Retail Sales

The Commerce Department said total retail sales rose 0.8% last month.

Economists surveyed by Briefing.com on average had forecast an increase of 0.5% for November, compared to a revised 1.7% jump in sales the prior month. October sales were originally reported to have increased 1.2%.

Sales excluding autos and auto parts rose 1.2%, compared to a revised 0.8% gain in ex-auto sales in October. Ex-auto sales were originally reported to have increased 0.4%.

Economists had forecast a rise of 0.6% in the measure for November, according to Briefing.com.

0:00/4:15Luxury toys for the holidays

After the report was released, the National Retail Federation bumped up its holiday sales forecast. The trade group now expects combined sales in November and December to increase 3.3% this year, up from its initial forecast for a 2.3% gain.

Holiday sales last year rose an anemic 0.4%

"The start to the holiday season has surpassed all expectations," NRF president Matthew Shay said in a statement.

"While employment data is still a concern, we are starting to see improvement in other economic indicators that support an increase to our forecast," he said. "In order to sustain this momentum for retailers and the U.S. economy, there must be a renewed focus on jobs as we enter the new year."

Black Friday: Where you spent

November's gain marked the fifth straight monthly gain in the measure -- an encouraging sign that, despite a tight job market, consumers are becoming more comfortable with spending on discretionary purchases.

For retailers, November marks the start of the year-end holiday shopping frenzy. Total November-December can account for as much as 50% of merchants' sales and profits for the full year.

Holiday sales this year got off to a robust start. Earlier this month, many large store chains also reported much better-than-expected monthly sales at their stores.

The government report showed sales at clothing stores rose 2.7%, were up 2.3% at sporting goods and hobby stores, increased 2.8% at department stores and climbed 1.3% at general merchandise sellers. Online sales rose 2.1%.

Higher gasoline prices fueled gas station sales to a 4% increase in November.

But there were a few weak pockets as well in last month's report. Electronics sales dipped 0.6%, a figure also reflected when Best Buy (BBY, Fortune 500), the No. 1 electronics seller, reported a miss on its sales and profit last quarter earlier Tuesday.

Furniture purchases slipped 0.5%. 

Retail SalesMeager increase forecast for holiday retail sales

Americans earn more - but save less

Income was expected to increase by 0.2% in the month, according to a consensus estimate of economists from Briefing.com. The economists expected that spending by individuals would rise 0.5% in November.

"This report is another indication that consumer spending is firming as we finish out the year," said Tim Quinlan, economic analyst at Wells Fargo. Consumer spending accounts for about two-thirds of the nation's economic activity, so signs of improvement bode well for the recovery.

Private sector wage and salaries were also up, increasing by $6.6 billion last month. But the increase wasn't as large as it was in October, when salaries jumped $31.2 billion.

While earnings and spending increased, the data showed that Americans did not save as much money in November as they did the prior month.

Americans saved $614.8 billion in November, compared with $622.8 billion the prior month. And personal savings as a percentage of disposable income slipped to 5.3% from 5.4% in October.

"The figures are seasonally adjusted, but the modest decline in the savings rate could be showing that the holiday shopping season will be much better than what we have seen over the last sever years," Quinlan said.

Quinlan's forecast calls for a 5% increase in holiday sales compared to last year, which would be the best year-over-year improvement since 2005, he said. 

Meager increase forecast for holiday retail salesPersonal income is up, and so is spending

GDP

"We're headed in the right direction, and a good deal of the concern that was evident with the initial release has undoubtedly diminished," said Michael Schenk, senior economist with the Credit Union National Association. "But it doesn't really get us to where we need to be."

The government calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the second reading for the quarter.

While the number is much better than the 1.7% growth reported in the second quarter, the rate is still considered weak for a recovery.

"I think most economists would agree that 2.5% is probably too low for robust job growth. It's about neutral," said Zach Pandl, an economist with Nomura Securities.

Consumer spending increased at a 2.8% pace, the best reading for that measure since the end of 2006, up from 2.6% initially reported. Exports were also revised upward to 6.3%, from 5%.

Those two points mark a bright spot in the report, as consumer spending and U.S. exports are engines of growth needed to drive the recovery forward.

0:00/2:40Slow economic incline ahead

Pandl expects the Fed's latest monetary stimulus plan, referred to as quantitative easing, will help spur stronger growth in the fourth quarter, but still not robust enough to totally diminish the need for the full $600 billion plan.

"This level of growth would still be considered unacceptable from the Fed's perspective," he said. "It's not fast enough to bring inflation back up and lower the unemployment rate. On the other hand, it suggests no reason for alarm."

The reading was slightly better than expected, as economists surveyed by Briefing.com had forecast growth of 2.4% for the third quarter. 

Fed’s hand strengthens on tame inflation dataGDP

Urban farming 2.0: No soil, no sun

One such indoor farm opened in September in Vancouver, growing lettuce and spinach inside an 8,000-square-foot warehouse using a hydroponic system that replaces dirt and weather with peat moss plugs and circulated water. High-efficiency LED lighting hits plants grown on stacked shelves.

The Eco Spirit-branded lettuce operation -- which is owned by the local Squamish Nation tribe -- now supplies eight stores for Choices Markets, a natural foods chain in greater Vancouver. The tribe licensed the technology from TerraSphere Systems in Canada and plans to grow the Eco Spirit label into a larger brand of locally grown produce.

"It's clean, it's safe, it's good for the environment," says Nick Brusatore, technical director of Vancouver-based TerraSphere Systems, which started developing the indoor farming technology eight years ago. TerraSphere generated $4 million this year from equipment sales and technology licenses to organizations like the Squamish Nation. New indoor farms are slated for New York, New Jersey, Ontario and Rhode Island.

"The demand is there, without a doubt," says Brusatore. "We're going to produce food everywhere."

Finding empty space won't be a problem. America is littered with thousands of abandoned big box stores, a trend fueled by the sputtering economy. About 11% of commercial and industrial real estate nationwide remains empty -- double the vacancy rate of just four years ago, according to Reis Inc., which tracks real-estate data.

