubt are exploring ways to create a more luxurious Lincoln, without breaking the bank. 

Car sales indicate a strong OctoberFord to bring 1,200 jobs to Michigan

It's the global economy, stupid.

The market has quickly shifted from an all United States, all the time approach to a focus on the rest of the world. And investors don't like what they see.

Sizzling inflation numbers out of China have raised fears that China's central bank will pull an anti-QE2 and raise interest rates soon. China's stock market plummeted Friday as a result.

At the opposite end of the economic spectrum, investors are growing increasingly concerned about sovereign debt woes in Europe again. For the time being, Ireland is the country in the Not-so-Fab-Five group of PIIGS nations that appears to be the biggest risk in the fragile eurozone.

Finally, the G-20 meeting in South Korea ended Friday much like the famous T.S. Eliot quote: not with a bang but a whimper. The group's communiqué was filled with a lot of nice sounding promises to cooperate and collaborate. All that was missing was the chorus to Kumbaya.

But the G-20 meeting did nothing to resolve the numerous concerns about trade and currency manipulation that existed before the summit.

The good news, if you could call it that, is that stocks in the United States only fell slightly Friday morning. It's encouraging that the sell-off was not truly awful given the more sizeable drops in some Asian and European markets.

G-20: The new global economy

Still, investors are going to need to continue keeping a close eye on the rest of the world. The tensions between developing and emerging markets are likely to be an overhang on the markets for some time.

"The lesser developed countries in Europe are ugly. Portugal and Ireland worries have been beneath the surface for a bit but are back," said Matt O'Reilly, chief investment strategist with Bridgeport, Conn.-based People's United Wealth Management. "And the larger concern continues to be China and the way they approach their currency."

China has come under fire from the United States for keeping the value of its currency, the yuan, artificially low. The concern is that a cheap yuan makes it tougher for U.S. manufacturers to compete with Chinese exports.

Exhibit A in that argument is the fact that China recently reported a $27.2 billion trade surplus while the United States posted a $44 billion trade deficit.

0:00/3:49Chanos: China's treadmill to hell

But at the same time, some think the U.S. is also taking steps to devalue the dollar. The stated intent of the Fed's $600 billion bond-buying program is to keep long-term interest rates low. A byproduct of this policy should be a weaker dollar.

Rob McIver, manager of the Jensen Portfolio in Portland, Ore., worries that the rhetoric between the United States and China could become too heated and lead to isolationist economic policies.

"It all boils down to jobs whether you are in the U.S., Europe or China. Now that we are coming out of a challenging economic period worldwide, some economies are trying to accelerate their recoveries," McIver said.

"One of our biggest concerns is politics," he added. "If the subpar recovery in the U.S. were to translate into protectionist policies, that would be bad news. Bad things happen in the long-term if you put up barriers to global trade."

The upside of a down dollar

One can only hope that cooler heads prevail and the leaders of developed and emerging market economies actually do follow through on the promises to act in a coordinated fashion hammered out at the G-20 meeting.

Along those lines, Pierre Lapointe, global macro strategist with Brockhouse Cooper, a brokerage firm in Montreal, said that more potential interest rate hikes by China should be viewed as a positive.

He said that even though there are questions about the value of the yuan, the fact that China is considering a boost to rates is a sign it wants to keep its economy from overheating.

"China wants to keep its manufacturers happy but without killing a recovery. It wants to avoid a boom/bust scenario," Lapointe said.

But O'Reilly said that if China continues to raise interest rates and the United States does not eventually follow suit sometime later next year, that puts the recovery in the markets and economy at risk.

"There should be growing support in the U.S. for the Fed to start increasing rates in 2011. I would be concerned if the Fed didn't do so because of the pressure it would put on the dollar," he said.

Nonetheless, the questions about currency and trade policies should not overshadow the fact that the global economy does appear to be on the mend. The gross domestic product even rose in Europe during the third quarter, albeit at a modest pace.

So while it's reasonable to think that the markets may pull back a bit more on global concerns following a strong run-up since the spring, Lapointe does not think that stocks are due for another massive sell-off.

"The possibility of rate hikes in China and debt fears in Europe are both important and need to be watched closely. But they are not going to derail the global economic recovery and market rebound," he said.

Reader comment of the week: I took a closer look at just how bad the foreclosure exposure for Bank of America could be on Wednesday.

The jury's still out on just how much of a loss BofA may take. But one reader is angry that more hasn't been done by regulators in Washington to crack down on the mortgage operations of big banks.

"The only reason BofA is still afloat is due to the Feds," wrote Wayne Brundrett. "They know exactly what they have done and are still doing yet they are doing nothing. If it wasn't for some of the state attorneys general the public would really be screwed."

- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney.com, and Abbott Laboratories, La Monica does not own positions in any individual stocks.  

China hikes interest ratesChina currency report delayed

G-20: We'll avoid currency war

The general goal, as stated at the outset of the world financial crisis in 2008, is to try and prevent the world from sliding into another economic slump.

"The actions agreed to today will help to further strengthen the global economy, accelerate job creation, ensure more stable financial markets, narrow the development gap and promote broadly shared growth beyond crisis," read the G-20 plan.

One of the many pledges is to "refrain from competitive devaluation of currencies." This is a direct reference to one of the more contentious subjects in international financial relations: the currency dispute between the United States and China.

"Advanced economies, including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates," read the G-20 plan.

0:00/4:35G-20: Might as well be the G-2

U.S. critics believe that China is keeping its currency, the yuan, artificially low by hoarding reserves, keeping its exports cheap and undercutting international competitors.

