Inflation pressures grow on Main Street

"They've been squeezed so badly for the last two years, any uptick in demand means they're going to try to raise prices a bit," said William Dennis, senior research fellow with the National Federation of Independent Business.

Q Kindness Cafй is one of those businesses. With the cost of everything from coffee to linen service to meat steadily rising, the St. Paul, Minn., diner was forced to raise prices on its menu.

"Business is definitely still soft. But we've gotten the screws turned on us from our suppliers," said owner Lisa Metwaly. "We had no other choice. I just hope we don't chase any more customers away."

Metwaly said so far she hasn't had any complaints or seen any drop off in business from the hikes, which raised the price of a typical entrйe by 50 cents to about $6.50.

Restaurants aren't the only businesses being affected.

Danforth Pewter, a small Vermont manufacturer of jewelry, ornaments and oil lamps made of pewter, just announced higher prices for its wholesale customers after the price of tin -- its key raw material -- doubled over the last six months, thanks to rising demand in China. (Tin is used in many electronic devices.)

"China is absorbing more and more of the global tin market, driving up prices," said Bram Kleppner, the company's CEO.

Kleppner said the company has seen some improvement in sales recently, but demand is still not back to pre-recession levels.

"Higher-end gifts are one of the first discretionary purchases to disappear in a recession," he said.

The company's price increase averages out to about 6%.

"With every single category that we increase prices on, there is a painful debate about what the consumer reaction will be, what it will feel like on the shelf," he said.

Will consumers pay?

A survey of small businesses by PNC Financial found that 37% expect to raise prices over the next six months, while only 7% said they would reduce prices. That's the widest disparity since the early months of the recession.

"Every time their costs go up, they think about raising prices," said Stuart Hoffman, PNC's chief economist. "The question is how much of this will be able to stick."

Stronger consumer spending in recent months might help businesses pass along their costs, Hoffman said. But it's not strong demand that's driving prices higher. Only 16% of those raising prices pointed to demand as the reason for the increase, while 82% blamed rising input costs.

0:00/02:08Gas prices smash the heartland

Small businesses expect far more inflation ahead than the typical economist. The survey found a majority believe prices to be up between 4% to 6% this year, far above the forecast from the Federal Reserve of inflation in the 1.3% and 1.7% range.

The typical small business has trouble with price hikes, and closely watches their competition when trying to decide on what their customers will accept, according to Mark Stiving, CEO of Pragmatic Pricing, a pricing consultant with many small business clients.

"Small companies tend to have a very hard time raising prices because big companies won't follow them," he said. (8 great cities to start a business)

Losing business is a risk for Lesley Hall, a hairstylist in Westwood, Calif., who just raised her prices for the first time since 2008 because of her own personal budget squeeze. To cover her living expenses, she's had to raise the price of a typical session to $68 from $60.

"I have a lot of anxiety about doing it," she said. "There's a tension between the need to raise your prices to survive and not chasing customers away." 

JPMorgan's Dimon: No mortgage writedowns

Regulators and state attorneys general have been trying to get the banks to include mortgage principal writedowns as part of a proposed settlement of allegations that banks wrongly foreclosed on thousands of homeowners. The writedown proposal has been a key sticking point in the negotiations.

In addition to JPMorgan Chase, the other servicers are Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

Dimon spoke to the U.S. Chamber about a wide range of topics from monetary policy to struggling municipalities.

Dimon had little sympathy for municipalities and suggested that investors should expect that some of them will go bankrupt. But he suggested it won't "shatter America" and it's "part of the credit cycle."

Elizabeth Warren's olive branch to Big Business

"The states have the wherewithal to fix their problems," Dimon said. "It's not going to stop the United States from starting to grow."

Dimon spent most of his discussion with Chamber president Tom Donohue blasting regulators' efforts to enact new rules on derivatives, or complex financial contracts that financial firms and companies use to hedge risk.

0:00/1:33Dimon: Let the big dumb banks fail

He specifically opposes requiring companies such as airlines and other companies to post cash up front before they enter into a deriviatives contract.

"If we're required to have Caterpillar to post margin requirements, they're simply going to do business in Singapore, where they don't have to," Dimon said.

-- An earlier version of this story incorrectly reported that Dimon had said no principal writedowns for those who couldn't pay their mortgages.

Jobless claims edge lower

Economists surveyed by Briefing.com had expected initial claims to total 383,000 in the latest report.

The Labor Department said the latest report reflects the annual revision to the weekly unemployment claims for seasonal factors. Last week's total, for example, was revised up by 12,000.

"The revised data show a slightly less steep drop in claims over the past few months but the key point here is that the trend is still clearly downwards," said Ian Shepherdson, an economist at High Frequency Economics.

The 4-week moving average of initial claims, which smoothes out volatility in the measure, was 394,250. That was up 3,250 from the previous week's revised average of 391,000.

0:00/3:55Want jobs? Fix the patent system

In addition to the decline in initial claims, the number of Americans filing for ongoing claims for unemployment benefits dropped 51,000 to 3,714,000 in the week ended March 19, the most recent week available.

The 4-week moving average of continuing claims was 3,765,250, down 32,750 from the week before.

On Wednesday, payroll processor ADP reported that private sector employment rose by 201,000 in March, while an outplacement firm said planned layoffs declined in the month.

More summer jobs - and they'll pay better

Thursday's initial claims report comes one day before the government's monthly payrolls report, one of the most closely watched economic indicators on Wall Street.