Finding buyers is also fairly easy. Large grocers, from Wal-Mart (WMT, Fortune 500) to Whole Foods (WFMI, Fortune 500), have made selling locally grown food a priority in their stores.

"Urban agriculture is a growth industry," says Dickson Despommier, a Columbia University microbiology professor and author of The Vertical Farm . His book touts a vision for commercial-scale agriculture in high-tech greenhouses as high as 30 stories tall, with the footprint of an entire city block.

On the flip side: Critics worry that today's urban farm startups will be huge -- and short-lived -- energy hogs, brought down by electrical bills they can't afford.

"Scores of companies have tried to do this, even the big guys like General Mills 15 years ago," says Bruce Bugbee, a professor of crop physiology at Utah State University. "It's too expensive. People don't realize how much light it takes to grow plants."

Turning warehouses into farms

But that won't stop entrepreneurs from trying. Jordan Motzkin, 22, of New York, has won grants from National Science Foundation and the College of the Atlantic for his startup, Big Box Farms, which finished testing a prototype in Maine and plans to open an indoor farm in an old Brooklyn warehouse early next year.

He expects the farm to grow millions of pounds of organic lettuce and basil. Motzkin then hopes to replicate it, first with farms in Chicago and Philadelphia, then elsewhere in the nation.

He plans to run the entire operation -- from indoor climate control to hydroponics and LED lighting -- remotely using iPhone applications. Big Box Farms is also working with Philips Electronics to test out their latest generation of LED lights, which are not yet available to the public. Motzkin says the new LEDs could make a big difference, improving energy efficiency by 40% to 60%.

"You're turning food into a factory scenario, where you can control the environment completely," says Chris Higgins, an industry consultant and owner of Hort Americas, a Dallas supplier of hydroponic growing systems. "They could get production 365 days a year, which would be a huge advantage. They're on the cutting edge."

They also yield more produce. Despommier says a stacked hydroponic operation might yield about 64 heads of lettuce per square foot annually, compared to about three heads at a traditional outside farm.

Another new company, Gotham Greens, will use hydroponics to grow everything from bok choy to basil in an enclosed rooftop greenhouse in the middle of Brooklyn. The company raised $2 million from investors and should finish the 15,000-square-foot greenhouse this spring, producing 40 tons of crops a year, most of which will be sold to a local Whole Foods store.

In San Francisco, Cityscape Farms plans to grow lettuce and herbs and raise fish in water-based aquaponics systems in greenhouses set up on urban rooftops and vacant lots.

Cityscape CEO Mike Yohay predicts that by eliminating transportation costs and fertilizer, a 10,000-square-foot greenhouse could produce $500,000 in profit and 20 to 30 tons of food a year for local supermarkets and corporate cafeterias.

Some investors, however, still aren't sold on the idea that indoor city farms can produce affordable food and carve out a big financial advantage over traditional farmers who may be just 60 to 100 miles away.

"We've seen half a dozen companies working on this," says Silicon Valley venture capitalist Paul Matteucci. "For the most part the quality of the product is excellent, but the costs are still too high."

But in Vancouver, Eco Spirit is optimistic. The indoor lettuce operation should generate $400,000 to $1 million in annual revenue, says Squamish Nation Chief Gibby Jacob. The tribe paid $2 million for the equipment and its franchise license from TerraSphere.

Since the produce began showing up in stores three months ago, consumers have literally eaten it up, says Mark Vickars, CEO of Choices Markets. They pay up to $5 for a 5.3-ounce container of the locally grown lettuce.

"The quality is excellent, the nutrient levels are high, the shelf life is long," Vickars says. "We're always trying to go local, and this gives us local 365 days a year." 

Inflation (CPI)Wal-Mart aims for more local produce

Job Growth

"The overall pace of job growth is disappointing," said Wells Fargo Chief Economist John Silvia, who had forecast a gain of 130,000 jobs in the month.

While private businesses continued to hire for the eleventh month in a row, they also missed expectations. Companies added just 50,000 jobs to their payrolls in October, falling short ofthe 175,000 jobs economists had predicted for the sector.

Meanwhile, the government shed 11,000 jobs during the month.

The job market is still reeling from the longest recession since the Great Depression, with 15.1 million Americans still unemployed.

On the upside, revisions for September and October showed there were 38,000 additional job gains in those months than previously reported.

Holding pattern

Overall, employers are still reluctant to commit to full-time hires as they remain uncertain about tax increases, health care costs and new regulations, Silvia said.

While gains were primarily in the services industry, huge losses in retail came as the biggest surprise, Silvia said. The sector lost 28,000 jobs in November -- a figure that could partially be attributed to seasonal adjustments, he said.

Manufacturing also brought disappointing news. Despite other indicators that show the manufacturing sector is recovering, factories cut 13,000 jobs last month.

The construction sector, which some economists had thought already bottomed out with its job cuts, also shed another 5,000 positions.

But employers are at least getting their feet wet with temporary hires. The economy added 40,000 temporary jobs in November, and overall, temp jobs have been increasing since September of last year.

Temporary jobs are often considered a precursor to permanent job growth, although many experts say they should have translated into full-time positions months ago.

Hours worked and wages were essentially flat in November, boding poorly for Americans heading into the holidays, said Diane Swonk, chief economist from Mesirow Financial.

Deep Black Friday and Cyber Monday discounts recently kicked off the holiday shopping season and gave a strong boost to retailers in November.

"[This] makes one wonder how much consumers were dipping into their savings to take advantage of all the holiday promotions that we saw during the month," Swonk said in a research note.

Jobless recovery?

The unemployment rate, which is calculated in a separate survey, unexpectedly ticked up to 9.8% after holding at 9.6% for the prior three months, the government said.

While many economists had predicted the rate would stay the same, an uptick isn't completely surprising either, said Sal Guatieri, senior economist with BMO Capital Markets.