U.S. Treasury Secretary Tim Geithner has tried to sort out the problem and defend against claims that the United States is deliberately weakening the dollar.

However, the conclusion of the G-20 summit failed to convince experts that any real progress had been made, particularly in the U.S-China currency dispute.

"The failure to agree to any definitive action should come as no surprise to the currency markets," said Mark O'Sullivan, director of dealings at Currencies Direct, a London-based currency transfer services company. "The vague set of indicative guidelines issued in the final communiqué, really once again underlines how little effect the G-20 can have on the current problems the global economy faces."

The G-20 said it will hold its next summit in France in 2011, followed by the 2012 summit in Mexico. 

U.S.: Yuan still too cheapChina currency report delayed

Retail Sales

Consumer spending accounts for two-thirds of U.S. economic activity, and related reports such as retail sales are closely watched to gauge the strength of the economy.

Sales excluding autos and auto parts rose by 0.4% from August. Analysts expected sales ex-autos to jump 0.4%.

Strength in auto, electronics and online sales paced the September incline.

Auto and other motor vehicle dealers sales were up 1.6% over August and 19% over a year earlier. Electronics stores reported a 1.5% increase over August, while online stores ticked up by 1%.

"Overall this is a significantly stronger report than expected," Ian Shepherdson, an economist at High Frequency Economics wrote in a research note.

Strong retail sales are another indication that shoppers might be ending their hibernation at just the right time for retailers, who rely heavily on holiday shopping to boost profit.

"It is increasingly clear that we are seeing 'frugal fatigue' give way to 'calculated consumption,' " Marshal Cohen, chief industry analyst at NPD Group said in a statement.

0:00/1:04What do you splurge on?

In a separate report released last week, individual retailers reported strong sales results for September.

Thomson Reuters, which tracks same-store sales for a group of 28 national chains, said total sales for the group rose 2.8% in September.

An important gauge of a retailer's health, same-store sales have been on the rise for 13 months in a row, according to Thomson Reuters. 

Tractor Supply income soarsRetail Sales

World underdogs take the lead

The United States is struggling to hit 2.7% growth for the year, while emerging economies, which also include smaller countries mostly in Asia and Latin America, are collectively on track for 7.1% growth for the year.

On a trip to Asia this week, President Obama reaffirmed India's increasing importance as a global trading partner, signing $10 billion in contracts for U.S. exports. And when world leaders meet in South Korea for the G-20 summit this week, Europe will give up a few IMF seats to emerging nations to reflect their expanding global influence.

China has already surpassed Japan to become the world's second largest economy, and could overtake the United States for the no. 1 position in 10 to 15 years. If that happens, it will mark the first change in the leadership position, since the U.S. overtook Great Britain in 1894.

So where did these countries get it right while western superpowers got it so wrong?

How they got here

Unlike the U.S. and Europe, banks and governments in emerging countries didn't take on much risk leading up to the recession, and had a huge savings stash.

This was a lesson they had learned after getting socked by financial crises in the 1990s, said Garry Evans, global equity strategist for HSBC, based in Hong Kong. By the time the recession hit in 2007, many of the emerging countries were well-positioned to withstand another shock.

For example, after a massive financial meltdown in 1997, Asian countries were bailed out by the IMF. As a condition, they were forced to adopt strict regulations. To avoid similar medicine in the future, those countries buckled down, Evans said.

"It's a bit like if you bully a kid at school, the kid is going to learn martial arts and keep a stock of knives hidden in the closet so he can come out fighting the next time," Evans said. "There's a bit of that mentality in Asia."

After decades of hyperinflation and a currency crisis in the late 1990s, Brazil, too, had implemented conservative monetary and fiscal policies that shielded it from the worst of the recent financial crisis.

So while U.S. banks lost billions as their investments in mortgages and complex securities went belly-up, banks in developing nations were sitting on a comfortable cushion of cash and more conservative investments.

Growing too fast?

While it might sound like a win for the global economy, rapid growth in emerging markets is not without risks.

For example, export-dependent nations like China are running huge trade surpluses at the expense of trading partners like the U.S., igniting tensions around the world and sparking fears of global trade wars.

And growing too fast can pose other dangers too. For example, China's overheating real estate market is a looming danger, as breakneck growth -- on track for 10.5% in 2010 -- has pushed property prices sky high. A bursting real estate bubble in China could bring on another economic meltdown that could spread to the rest of the world.

Chak Wong, a finance professor at Chinese University of Hong Kong, likens the hurdling Chinese economy to the movie "Speed," the 1994 thriller where a bus is detonated to explode if it slows below 50 miles per hour.

0:00/4:33Greece sees growth next year

"China more or less is like that ... they would like to stop it, but it's really difficult to stop it without causing major damage," Wong said. "The really difficult part is how to engineer a soft landing."

Kicking the 'third world' stigma

Even if China does become the world's largest economy, its population is roughly 4.5 times bigger than that of the U.S., making it difficult for China to catch up to the American standard of living, said Jay Bryson, global economist with Wells Fargo.

"It's only a matter of time before they catch us. Sooner or later India will probably catch us as well," Bryson said. "But, when that day comes, they will still be very, very dirt poor economies. The average Chinese citizen will be 25% as well-off as the average American citizen."

Still, many say the U.S. should not fear emerging markets, led by China, taking on a larger leadership role in the world. In some respects it may just be a "return to normal," said Piero Ghezzi, managing director and head of emerging markets research at Barclay's Capital.

"Historians like to point out the fact that the past few hundred years may have been more of an exception than the rule," Ghezzi said. Until the 19th Century, China had the world's largest economy. "For most of world history, China and India had a huge percentage of the world economy." 

China currency report delayedChina manufacturing sector grows