A CNNMoney survey of 18 economists forecast an 180,000 jump in payrolls. They also expect the unemployment rate to hold steady at 8.9%.

Shepherdson said he expects the decline in initial claims to continue as access to credit becomes easier for businesses.

"The drop in claims has already been reflected in a clear acceleration in private payrolls in recent months, and we think there is more to come," he said. "The labor market recovery is gathering momentum."

Job Growth

Economists surveyed by CNNMoney were expecting the unemployment rate to edge up to 9.2%.

The economy gained 192,000 jobs in the month, roughly in line with economists' forecast of 190,000 jobs. Businesses added 222,000 jobs -- their best hiring month since last April -- while state and local governments cut 30,000 jobs.

Another good sign: More jobs were added in the previous two months than originally thought. Readings for December and January were revised upward by a combined 58,000 jobs.

The report could mean that the labor market has finally turned the corner and should start to help overall economic growth going forward, said Sung Won Sohn, economics professor at Cal State University Channel Islands.

"The last piston in the economic engine has begun to fire," he said.

Despite the recent improvement, unemployment remains significantly higher than before the Great Recession hit. Austan Goolsbee, the chairman of the White House Council of Economic Advisors, acknowledge more needs to be done to replace the 8 million jobs lost during the worst of the recession, despite the signs of improvement.

"The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead," he said. "It is important not to read too much into any one monthly report."

Why unemployment is falling

Still, businesses are clearly becoming far more confident about adding workers. Private businesses gained a total of 457,000 jobs over the last three months, even as state and local governments continued to lose jobs.

The gains have been widespread, with 68% of industries tracked by the Labor Department adding jobs in the month -- the most broad-based gain in employment across the business world since 1998.

And more job seekers are finding work. The unemployment survey -- which is compiled from a separate survey of households -- showed that 664,000 additional workers reported having a job compared to three months ago.

Lakshman Achuthan, managing director of Economic Cycle Research Institute, said this is likely a sign of a pickup in new businesses opening up, though new employers can be difficult for the government to track.

"These are things that fall under the radar," he said. "All of us probably know, anecdotally, stories of our friends and family who lost a job at a big place and took the opportunity to strike out on their own."

Another factor helping unemployment is a sharp decline in job losses. The number of people losing their jobs fell by 1.1 million since November, the biggest three-month decline since the Labor Department began tracking that number in 1967.

That improvement has also shown up in readings on jobless claims -- the number of people filing for first-time unemployment benefits hit a three-year low last week.

"We're not firing like we were and there is new business formation," said Achuthan. But he cautioned that the market is still difficult for the long-term unemployed.

Nearly 6 million Americans have been out of work for more than six months and the average duration of unemployment climbed to 37 weeks in February, a post-World War II record.

And the unemployment rate is likely to rise as the labor market continues to improve and job seekers sitting on the sidelines return to the work force, said Tig Gilliam, president of the North American unit of job placement firm Adecco.

The number of jobless people who are no longer counted as unemployed because they're not actively seeking work remained little changed at about 2.7 million.

"There are enough people who are discouraged about the job market that they just haven't actively looked," he said.

GDP

The prior estimate had been for a 2.8% growth rate in the period.

While economists don't consider the three-tenths revision a major change, the report contained new information on strong corporate profits, which could be an encouraging sign for the job market going forward.

Company profits grew 9.7% during the quarter -- about twice what economists had been expecting.

"That's impressive when you have nominal GDP growth of only 3.1%," said Joseph LaVorgna, chief U.S. economist with Deutsche Bank. "To get that kind of corporate profit growth is impressive, and a good sign for 2011."

The government said consumer spending and exports helped drive the overall number higher in the fourth quarter, while budget cuts by state and local governments continued to hold growth back.

The Commerce Department calculates GDP as a measure of goods and services produced in the United States. The number is backward looking and is often revised multiple times. This is the third reading for the fourth quarter.

Household wealth down 23% in 2 years - Fed

Titled "Surveying the Aftermath of the Storm," the report offers a broad look at how the financial crisis impacted individual households.

It is widely known that the 2008 financial crisis resulted in the vaporization of trillions of dollars in household wealth. But Federal Reserve officials said Thursday the new report offers a look at exactly how hard the recession hit families, and how they reacted.

The numbers paint a stark picture.

Families that owned stock saw their portfolios drop by more than a third to $12,000 from $18,500, on average. The value of primary real estate holdings decreased by an average of $18,700.

And families took on more debt, pushing median total debt levels to $75,600 from $70,300. They also made less money. Media household income dropped from to $49,800 from $50,100.

0:00/04:41Americans move south

Interestingly, families below the median national income in 2007 actually saw their earnings increase by 2009. Meanwhile, families that started above the national average in 2007 saw their incomes decline.

Families in the top 10% of net worthin 2007 saw their incomes decline by 13% on average, a phenomenon the Fed attributed to large declines in capital gains and in business, farm or self-employment income.

The report also reveals that some families are doing quite well.

"Although over 60% of families saw their wealth decline over the two-year period, a sizable fraction of households experienced gains in wealth," the report says.

The Federal Reserve's biggest bloopers

But it's hard to pin down what made those families successful. "Shifts in wealth do not appear to be correlated in a simple way with families' characteristics," the authors write.

The report's authors also make the point that Americans appear to be reacting to the recession in a counterproductive way.

"[F]amilies' behavior may act in some ways as a brake on reviving the economy in the short run," the report says.