See full survey results

That's because the unemployment rate only includes people who are actively looking for jobs, and in this downturn, many Americans just give up.

When the job market started looking up in October, many of those so-called discouraged workers may have started looking again, and that makes the unemployment rate float higher, Guatieri said.

"Some discouraged job seekers were encouraged to come back into the labor search," he said. "In the end, they were greatly disappointed when they could not find work."

The number of discouraged workers rose to 1.3 million in November, up 63,000 from the previous month.

0:00/2:39Long-term unemployed can't find jobs

The jobless rate has remained above 9% for 19 straight months, the longest stretch on record since the Labor Department started tracking unemployment in 1949. That record "hammers home" the fact that Americans are stuck in a jobless recovery, Guatieri said.

"The economy is not growing fast enough to satisfy all the new job seekers," he said. "We're not even keeping up with population growth in generating jobs, let alone putting a dent in the sky-high unemployment rate."

Economists often say the labor market needs about 150,000 additional jobs per month just to keep pace with population growth, and at least 300,000 to make a difference in the unemployment rate.

Lawmakers point fingers

The jobs report barely moved stock markets Friday, but lawmakers were quick to jump up on their soap boxes to point fingers across the aisle. Both sides accuse each other of holding up the job recovery.

"My Republican colleagues have offered few ideas on how to create jobs, but have been vocal and steadfast in their opposition to unemployment benefits for those without jobs," said Rep. Carolyn Maloney, a Democrat from New York and chairwoman of the Joint Economic Committee.

Democrats say the disappointing jobs number supports their push for extending federal unemployment benefits. On Tuesday, the Senate failed to advance a Democrat-sponsored bill to extend federal unemployment benefits.

Meanwhile, Republicans say the jobs report supports their call to extend the Bush tax cuts which -- they argue -- stimulate the economy.

"All the while, [Democrats] have left a massive job-killing tax increase hanging over the heads of every single American family and small business, prolonging the existing economic uncertainty that has kept employers from hiring," Republican National Committee chairman Michael Steele said in prepared remarks. 

Job GrowthLayoffs are slowing but jobs growth still weak

Tax cut deal: How it affects you

Here's a rundown of some of the biggest ticket items that will affect individuals. (Except where noted, all provisions are for 2011 and 2012).

Extended income tax rates: $207.5 billion The six federal income tax rates will remain at the same levels they are today: 10%, 15%, 25%, 28%, 33% and 35%. In addition, itemized deductions will continue to be allowed in full for high-income taxpayers.

AMT fix: $137 billion More than 20 million tax filers will be protected from having to pay the so-called "wealth tax," otherwise known as the Alternative Minimum Tax.

For tax year 2010, the bill will raise the amount of income that is exempt from the reach of the AMT to $47,450 for individuals and to $72,450 for couples filing jointly. In 2011, those exemption amounts will increase to $48,450 and $74,450 respectively.

In addition, the bill will allow taxpayers to apply nonrefundable credits (which reduce one's tax bill dollar for dollar) to their tax liability -- whether under the AMT or the regular tax code.

Social Security tax break: $112 billion Workers will get a 2 percentage-point break on their payroll tax for one year. Instead of paying 6.2% on wages up to $106,800, they will only have to pay 4.2% in 2011.

What Social Security break means for your paycheck

This tax break replaces the Making Work Pay credit, which expires this year.

Unlike Making Work Pay, which was limited to workers making less than $75,000 ($150,000 for couples), the payroll tax holiday will be available to everyone who pays into Social Security.

Expanded child tax credit: $90 billion The bill will retain the $1,000 child tax credit (up from $500 before the Bush tax cuts). It also will retain the reduced-earnings threshold, which allows more people to claim the credit as refundable.

A refundable tax credit is one paid to a tax filer even if the value of the credit exceeds his tax liability. So if a filer doesn't owe any federal income tax but qualifies for the credit, it is paid to him in the form of a refund.

Smaller estate tax: $68 billion Barring any changes, the estate tax in 2011 and 2012 will be reinstated at an exemption level of $1 million and a top rate of 55%. But under the bill, the exemption level will be raised to $5 million and the top rate lowered to 35%.

0:00/3:14CEO: Obama is 'salesman-in-chief'

The legislation will also reinstate the so-called "step up in basis" for beneficiaries of those who die in 2010, 2011 or 2012. A stepped-up basis means that when someone sells an inherited asset, his capital gains tax bill will be based on the asset's price the day he inherited it, rather than when the decedent originally bought it.

Practically speaking that means the beneficiaries of those who died in 2010 will be allowed to choose which estate tax rules to follow -- those of 2011 or those of 2010. Under 2010 rules, there is no estate tax but also no step-up rules; there is only an option to exempt $1.3 million worth of capital gains from tax.

Help for the jobless: $57 billion The unemployed will get a 13-month extension of the deadline to file for additional unemployment benefits -- which go as high as 99 weeks in states hit hardest by job loss.

Extended investment tax rates: $53 billion Everybody will get to keep their low investment tax rates for the next two years. For most people, that means their qualified capital gains and dividends will continue to be taxed at 15%.

Low-income tax filers (those in the 10% and 15% brackets), however, will continue to enjoy a 0% tax rate on their capital gains or dividends.

Marriage penalty relief: $27 billion Marriage will still be hard (sorry), but not because less-than-wealthy two-earner couples will owe more to the IRS than they did when they were single.

The bill continues to ensure that the standard deduction for couples is exactly twice that for single filers. It also maintains an expanded 15% tax bracket so that the amount of income in that bracket for joint filers is exactly double that for single filers.

Expanded college credit: $18 billion Paying for college tuition in 2011 and 2012 will be made a bit easier with the retention of the American Opportunity tax credit, which is an expansion of the HOPE tax credit.

The Opportunity credit is worth up to $2,500 (up to 100% of the first $2,000 spent and up to 25% of the next $2,500), and it may be claimed for four years' worth of college. Eligibility to take the credit is limited to those with modified adjusted gross income below $90,000 ($180,000 for couples filing jointly).

Individual tax break extensions: Costs vary The legislation will extend a number of tax breaks that have been introduced in the past few years such as the option to deduct on one's federal return state and local sales tax instead of state and local income tax -- at a cost of $6 billion. Also, it will extend a deduction for qualified tuition and other education-related expenses at a cost of $1.2 billion.

Less pricey extensions include a break for teachers to deduct up to $250 in classroom expenses (just under $400 million). 

7 key money decisions facing lame-duck CongressTractor Supply income soars

Costliest stimulus, weakest payoff

The new tax package includes an extension of the Bush-era tax cuts, a reduction in the estate tax threshold, a patch for the alternative minimum tax, a partial one-year payroll tax holiday and some additional tax breaks for businesses that invest in plants and equipment.

The package was sold as a form of stimulus, which supporters of the measure argue is necessary to keep the still-struggling U.S. economy growing.

But many economists say it will drag the country deeper into debt, while doing little to spur growth.

"There are efficient ways to stimulate the economy and there are inefficient ways. Generalized tax cuts are inefficient," said money manager Barry Ritholtz, CEO and director of equity research at Fusion IQ.

And at a price tag of almost $900 billion at a time when the national debt is sky high, the proposal is considered a pretty big risk. That's why even some Republicans who like the idea of lower taxes are opposing the bill. (Stimulus vs. debt: An analysis)

"Last November the American people did not vote for more deficits, more stimulus or more uncertainty in the tax code, that's just what this lame duck Congress is about to give them," said Rep. Mike Pence, R-Ind., in comments during House debate on the measure.

How the bill would affect you

While the CBO hasn't tried to calculate the economic impact of this specific package, it has previously looked at the effectiveness of many of the same proposals that made it into this legislation.

Most of the current tax package doesn't fare very well. And some of the most expensive parts produce the least economic gain.

By the numbers

Extending the Bush tax cuts is the costliest proposal in the measure, but returns just 10 to 40 cents on every dollar spent, the CBO said. So does granting relief from the AMT, which is the second-largest expense in the bill.

Extending the Bush tax cuts for another two years will cost $330 billion, while the AMT fix costs another $136 billion, resulting in a combined loss of $280-$420 billion.

Tax breaks for employers investing in plants or equipment returns between 20 cents and $1.00 for every dollar of lost revenue. But it is among the smallest tax proposals in the bill, costing about $21 billion over the next 20 years. And many economists question whether it'll do any good, since business are still reluctant to spend their cash.

"What businesses need are customers. They have excess capacity, so a tax incentive to invest won't likely have much impact," said John Irons, research and policy director of the Economic Policy Institute, a liberal think tank.

The tax cut with the potential to do the most for the economy is the payroll tax holiday, which will cost about $114 billion, and is estimated to be a fairly effective way to pump money into the economy, returning between 30 to 90 cents to the dollar.

But the current proposal only gives workers a break on their half of the Social Security tax. Employers pay the other half. According to CBO's analysis, giving the break to employers rather than employees would have been the more effective stimulus, returning between 40 cents and $1.20.

And economists say the estate tax break, which will cost $68 billion in lost tax revenue, has little economic impact because it mostly affects the already affluent, who are less likely to spend their tax savings.

0:00/2:59Readers chastise pols over tax deal

Much of the help included in the 2009 stimulus that is missing from this package, such as investment in infrastructure and aid to state and local governments, is more effective than any of the current tax break proposals, according to CBO.

The extension of unemployment benefits was by far the most effective proposal in the current bill, returning between 70 cents to $1.90 for every dollar spent on the program, according to CBO. But it's also one of the least expensive parts of the plan, with limited return.

"If you give it a grade, it's both an A- and a D," said Irons. "It's hard to grade the package since it's a complete mixed bag."

While many economists favor more stimulus, even some of supporters of the plan concede that the bill currently on the table is a relatively ineffective way to pump money into the economy.

Evidence from past tax breaks show that only about two-thirds of the money put into the average taxpayer's pocket will be spent, said Mark Zandi, chief economist of Moody's Analytics. The rest will be saved or used to pay down debt, adding little to the economy.

He says that while the proposal isn't perfect, rejecting it would risk another recession.

"This is not what I would design if I was king," said Zandi, "but given the political constraints and the need to get something done before beginning of year, this is about the best we could hope for." 

Tractor Supply income soarsTax bill: To support or not support?

Congress OKs spending - until Tuesday

The vote represents the latest turn in what has become a contentious preview of one of the prime fiscal issues in Washington next year: The clash between the parties over spending.

In the short term, it means the House and Senate will have to take up the issue again next week as they try to figure out a solution for the current fiscal year, which ends in September.

The Washington Punch List

The good news, if you can call it that, is that Congress has come down to the wire many times before and has usually managed to pass a funding bill without causing a government shutdown.

A shutdown would throw a real monkey wrench into both public and private operations, as the government shifts to performing only essential operations.

The circuitous process used by lawmakers this year is not how things are supposed to work.

0:00/3:14CEO: Obama is 'salesman-in-chief'

Normally, lawmakers pass 12 appropriation bills for the president's approval. Those bills give federal agencies the legal authority to spend and conduct business.

This year, not one of the 12 has been approved by the Senate.

"In a rational world, we would pass all these things [12 appropriation bills] before the fiscal year begins," said Rudolph Penner, a former Congressional Budget Office director who is now public policy scholar at at the Urban Institute. "I think it's outrageous that we have gotten so used to passing continuing resolutions."

The last time Congress failed to pass funding bills, in 1995 and 1996, both political parties were damaged, with Republicans attracting most of the public's ire.

"They'd be crazy to let this happen again," Penner said. 

Jobless benefits extension is mired in political bickering7 key money decisions facing lame-duck Congress

Inflation (CPI)

Tepid rises in food and energy costs kept the rise in the overall index muted. Food prices rose a modest 1.5% for the year, while gasoline prices climbed 7.3% for the year. Though gasoline prices have been rising for several months, momentum is starting to wane -- the 0.7% monthly increase in gas prices was the slowest of the last five months.