The data shows that Americans have increased their savings rate across the board, regardless of how they are weathering the storm. That means less money is being pumped into the economy. 

New home sales tumble to record low

"We've been running at a very low level," said John Canally, an economist with LPL Financial, a Boston-based financial adviser.

The release followed Monday's downbeat report on existing home sales, which fell 9.6% month-over-month.

"New home sales are even more crucial to the nation's economy," said Canally "It's the new home sales that actually drive economic activity and contribute to GDP."

New home builders hire construction workers and buy building materials from domestic sources, contributing much more to the economy than people just trading one existing home for another.

Weather factor

Particularly bad winter weather this year probably added to market woes. Sales dropped precipitously in the Northeast and Midwest, which experienced some frigid and snowy days during the month. Sales, though, were down across the board, falling in all four regions.

A better sign for the market was the number of new homes in inventory. That remained at 186,000 in February, a 40-year-plus low, according to Canally and only about a third of the number of new homes on the market during the peak months off 2006.

The drop is a positive but limited sign for the market. New homes compete with existing ones for buyers and there's still a big inventory overhang of those. In addition, there's a "shadow inventory" of foreclosed homes repossessed by banks and not yet put back on the market.

"One of the biggest detriments to building new homes is the flow of existing foreclosed homes," said David Crowe, chief economist for the National Association of Home Builders (NAHB).

Right now, there does not seem to be any reasons to think that new home sales will recover anytime soon. The builders certainly are not optimistic.

The widely used gauge of builder confidence, the NAHB/Wells Fargo Housing market index, stood at 17 this month. That was up from single digit levels of two years ago, but still well below the 50 mark. When it is below 50, more builders rate market conditions as poor than as good. 

Budget pain already taking a toll

The Defense Department has put the construction of an attack submarine on hold and is struggling to avoid disrupting the workforce at the Virginia shipyard where it's built. The Justice Department is running out of money to house prisoners. And the National Institutes of Health is giving out less funding for scientific research.

Since October, agencies have been stuck at last year's funding levels as Congress has passed six so-called continuing resolutions.

And after playing it cool for months, they are starting to lay out the consequences for lawmakers, who are -- in theory -- working on a plan to fund the government for the next six months.

At the Pentagon, officials are flat out telling Congress that they are already in serious trouble. The military has delayed 75 projects, and the Army and the Marine Corps have imposed temporary civilian hiring freezes.

0:00/2:59Rep. Ryan: Tax hikes will crash economy

The Army has deferred a contract for new Chinook helicopters and delayed refurbishment of war-torn Humvees.

The Justice Department, Social Security Administration and Congressional Budget Office have frozen hiring.

Social Security Commissioner Michael Astrue said his agency won't open eight new offices and has cut back on mailing benefit statements to non-beneficiaries over the age of 25.

Financial regulatory agencies -- the Commodity Futures Trading Commission and Securities and Exchange Commission -- have struggled to implement the Dodd-Frank Wall Street reform law.

The SEC delayed the creation of five key initiatives mandated by Dodd-Frank, including a new office of women and minority inclusion and a whistle blower unit.

At the National Institutes of Health, officials are funding some grants at 90% of their optimal level, due to uncertainty over the budget.

Funding the government -- 3 weeks at a time

Sally Rockey, deputy director for extramural research at the NIH, said that funding will be restored if Congress can set a spending level for the rest of the year. But Rockey warned that the longer lawmakers drag their feet, the tougher it is for the agency.

At this point, there is no chance lawmakers will pass a real budget. Instead, the most likely scenario is that Congress will pass a spending bill for the next six months that keeps funding at fiscal year 2010 levels, while trimming fat around the edges.

But some agencies argue that's not going to work.

Pentagon officials say if they don't get more funding -- and fast -- troops won't get all the training they need, flight time for pilots will decrease and maintenance will suffer in a way that does serious damage to military readiness.

Defense Secretary Robert Gates has described the prospect of a year without a funding increase as "a crisis at our doorstep."

Attorney General Eric holder said he will be forced to consider layoffs if his agency doesn't get more funds, and he might run out of money to house additional prisoners.

For lawmakers, the budget calculus isn't going to get any easier. The current spending bill expires on April 8. Republicans favor steep cuts to spending, while President Obama favors a more measured approach.

The dumbest debate ever

Patience is wearing thin on both sides.

When the House passed the most recent stopgap bill, 54 Republicans joined 104 Democrats to vote against the measure, which cut $6 billion in spending.

That siphoning of votes suggests that reaching a long-term agreement amenable to both parties will be more difficult this time around. The good news is lawmakers usually manage to hammer out a deal before the deadline.

For agencies, the question is: A deal at what funding level?

Job creation rate hit 29-year low during recession

Of course, more established firms also experienced drops in job creation, but they weren't as dramatic as at newer firms. Among firms of all ages, the job creation rate fell 25% from 2006 to 2009, according to Kauffman.

A healthy economy needs to constantly create jobs to replace ones that are being lost. In the recent recession, the problem wasn't just layoffs, but that not enough new jobs were being added.

Even during the depths of the Great Recession, though, many companies were able to generate new jobs.

0:00/2:14Underemployed and looking for work

More than 14 million private-sector jobs were created in the 12 months ending March 2009, Kauffman found.

"It's heartening to know that, despite the economic obstacles, entrepreneurs were still finding ways to create jobs, though fewer than in past recessions," said Robert E. Litan, vice president of research and policy at the Kauffman Foundation.