While food and energy prices may soon hit consumer's wallets given the recent surge in energy and agriculture commodities, "deflation is still a greater threat than inflation," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, adding that "there is far too much slack in the economy" for for inflation to kick in.

0:00/2:13Luxury retail comeback

Ataround 1%, inflation is still considered too low, and can raise some concerns of deflation -- or falling prices. That's why the Federal Reserve is trying to raise inflation slowly, to reach its target of about 2% per year.

Following its final meeting of the year Tuesday, the central bank reiterated its controversial plan to stimulate the economy by buying up long-term Treasuries in order to bring down interest rates.

But critics of that policy fear that it could push up asset prices and lead to higher inflation down the road.

So far those fears have not come true. In October, core CPI rose a measly 0.6%-- the smallest increase on record. And Wednesday's numbers are unlikely to lend more support to the opposition.

On a monthly basis, CPI rose 0.1% in November, marking a slowdown from the previous month. Economists surveyed by Briefing.com expected a 0.2% rise. Core CPI also rose 0.1% during the month, in line with economist forecasts.  

Inflation (CPI)Fed’s hand strengthens on tame inflation data

GDP

"We're headed in the right direction, and a good deal of the concern that was evident with the initial release has undoubtedly diminished," said Michael Schenk, senior economist with the Credit Union National Association. "But it doesn't really get us to where we need to be."

The government calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the second reading for the quarter.

While the number is much better than the 1.7% growth reported in the second quarter, the rate is still considered weak for a recovery.

"I think most economists would agree that 2.5% is probably too low for robust job growth. It's about neutral," said Zach Pandl, an economist with Nomura Securities.

Consumer spending increased at a 2.8% pace, the best reading for that measure since the end of 2006, up from 2.6% initially reported. Exports were also revised upward to 6.3%, from 5%.

Those two points mark a bright spot in the report, as consumer spending and U.S. exports are engines of growth needed to drive the recovery forward.

0:00/2:40Slow economic incline ahead

Pandl expects the Fed's latest monetary stimulus plan, referred to as quantitative easing, will help spur stronger growth in the fourth quarter, but still not robust enough to totally diminish the need for the full $600 billion plan.

"This level of growth would still be considered unacceptable from the Fed's perspective," he said. "It's not fast enough to bring inflation back up and lower the unemployment rate. On the other hand, it suggests no reason for alarm."

The reading was slightly better than expected, as economists surveyed by Briefing.com had forecast growth of 2.4% for the third quarter. 

Fed’s hand strengthens on tame inflation dataGDP

What happens when the jobless give up?

Especially troubling is that long-term unemployment continues to mount. "It is unprecedented in post--World War II U.S. history to have 3% of the labor force unemployed for over a year," Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said in a recent speech. "If history is any guide, this year-plus unemployment rate will only revert to pre-recession levels after several years."

Add to that mix this perplexing fact: While there aren't nearly enough jobs, there are more of them -- a lot more. Since the month after the recession ended, the number of available jobs has surged 44%, according to the Labor Department. Job vacancies are nowhere near pre-recession levels (according to the Conference Board, there are still 10.4 million more unemployed workers than advertised vacancies). Still, there are as many as three million jobs going unfilled.

Various economists have posited various reasons for this mismatch:

* Employers, still reeling from all the downsizing they've had to do, are pickier about whom they hire and slower to close the deal.

* Jobless workers, especially those out of work for months and years, don't have the skills to multitask in a fast-paced economy where medical workers need to know electronic record-keeping, machinists need computer skills, and marketing managers can no longer delegate software duties.

* Workers, some of whom feel cushioned by unemployment benefits, are too picky to take lower-paying or less prestigious jobs.

* There is a geographic divide between where the jobless are -- states like Florida, Nevada, and Michigan -- and where the jobs are -- states like Maryland, South Dakota, and Iowa. Relocation is especially hard if your mortgage is under water.

The cost of not working

Whatever the right mix of reasons, the fallout is crippling. Economically, long-term joblessness means fewer dollars for consumption. For deficit control, it means fewer taxpayers contributing to government revenues and tens of billions more spent on unemployment insurance. Then there is the psychological toll on individuals and families -- and on the nation.

Early on in the recession, popular culture seized on the romantic notion of tightening our belts and looking inward to frills-free fun with our friends and families, after a decade of borrowed hyperconsumption. Now we need to ask a less romantic question: What happens when millions of Americans lose the habit of work, a habit that lends balance, structure, dignity -- and, of course, economic support -- to lives?

The longer people are unemployed the less employable they become. Skills become rusty; managers look more suspiciously at someone who has been out of work for years than a candidate already employed. I remember an old conservative saying: Graduate from high school; get a job -- any job; get married -- stay married; and (statistically speaking) your chances of landing in poverty are practically nil.

Even if that was once true, that calculation has lost some relevancy in this far more complex economy. But the concept of getting people back on the ladder, even if it's on a lower rung, is a worthy one.

Hopefully, Congress will pass a tax bill that gives business enough certainty and financial incentive to create more jobs. Hopefully, economic growth will begin to put a dent in that loss of 8 million jobs since the recession hit.

But an even knottier problem facing the nation's political leadership, from the President on down, is how to get the long-term unemployed into jobs as they become available. To avoid becoming chronically unemployed, people need more than platitudes offering sympathy. Career reinvention requires encouragement and guidance. Business leaders have specifics to offer on what jobs will be coming down the pike in expanding sectors like health care, and what skills are needed. They should to be brought into the political dialogue.

President Obama opened the conversation this fall with an industry-led initiative to better match community college graduates with skilled jobs. He followed with a Dec. 6 speech calling for a "Sputnik moment" to restart American innovation to create jobs and compete in the world.

But as he assembles a largely new economic team, the President face a more immediate challenge: the need for a "Manhattan Project" to get the long-term jobless back to work, something that would boost the psyche of both the unemployed and the nation. 

Layoffs are slowing but jobs growth still weakJob gloom at all-time high

Tax plan a raw deal for Social Security, critics say

To fund Social Security, workers and their employers each pay 6.2% of the first $106,800 in wages. The tax-cut deal would reduce the employee portion to 4.2%.

The idea is to let workers keep the money so they'll spend it and give the economy a boost.

The White House has said the Social Security system would be reimbursed for the full amount from general revenue -- an estimated $112 billion -- so it wouldn't affect the program's long-term solvency.

Social Security advocates don't doubt that's true over the coming year. But they worry that reinstating the 6.2% rate could be portrayed as a 50% tax increase.

Take the Social Security quiz

"It's easy to enact tax cuts but virtually impossible to allow them to expire. This payroll tax holiday proposal will be no different. Election year politics in 2012 will doom the repeal of this [$112 billion] cut," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.

If that prediction comes true, that could portend trouble for the program's funding in the future, Kennelly and other Social Security advocates say.

Since workers' payroll taxes are intended to fund Social Security benefits, mixing general revenue into the funding could weaken the program over time because it would have to compete with other important priorities paid for by general revenues, like education, Kennelly said.

As it is, the federal government will soon need to start paying back the $2.5 trillion in surplus payroll tax revenue that it has borrowed from Social Security over the years. That's because, starting in 2015, the amount of annual payroll tax income paid into the system will permanently fall below the amount of benefits that will need to be paid out.  

Social Security: No 2011 increaseLaid-off workers pick up hot skills

Manufacturing (ISM)

"Manufacturing continues to benefit from the recovery in autos, but those industries reliant upon housing continue to struggle," said Norbert Ore, chair of the ISM Manufacturing Business Survey Committee.

The ISM said that most of its components tracking specific manufacturing activities -- such as new orders, production and employment -- , showed growth, though that growth was slowing.

The component for new orders slowed to 56.6 in November from 58.9 the prior month. Production slowed to 55 from 62.7 and employment slowed to 57.5 from 57.7. 

Layoffs are slowing but jobs growth still weakManufacturing growth slows in September

GDP

"We're headed in the right direction, and a good deal of the concern that was evident with the initial release has undoubtedly diminished," said Michael Schenk, senior economist with the Credit Union National Association. "But it doesn't really get us to where we need to be."

The government calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the second reading for the quarter.

While the number is much better than the 1.7% growth reported in the second quarter, the rate is still considered weak for a recovery.

"I think most economists would agree that 2.5% is probably too low for robust job growth. It's about neutral," said Zach Pandl, an economist with Nomura Securities.

Consumer spending increased at a 2.8% pace, the best reading for that measure since the end of 2006, up from 2.6% initially reported. Exports were also revised upward to 6.3%, from 5%.

Those two points mark a bright spot in the report, as consumer spending and U.S. exports are engines of growth needed to drive the recovery forward.

0:00/2:40Slow economic incline ahead

Pandl expects the Fed's latest monetary stimulus plan, referred to as quantitative easing, will help spur stronger growth in the fourth quarter, but still not robust enough to totally diminish the need for the full $600 billion plan.

"This level of growth would still be considered unacceptable from the Fed's perspective," he said. "It's not fast enough to bring inflation back up and lower the unemployment rate. On the other hand, it suggests no reason for alarm."

The reading was slightly better than expected, as economists surveyed by Briefing.com had forecast growth of 2.4% for the third quarter. 

Fed’s hand strengthens on tame inflation dataEconomy still hobbling along

Tax bill: To support or not support?

Both chambers of Congress are likely to vote this week on a $858 billion proposal to extend tax-cuts and jobless benefits -- a measure that symbolizes the new balance of power in Washington in the wake of the mid-term elections. President Barack Obama largely hashed out the framework for the tax bill in talks with Senate Republicans.

To bring the newly-empowered GOP aboard, the White House agreed to extend for two years the current tax rates on all earners, not just on those making under $250,000, as Democrats wanted. And the administration agreed to cut the estate tax, set to jump next year to 55 percent on estates over $1 million, to 35 percent on estates worth more than $5 million.

"Either way you vote, you're going to regret portions of it," Braley said last week as Congressional Democrats started chewing over the terms of the deal. "It's going to boil down to whether the sum benefit of voting 'Yes' outweighs the very strong reservations we have about providing a tax bonus of hundreds of millions of dollars to some of the wealthiest Americans."

Braley is a rising star in the party, a prolific fundraiser who last year founded the Populist Caucus to focus on "middle class economic issues" in part through pushing "an equitable tax structure." But Braley secured a third term in November by fewer than 4,000 votes, one of only ten House Democrats reelected with under 50 percent of the vote. That result is likely to land him on the Republican target list for 2012; how he votes on this tax package could provide potential opponents with campaign fodder.

It was no surprise, then, that Braley has been taking his time working through his decision. In addition to his concerns over benefits for top earners, Braley is fretting about the deficit impact of the package, which currently isn't funded. He said it could blow an even bigger hole in the budget than forecast if policymakers in two years simply decide to continue extending the lower rates for all.

On the other hand, its proposed 13-month extension of unemployment benefits would give the recovery a clear boost, he said, because so much of that money will be pumped back into the economy. For the same reason, he liked the two-percentage-point payroll tax relief -- which he called similar to a targeted benefit he secured in last year's stimulus package -- but he worried about its impact on the solvency of Social Security.

For some Democrats, one of those concerns or another tipped the balance definitively. Rep. Kurt Schrader (D-Ore.) said he just won reelection on a pledge to control spending, making a vote for the bill out of the question. Rep. Gene Green (D-Texas) is reluctantly supporting it, because too many of his Houston constituents are out of work and dependent on the unemployment benefits the package will extend.

Braley last week remained committed to being uncommitted. "I spent 23 years trying cases in front of juries," the former trial lawyer said. "And I always made it clear that they should wait until all the evidence was in, and that they'd heard the instructions from the judge before they made up their mind."'