Even so, the economy experienced a net loss of 5.7 million jobs between March 2008 and March 2009.  

Health care's hidden costs: $363 billion

That amounts to $1,355 per consumer, on top of the $8,000 the government says people spend on doctor fees and hospital care.

"We're surprised that this number came in so high. It's significant," said Paul Keckley, executive director with the group.

The out-of-pocket costs that the government tallies usually include only insurance-related costs like premiums, deductibles, and co-payments.

Keckley said the study is the first to estimate how much consumers dish out on health care related goods and services not covered by private or government insurance.

These include: ambulance services, alternative medicines, nutritional products and vitamins, weight-loss centers and supervisory care of elderly family members.

"These costs can add up to billions of dollars, even eclipsing housing as a household expense," said Keckley.

Big health care changes in 2012

The Deloitte study found that half the hidden costs are for supervisory care, or the unpaid care given by family and friends.

"We compared on an hourly basis the average number of hours per month taken off work to look after a family member or friend, and lost wages in doing this," said Keckley.

The report estimates the value of unpaid care is $12.60 per hour, or $199 billion a year.

"It has been one year since the passage of health care reform," said Keckley. "We wanted to understand the financial context behind decisions that consumers are making about how they spend their money on health care."

0:00/2:22Humana deals with health care reform

As health reform rolls out over the next few years, Keckley expects that out-of-pocket health care costs to consumers will increase quickly. Health care costs continue to rise faster than household incomes and insurers are passing along more costs to their customers.

The average household income fell 1.9% last year while health care costs rose 6%, he said.

"This is a perfect storm in which consumers' hidden costs will only increase exponentially in the near future."

The Deloitte study looked at the most recently available health care expenditure data from the government. The firm, with Harris Interactive, also polled 1,008 U.S. adults,18 and older, between Sept. 29 to Oct. 4, 2010.

Diet Coke may be the new #2, but U.S. soda market is shrinking

Diet Coke jumped a spot in the U.S. cola wars by simply managing to post smaller volume declines than Pepsi. Diet Coke was down 1% in volume in the U.S. in 2010 while Pepsi fell 4.8%, according to Beverage-Digest .

The trade publication reported that the U.S. carbonated soft drink category fell about 0.5%, but that's better than the 2.1% drop in 2009 and 3% drop the prior year. Because the sector has been shrinking in the U.S., Coke and Diet Coke's market share remained flat even though both lost a small percentage of volume. The soft drink category in the U.S. hasn't seen an increase since 2004, signaling that flagging sales numbers are not just recession driven. The total category's volume has now sunk back down to 1996 levels.

These declines are due to an intersection of two consumer trends that began in the early part of the 2000s, says John Sicher, editor and publisher of Beverage-Digest : "More and more Americans became concerned about calories, and the phenomenal growth of bottled water," he explains. That's also why diet sodas have held up better. The biggest percentage gains last year out of the top-10 carbonated soft drink brands came from diet beverages. Diet Mountain Dew and Diet Dr Pepper both grew in volume more than 5%, and Coke Zero, the no. 11 brand, grew 17.5%.

As U.S. consumers have turned away from soda, big winners along with bottled water include energy drinks, ready-to-drink tea, and sports drinks. In the soda category, what Sanford Bernstein analyst Ali Dibadj calls "the dark stuff" is losing share to non-cola flavors like Dr Pepper. "The colas have gotten a little bit boring to people," he says.

For PepsiCo (PEP, Fortune 500) and Coca-Cola (KO, Fortune 500), the companies' flagship brands are still extremely important but are now just one (albeit important) piece of the pie. "It's not just about the cola wars," says Joe Jacuzzi, a PepsiCo spokesman. "It's about all sorts of things that consumers are looking for these days."

Coca-Cola noted in its annual report that its 2% unit case volume growth in North America was driven by a 5% increase in still beverages. Its Powerade line grew 19%, teas grew 12%, and its Simply line (juices like Simply Orange) was up 23%. PepsiCo reported a mid-single digit increase in its Gatorade brand and a high-single digit rise in its Lipton ready-to-drink tea business.

"Pepsi has done a relatively good job with non-carbonated, but you have to keep supporting your flagship brand, especially when Coke has arguably gotten better at doing that," says HSBC Securities analyst Lauren Torres.

Beverage-Digest 's Sicher says not to expect growth anytime soon. "I think that with a decent economy, good marketing, and some innovation, it can be in the flattish range," he notes.

One bright spot: Beverage-Digest reported that even though volume has declined, the retail value of the U.S. consumer soft drink business has grown to $74.2 billion in 2010, 0.4% over 2009. Americans might not be drinking as much soda, but they're willing to pay more for it. "There's been modest price increases that have helped," says Torres. The business, she adds, is "still important and still contributing."

Let the price hikes begin!

"The increases are necessary to offset inflationary pressure from higher raw material and energy costs," Kimberly-Clark (KMB, Fortune 500) said in a press release.

Huggies diapers and Pull-Ups prices will rise by 3% to 7%, the company said. Cottonelle and Scott 1000 toilet paper will rise about 7%.

Kraft Foods (KFT, Fortune 500) raised its price on Maxwell House coffee by 22%, or 70 cents per pound, after Smuckers (SJM) said last month it would raise the price of Folgers by 10%.

The increases come as major brands struggle to keep their profit margins intact, amid surging costs on raw materials. Producer prices rose 1.6% in February alone, the the biggest jump in nearly two years, according to government data released Wednesday.

Until recently, producers and retailers resisted price hikes, fearing they would lose customers during a still-sluggish economy and high unemployment.

Now they're starting to cave, mainly on non-discretionary goods, where they still feel they have some pricing power.

Prices rise 2.1% in past year

The sticker prices on necessities like food and gas, for example, have surged over the last year. Gas prices are 11% higher than a year ago, and food prices are up 2.3%, according to the latest government inflation data.

"We're at the point now, where its harder for companies to avoid raising prices," said Mark Vitner, Wells Fargo senior economist. "Prices are rising the most for the things we buy the most frequently."

Just last month, Heinz (HNZ, Fortune 500) raised its prices on ketchup and Ore-Ida potatoes. Companies can get away with price hikes on food and even diapers and toilet paper, because these products are viewed as household staples.

But now, economists are wondering if rising commodity prices will lead to more broad-based inflation. The Federal Reserve still says that's not an imminent threat to the economy, but some skeptics disagree.

"I have no doubt by the end of this year, inflation will be running at the top of the Fed's comfort zone or slightly above it," Vitner said.

Last week, New York Fed president William Dudley faced guffaws from a raucous crowd, after he explained that overall inflation remains tame, citing iPad prices as an example.

0:00/02:08Gas prices smash the heartland

"I can't eat an iPad," an audience member hollered back, according to one report.

But even prices on some discretionary brands are starting to rise, hinting that broad-based inflation could be next.

Nike (NKE, Fortune 500) shoes for example, aren't exactly considered a necessity, but on Thursday, executives said they plan to significantly raise prices on Nike shoes in 2012, to cope with the rising costs of cotton, as well as oil and transportation.

"Who are you going to believe?" Some egg-head economist, or your own eyes?" Vitner said. "It's obvious to anybody who buys anything that inflation is picking up."

Federal budget: Fix it before a crisis

Why is Congress spending so much time and effort on so little money? Are those billions bigger than they appear because cuts today will carry forward into further cuts tomorrow? Is today's skirmishing part of a larger political strategy to rein in our deficits?

Maybe.

But I think good old-fashioned human psychology is a bigger factor. Congress faces the same time- management challenge that plagues me and, I suspect, you. The urgent crowds out the important.

The dumbest debate ever

Productivity guru Steven Covey popularized the "important versus urgent" distinction, showing how we should spend our time versus how we do.

People spend too much time on"waste" and "distraction," immersed in unimportant issues. Waste and distraction can be fun, of course, and are welcome in small doses. Charlie Sheen's rantings about his "tiger blood" are entertaining. And no one should berate President Obama for filling out his NCAA bracket. But let's hope he didn't spend too much time on it.

Today Congress faces a different problem. It seems stuck in the realm of "crisis and necessity," to use Covey's terms. Unless lawmakers pass yet another spending bill, many agencies will run out of money on April 8. Unless Congress increases the debt limit, America will be unable to pay some of its bills.

Urgent and important, these issues demand congressional attention. As Samuel Johnson might have said, nothing focuses the mind like the prospect of a government shutdown and subsequent hanging by the voters.

0:00/2:59Rep. Ryan: Tax hikes will crash economy

And therein lies the problem. America faces much larger fiscal challenges -- a broken tax code and an unsustainable build-up of debt. But these exceptionally important challenges aren't urgent. Neither has a deadline. And so they languish, prompting commission reports and congressional hearings but little action.

Budget watchers often lament that we won't fix our budget until struck by an actual fiscal crisis -- skyrocketing interest rates or a failed Treasury auction. Indeed, some experts sometimes seem to be wishing for such a crisis so that long-run budget issues finally become urgent.

Let's hope it doesn't come to that. Rather than wait for (or cheer on) an actual crisis, we have a better option: leadership. The art of leadership is getting people to pay heed to what's important, even when it isn't urgent. President Obama, for example, enacted his health reform legislation one year ago because he pushed for it, not because it was politically urgent.

Debt ceiling: Danger ahead

We need the same leadership on budget issues and tax reform. Our elected leaders must make time to address our long-run challenges, even as they address the urgent problems of the day. The Senate's bipartisan "Gang of Six" has taken an important first step, working together to turn the recommendations of the president's fiscal commission into draft legislation.

But more leadership is needed. That's why 64 senators -- 32 Democrats and 32 Republicans -- wrote to Obama last week urging him to take the lead in deficit-reduction discussions in which everything would be on the table: discretionary spending, entitlement programs and tax reform.

Let's hope the president takes the senators up on this request. He is in a unique position to elevate the budget debate from day-to-day urgency mode to the realm of leadership, where it belongs.

Beware of 'fake' potassium iodide: FDA

The demand for potassium iodide in the U.S. has spiked as the situation in Japan has worsened, she said. But health experts say there's no need for U.S. consumers to stock up on potassium iodide.

Products to watch out for include fake tablets and liquids purporting to be iodide, as well as dietary supplements and other products that say they protect against radiation, said the spokesperson.

The agency added information about radiation safety on its website that includes more details about what to beware of before buying iodide products.

There are only three FDA-approved potassium iodide products that protect against radiation. The agency's website identifies them as Iosat, made by Anbex; ThyroSafe from Recipharm AB; and ThyroShield from Fleming & Co.

At all three companies, the products are currently out of stock, according to their websites.