Overlaying serious misgivings about the shape of the package, House Democrats were riled by the process that hatched it. The White House stiff-armed them out of the negotiations. And then Obama, in a Tuesday afternoon press conference defending the deal, thumbed his nose at the left, dismissing as "sanctimonious" those liberal stalwarts who preferred a protracted fight with Republicans over a quick deal forestalling rate hikes.

Considering the President's rightward feint, Braley predicted trouble. "He's going to have a problem with his base over this," he said. That base helped revive Braley in the fall after the American Future Fund, an Iowa-based conservative group with anonymous funders, flooded his district with more than $1 million in attack ads.

0:00/3:06Summers: Tax deal will lower deficit

On Wednesday afternoon, the White House dispatched Vice President Joe Biden to Capitol Hill to meet with House Democrats and try to allay their concerns. Braley attended and walked out impressed, if not swayed, by Biden's presentation. "He spent 36 years of his life here, and he understands the dynamics of how legislation gets passed," he said. "Hearing it from him made it easier for people to understand that when he says, 'This is the best deal we could get under these circumstances,' he believes that."

But Biden also made clear that the deal was essentially cooked. House Democrats would have to take it or leave it as-is. By Thursday morning, simmering frustration over what the House Democrats viewed as shabby handling from the White House boiled over. In a closed-door session in the basement of the Capitol, Democrats erupted into shouts of "Just Say No!" audible in the hallway outside. They overwhelmingly approved a non-binding resolution pledging to block House consideration of the package without changes.

Afterward, Braley reflected the party's newly defiant tone. "We expect to be part of these negotiations, and you are not going to unilaterally dictate to us what your deal is," he said.

House Democrats were similarly united less than two years ago as Congress considered another White House-backed package carrying an enormous price tag and the promise of a major economic punch. But with that stimulus package, House Democrats were lined up in support. They had been given a remarkably free hand to craft the first draft of that deal, and it much more closely hewed to their priorities.

The calculus behind this decision looks nothing like that one. Indeed, it more closely resembles the one facing Republicans on the Wall Street bailout in the fall of 2008. In both cases, the President asked his party's Congressional rank-and-file to hold their noses and support an ideologically repugnant proposal for the greater economic benefit. A minority of Congressional Republicans ended up voting for TARP when it passed -- and the tax bill will likely gain similarly thin support from House Democrats. But Democratic leadership aides said some face-saving tweaks adding tax credits for renewable energy projects would likely earn the proposal enough backing to skate through this week.

By Friday, Braley was still officially on the fence pending a final look at the details: "There's certainly a lot of pieces in the air." 

Wall Street reform bill: One vote awayJobless benefits extension is mired in political bickering

Last unemployment check is in the mail

Though President Obama on Tuesday called on Congress to extend unemployment benefits, lawmakers are still fighting over the expense. Sen. Max Baucus, a Montana Democrat, introduced a bill Monday night that would extend benefits through next year at a cost of $56.4 billion. But Republicans are likely to balk at the price tag.

While they debate, state unemployment agencies are very concerned about the impending end to these extended jobless payments, which they say people depend on to cover their rent and buy food.

"It's a critical safety net program," said Nancy Dunphy, New York State's deputy commissioner of labor for employment security. "This is the worst time of year to be running out of benefits."

99ers: The unemployed need help!

Federal jobless payments, which last up to 73 weeks, kick in after the state-funded 26 weeks of coverage expire. These federal benefits are divided into four tiers of emergency unemployment compensation, which last between six and 20 weeks, followed by up to five months of extended benefits. The jobless must apply each time they move into a new tier.

Unemployed Americans who've just exhausted their state benefits are already blocked from entering the federal system in most states. They would have had to file their initial federal claim by this past weekend.

0:00/2:39Long-term unemployed can't find jobs

Those already in a federal emergency benefits system will not be able to move to the next tier after this coming weekend. However, they can continue to collect the benefits available in their current level. So those who just entered a tier could continue receiving benefits for awhile, but those who are near the end of their tier will see payments dry up sooner.

Many of the jobless who are in the last stage of the federal safety net -- the up to five months of extended benefits -- will stop getting checks this month no matter when they started this level. That's because the federal government will stop fully funding this stage after Nov. 30.

Not every state offers federal extended benefits, because they were required to split the costs of the program with the federal government. Prior to last year, only 12 states provided this support, depending on their state unemployment rate.

The Recovery Act put the federal government on the hook for the entire cost of extended benefits, so 26 more states signed on. But they are dropping the support once the full federal funding ends.

When the unemployed in those 26 states will see their last extended benefits checks depends on where they live. In Michigan, for instance, the jobless could get payments through the rest of the year. But the unemployed in Nevada will not receive these benefits after Dec. 11.

Regardless of when the jobless stop receiving benefits, the unemployed should check with their state agencies to see whether they should still file claims. That's because it will be easier for states to restart their payments should Congress extend the deadline to file for federal benefits.

"If Congress passes the extension, we want to pick up where we left off," said Mae Worthey, spokeswoman for the Nevada Department of Employment, Training and Rehabilitation. 

Jobless claims surge to 457,000Jobless benefits extension is mired in political bickering

Only one of the PIIGS matters: Spain

Investors have been extremely nervous about the sovereign debt crisis in Europe. Three of the five PIIGS countries -- Portugal, Ireland and Greece -- have gotten the most attention. Italy is a worry as well.

But some experts said that the market may be able to deal with more problems in any of those four nations as long as they don't spread to Spain.

"The global economy likely can absorb defaults in Ireland and Greece. The global economy can probably deal with Portugal as well," said Dr. Robert Shapiro, chairman of Sonceon, an economic advisory firm in Washington. "But then you get to Spain. It's the ninth largest economy in the world."

Shapiro, who served as Under Secretary of Commerce for Economic Affairs in President Clinton's administration, said the big fear is that a default in Spain could significantly hurt German and French banks since they hold more than $600 billion in Spanish debt, a large chunk.