CVS (CVS, Fortune 500) and Walgreens (WAG, Fortune 500), two of the nation's largest drugstore chains, don't sell potassium iodide drugs in stores. CVS sells an over-the-counter variety of the drug on its website, but said it sold out of it last weekend.

Consumers are especially vulnerable to buying fraudulent drugs from unfamiliar online stores, the FDA spokesperson said. Searching on Google (GOOG, Fortune 500) for potassium iodide turns up a large number of online sellers.

Don't hoard it: Both the FDA and the Centers for Disease Control and Prevention said consumers do not have to stock up on potassium iodide.

Even as Japan's nuclear crisis continues, the CDC's top radiation expert said it currently poses no risk of radiation exposure in the United States.

0:00/3:04Do Americans need iodide pills?

"There is no radiation coming into the United States from Japan," Charles Miller, head of Radiation Studies with CDC's National Center for Environmental Health, said Wednesday.

Environmental and health experts are closely monitoring the situation for any changes, he said.

Miller also reiterated the FDA's caution about consumers falling prey to phony iodide drugs.

"We are especially concerned if what people are buying isn't approved by the FDA," he said.

When to take it: People should not panic and run out to buy iodide, said Dr. Stewart Weiss, an endocrinologist and clinical professor of medicine with New York University Medical Center.

Unless there is a real threat of harmful radiation exposure, taking iodide drugs needlessly could be harmful, he said.

"Many people are allergic to iodine," he said. Iodine is the chemical produced by the drug.

Taking iodide could also worsen existing thyroid conditions, he said, or lead to side effects such as skin lesions, and be harmful to children in excessive doses.

What's more, potassium iodide protects only the thyroid from absorbing radiation, Weiss said.

"So anyone that's hoarding it to protect themselves is missing the point," he said. "It does not protect other organs from radiation exposure."

What to watch out for: Roger Bate, an expert on counterfeit and adulterated drugs at the American Enterprise Institute, said the FDA and CDC's concerns don't surprise him.

"In previous instances, when there's been a major concern about a health problem, we've seen fake drugs hit the market," said Bate.

It can happen as quickly as just a few days, he said. "It recently happened with fake Tamiflu that was sold online," he said. After 9/11, Bate said regulators became aware of fake Cipro, an antibiotic used to treat anthrax, hitting the market.

Adulterated or fake drugs can contain anything from chalk to road paint to fungal bacteria, he said.

How can consumers protect themselves? "You have to trust the source, the manufacturer," he said.

If you do buy iodide, check the packaging to make sure it's from one of the three FDA-approved manufacturers.

If you purchase online, check that the seller is a credentialed pharmacy by consulting the National Association of Boards of Pharmacy or pharmacychecker.com, he said.

"There are more than 10,000 websites selling drugs," he said, referring to all drugs, not just potassium iodide. "But only a few hundred are licensed sellers. Looking at that ratio, there's significant risk of bad drugs reaching consumers."

Wisconsin's Walker: Union Man of the Year

The measure will give state and local governments the flexibility they need to raise workers' health care and pension premiums to help balance their budgets, Walker says.

But unions were also celebrating the outpouring of strength and support for their cause. Tens of thousands of union workers have descended upon state capitols around the nation to protest looming threats to their members, including in Ohio, where lawmakers are also on track to eliminate collective bargaining for state workers.

"We should have invited him here today to receive the Mobilizer of the Year award!," AFL-CIO President Richard Trumka said in a speech Thursday.

Of course, Walker's bill will not sit well with many public employees in Wisconsin. They will have to pay thousands of dollars more for their health care and pension benefits. They also will no longer have a say in workplace conditions.

Teachers under attack

But the hard-charging governor also has managed to make collective bargaining synonymous with fairness and worker rights in the public's mind, said Harley Shaiken, a labor professor at the University of California, Berkeley. Many Americans see him as running roughshod over the democratic process.

"He has sparked the most energized labor movement in decades," Shaiken said. "He's recruited many people who are angry at what they view as a power grab."

0:00/1:05Protesters storm Wisconsin capitol

While several other states are looking to curtail collective bargaining, the surprisingly strong blowback in Wisconsin and Ohio may lead some politicians to soften their stance, said Rebecca Givan, assistant professor at Cornell's School of Industrial and Labor Relations. They may wait to see what happens with the push to recall Republican state senators and at the ballot box in 2012.

"Republican governors in other states will have to balance their agendas in cutting public sector collective bargaining with public opinion since they want to get re-elected," Givan said.

While Walker may have shifted public sentiment to the unions' favor, he may also push people away from working in the public sector. Fewer people will likely opt for government work if the benefits and pay become less attractive, said Craig Olson, a labor professor at the University of Illinois.

For instance, Wisconsin's teachers will have to shell out about $5,000, or 10% of their wages, on average, to pay for increased medical and pension benefits, he said. And their raises will be limited to cost-of-living increases.

"It's going to be more difficult to attract high-quality people into public service," Olson said.

Job Growth

Economists surveyed by CNNMoney were expecting the unemployment rate to edge up to 9.2%.

The economy gained 192,000 jobs in the month, roughly in line with economists' forecast of 190,000 jobs. Businesses added 222,000 jobs -- their best hiring month since last April -- while state and local governments cut 30,000 jobs.

Another good sign: More jobs were added in the previous two months than originally thought. Readings for December and January were revised upward by a combined 58,000 jobs.

The report could mean that the labor market has finally turned the corner and should start to help overall economic growth going forward, said Sung Won Sohn, economics professor at Cal State University Channel Islands.

"The last piston in the economic engine has begun to fire," he said.

Despite the recent improvement, unemployment remains significantly higher than before the Great Recession hit. Austan Goolsbee, the chairman of the White House Council of Economic Advisors, acknowledge more needs to be done to replace the 8 million jobs lost during the worst of the recession, despite the signs of improvement.

"The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead," he said. "It is important not to read too much into any one monthly report."

Why unemployment is falling

Still, businesses are clearly becoming far more confident about adding workers. Private businesses gained a total of 457,000 jobs over the last three months, even as state and local governments continued to lose jobs.

The gains have been widespread, with 68% of industries tracked by the Labor Department adding jobs in the month -- the most broad-based gain in employment across the business world since 1998.

And more job seekers are finding work. The unemployment survey -- which is compiled from a separate survey of households -- showed that 664,000 additional workers reported having a job compared to three months ago.

Lakshman Achuthan, managing director of Economic Cycle Research Institute, said this is likely a sign of a pickup in new businesses opening up, though new employers can be difficult for the government to track.

"These are things that fall under the radar," he said. "All of us probably know, anecdotally, stories of our friends and family who lost a job at a big place and took the opportunity to strike out on their own."

Another factor helping unemployment is a sharp decline in job losses. The number of people losing their jobs fell by 1.1 million since November, the biggest three-month decline since the Labor Department began tracking that number in 1967.

That improvement has also shown up in readings on jobless claims -- the number of people filing for first-time unemployment benefits hit a three-year low last week.

"We're not firing like we were and there is new business formation," said Achuthan. But he cautioned that the market is still difficult for the long-term unemployed.

Nearly 6 million Americans have been out of work for more than six months and the average duration of unemployment climbed to 37 weeks in February, a post-World War II record.

And the unemployment rate is likely to rise as the labor market continues to improve and job seekers sitting on the sidelines return to the work force, said Tig Gilliam, president of the North American unit of job placement firm Adecco.

The number of jobless people who are no longer counted as unemployed because they're not actively seeking work remained little changed at about 2.7 million.

"There are enough people who are discouraged about the job market that they just haven't actively looked," he said.

States kick grandma to the curb

Many state officials say they don't want to reduce senior services, but they have little choice due to massive deficits. But it's not all bad news. The funding for one senior program in Georgia was restored after legislators agreed the service was too important to cut.

Here's a look at what's at risk for many of the nation's elderly.

Shuttering nursing homes

Among the most dramatic of the proposed cuts is the severe reduction in Medicaid reimbursement rates to nursing homes in Texas. Facing a shortfall of up to $27 billion, state lawmakers want to reduce the rate by 10%. But payments to nursing homes would plummet by a total of 34% because they would also lose federal matching funds.

Happy 65th birthday, boomers. Now what?

This could result in the shuttering of 850 of the state's 1,000 nursing homes, forcing up to 45,000 elderly residents to find other accommodations, said David Thomason, chair of the Texas Senior Advocacy Coalition.

Texas nursing homes already lose money on Medicaid patients so they could not absorb another reduction, facility operators say. If rates were cut further, many would be forced to stop participating in the Medicaid program and would need to either close the buildings or convert them to other health-related uses.

As it is, Sears Methodist Retirement System in Austin has to solicit donations and charge private patients more to make up the $4 million loss it suffers on its Medicaid residents, said Keith Perry, who heads the non-profit. If the cuts go through, Sears Methodist would have to stop caring for its roughly 400 Medicaid patients, whose average age is 84.

"There's no way we could staff those facilities at those reimbursement rates," Perry said.

This scenario is terrifying Carol Poor, whose 83-year-old mother lives in an Alzheimer's unit at Christian Care Centers in Gunter, a town north of Dallas. If her mother were discharged, Poor said she would have to retire early from her secretarial job to care for her mother since neither can afford to pay for a nurse or nursing home.

"My mother worked and paid taxes all these years," said Poor. "She deserves someone to be there for her."

Texas lawmakers did not return calls seeking comment.

Losing their center

On a recent Wednesday in March, dozens of elderly New Yorkers gathered at the Clinton Senior Center in midtown Manhattan for an hour-long yoga class, followed by a hot lunch of pork chops, potatoes, and carrots.

But they soon may have to fend for themselves if New York State does not restore $27 million in funding for New York City's senior centers. Without this money, Mayor Michael Bloomberg has said he'll have to close 105 of the city's 256 centers. Clinton would be one of them.

0:00/2:45Senior sanctuary on chopping block

The center's services are critical to keeping these low-income senior citizens living at home, said David Gillcrist, executive director of Project Find, which runs Clinton. They receive a nutritious meal and take classes that improve their balance, strength and confidence. Equally as important, they are able to socialize with friends and not become isolated and depressed.

All these services help keep the seniors out of hospitals and nursing homes, which would ultimately cost the city a lot more than the $367,000 it provides to Clinton, Gillcrist said.

"It makes no sense to gut one-third of the support network that lets senior citizens age independently," he said.

The city's Department of Aging is trying to blunt the impact of the cuts by maintaining as many services as possible, said a Bloomberg spokesman. But the city, which is facing a $4.6 billion shortfall, cannot make up for the elimination of the state funds.

A spokesman for Gov. Andrew Cuomo did not return an email seeking comment.

Meals on Wheels saved

Some of the most draconian cuts may never take place if state lawmakers can find money elsewhere in the budget to restore funding. This just happened in Georgia.