And that could create a scenario similar to the Wall Street meltdown of 2008.

"A default in Spain would endanger French and German banks and that would have serious consequences for U.S. financial institutions because they all have counterparty risk," Shapiro said. "Just as Lehman Brothers spread to Europe, a European banking crisis would spread to the United States."

If only success in the world of sports translated into economic might. With Rafael Nadal winning three of the four tennis Grand Slam tournaments and Spain's soccer squad claiming the World Cup, it would be unfortunate if 2010 also turned out to be the year that Spain doomed the global economy to another downturn.

Fortunately, Shapiro does not think that a Lehman or Bear Stearns-like collapse for Spain and European banks is that likely. But he doesn't think the threat of a meltdown should be dismissed either, pegging the odds of this worst-case scenario at about 15% to 20%.

Jeffrey Roach, chief economist and investment committee chair with Horizon Investments in Charlotte, N.C., also said that the problems in Spain bear watching.

He said investors should not be surprised that Portugal and Ireland could face problems with their debt loads. The worry though is that so much is still unknown about how deep Spain's problems are.

"The story has yet to be played out. The concern is the extent of the risks spread out in Spain," Roach said. "The markets may be surprised if the effects are much broader than what was experienced in the U.S. We all know that Spain, like the U.S., had an unusual housing bubble."

0:00/1:30Ireland braces for more cuts

Roach added that Germany will play a key role in determining what happens to the rest of the continent.

"Germany is the only country with the strength to keep the eurozone together and the euro afloat," Roach said. "We need to see Germany remain committed to fiscal responsibility. Once Germany leads the way other nations will follow."

That sounds good on the surface. But there are fears about whether Germany actually has the wherewithal or desire to continue supporting its weaker brethren. There has been some chatter lately that Germany might want to consider leaving the euro behind and bringing back the mark.

Europe's new contagion worries

One fund manager worries that could have a disastrous impact on the continent.

"The euro can survive but there needs to be a cohesive strategy. If Germany is talking about the euro as if it cannot be sustained, that's a worrisome risk," said Nainesh Shah, senior securities analyst with Roosevelt Investments in New York.

Shah said that he's not overly concerned about Germany defecting from the eurozone. But he conceded that his firm's Roosevelt Multi-Cap Fund, which has the flexibility to invest in all markets around the world, has only two holdings based in Europe.

"We are not significantly worried. But are we uncomfortable with Europe? Yes," Shah said.

So for now, the euro continues to drop against the dollar, despite the Federal Reserve's best efforts to weaken the greenback with its second round of quantitative easing.

Shapiro said there is a chance for Europe to avoid creating another global credit nightmare. But it has to be nimble and more proactive.

"This could be a train wreck in slow motion," Shapiro said. "There is no quick solution here. What can the EU do? Our own government made enormous errors by ignoring worst-case scenarios. The EU needs to hold the line at Ireland and Portugal."

The problem is that investors don't seem to have faith that the EU can do that.

- 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.  

Stocks retreat; Dow off by 37It’s the global economy, stupid.

WikiLeaks' next target: 'A big U.S. bank'

Inconveniently, he didn't say which one, specifying only that it is "a big U.S. bank." Assange also didn't say just what sort of information he has that would be so damaging.

With Wall Street already up to its ears in scandal, market watchers reacted with a shrug.

"We already know the banks are grossly incompetent, can't manage risk and would be dead without taxpayer support," said Barry Ritholtz, a Wall Street money manager who rails on the bankers at his Big Picture blog. "What are we going to find in these leaks -- that free checking isn't really free?"

Like it or not, we shall soon find out. Assange said in an interview with Forbes that he plans to release "either tens or hundreds of thousands of documents" early next year.

The release, Assange said, will reveal "unethical behavior." He said he would stop short of calling the depicted actions criminal.

Assange said he seeks to provoke a full-scale investigation of the banks, along the lines of the probes that followed the collapse of energy trader Enron nine years ago.

"It will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms, I presume," he said.

Wall Street, which is already the subject of numerous investigations and has a potentially massive problem in the form of rising scrutiny of its mishandling of mortgage documentation, did not exactly shudder at the news.

Stocks in the biggest U.S. financial firms, ranging from Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) to Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500), dropped 1% 2% in midday action Tuesday, on a day when stocks were generally lower and the European banking crisis was adding to worries about U.S. financials.

The biggest risk seems to stem from the prospect of another public black eye, along the lines of the hearings that Sen. Carl Levin, D., Mich., held in April.

It was at those hearings that Levin repeatedly questioned Goldman bankers about internal e-mails referring to a "sh---y deal" the firm had pushed on its clients.

0:00/2:32Sen. Levin's R-rated tirade

But there's reason to doubt that documents showing more unethical behavior will have any effect, let alone bring down a bank.

The administration, after all, spent much of its first year in office trying to reassure the public and the markets that no big U.S. lenders would be allowed to fail.

That is why Congress pressured accounting standard setters to ease a rule governing how banks recognize losses, and why the administration carried through with the bank stress tests that allowed banks to cheaply raise more capital.

"Anyone who follows the banking industry knows these guys are essentially insolvent," said Ritholtz. "So we're not going to get surprised there."

The banks have paid the country back by shrinking their loan books in eight of the past nine quarters, while paying their top executives in a fashion that is, if it's possible, even more irresponsible than before the 2008 meltdown.

So what about the weapon Assange has used with some results in the military and diplomatic leaks, the acute embarrassment of the subjects? That doesn't seem likely to change the game for the banks.

It hasn't been a problem, for instance, through three years of revelations about banks pushing toxic derivatives on unsophisticated municipal treasurers and foreclosing on the wrong people.

"I'm not saying he doesn't have anything, but you have to wonder what else could really be exposed at this point," says Peter Cohan, a management consultant and author who teaches business strategy at Babson College. "I just wonder at what point people will tire of giving this guy all this free publicity." 

Wall Street tries to undo financial regulations overhaulRegulators: Much to do on Wall Street reform