Senior services agencies there had a few tough weeks, when it looked like they'd lose a million dollars of funding for Meals on Wheels. Agencies prepared to stop feeding a total of 138,000 elderly residents.

Georgia reduced its support for Meals on Wheels in 2009, supplanting it with $1 million in federal stimulus money. That federal funding is running out this year. Gov. Nathan Deal did not replace it with state money.

Patricia Lyons, who runs Senior Citizens Inc. in Savannah, prepared for the worst. She asked her staff to assess whom to drop from the rolls. She wanted to make sure the most vulnerable didn't get cut, since her drivers not only deliver food, but check to make sure the elderly haven't fallen or gotten sick.

"If someone loses their meals, it's only a matter of time before they end up in a nursing home," said Lyons, who receives $500,000 from the state for Meals on Wheels. "It's more than a meal to these people. It's a lifeline."

Lawmakers agreed that the program was too important to gut. The state Assembly restored the funding in early March by cutting some other contracts in the budget, and the Senate is expected to follow suit soon.

"It's much cheaper to keep the folks at home and it's much more compassionate," said Sen. Renee Unterman, who heads the health and human services subcommittee.

Though they are grateful to have the money restored, agency directors say they need even more from the state to handle all their requests for help.

At Middle Flint Council on Aging, an agency in Americus, it can take five months for the elderly to start getting meals. The number of people on the wait list, which now stands at 472, keeps growing, said Norm Graves, the agency's director.

Graves said he tries to find alternate aid for those who come to the agency, but it's hard since all social service groups are financially strapped.

"It's a struggle to find them a care package to get them through to the next week," he said.

SEC fights for its Wall Street watchdog role

She also will talk about the need for resources to carry out the new Dodd-Frank laws cracking down on Wall Street firms that caused the financial crisis.

"A vigorous examination program not only reduces the opportunities for wrongdoing and fraud, but also provides early warning about emerging trends and potential weaknesses in compliance programs," Schapiro said in testimony before the Senate Banking Committee.

Schapiro is scheduled to appear before a House Oversight subcommittee later in the day to defend against criticisms of her management.

Separately, Schapiro's staff got pummeled from both parties at a House Financial Services subcommittee hearing about the agency's funding.

"How much does whitewash cost?" California Democrat Rep. Brad Sherman asked SEC staffers, referring to the consequences of the agency's handling of the Madoff Ponzi scheme. "It's been two years. Nobody's been fired. Nobody's to blame. Nobody's accountable."

The SEC is in the midst of a major makeover, as prescribed by the Dodd-Frank Act, hiring hundreds of new staffers, including new investigators and attorneys to serve as "more cops on the beat."

However, that makeover has been slowed, as the agency is currently operating at 2010 levels due to Congress' inability to pass a budget covering 2011. President Obama has proposed a dramatic increase in funding for the SEC in 2012.

The funding battle worsened for the SEC when Republicans took control of the House and gained seats in the Senate. Republicans made no secret about wanting to slow down or undo parts of the Dodd-Frank Act, by choking funding to agencies charged with enforcing the new laws.

0:00/5:51SEC: Bigger battles, less firepower

Sen. Mike Crapo, an Idaho Republican, echoed this idea, saying he'd like see the Dodd-Frank Act implementation slowed down. He also said he wasn't in favor of increasing any agency's budget, even if the agency works like the SEC by collecting revenue from fees on Wall Street firms and other companies -- and not taxpayer dollars.

"Whether it's the income tax or fees on transactions, we should pay very close attention that we don't drive up the cost of government," Crapo said.

The House Republican-passed budget covering the rest of 2011 would slash SEC funding to 2008 levels.

If that budget became the reality for the SEC, "we'd certainly be in a position of laying off significant numbers of employees and halting any technology development," Schapiro said. "We'd not be able to operationalize the Dodd-Frank rules."

Schapiro said that the May 6 flash crash was caused in part by the SEC's "lack of technology," and that "our budget really recognizes the shortcomings," and would beef up technology to prevent future flash crashes.

Schapiro later faced House Republicans on Thursday, answering questions about why she allowed the SEC'schief general counsel to work on the Madoff case, even though his mother had been a Madoff investor and her estate, eventually, was sued to get back investments.

Gas prices: Up 37 cents and counting

And it's not over.

"Given what's going on, it could frankly go to $4," said Joseph Stanislaw, senior adviser at consulting company Deloitte.

The earthquake in Japan, for all its devastation and loss of human life, is not contributing to high fuel prices, according to experts. High gas prices are being driven by anxiety over the ongoing instability in the Middle East and North Africa, where regimes are being threatened and toppled. The civil war in Libya and discontent with the Saudi Arabian monarchy are the main drivers for oil price volatility, which is the main culprit behind the run-up in gas.

Stanislaw said that gas prices are rising in tandem with "the general psychology around what we will call the Arab spring. Will demonstrations actually take place in Saudi Arabia? That will have a major influence on the price of crude oil, which will have a major influence on the price of gas in the U.S."

0:00/02:08Gas prices smash the heartland

He added that if the geopolitical strife in the Middle East and North Africa "calms down," the price of gas could drop closer to $3 per gallon in the U.S.

But gas prices still have room to rise, if history is any indication. The price is still about 14% below its peak of $4.114, reached on July 17, 2008.

How to score a gas discount

The good news is they won't rise forever.

Tom Kloza, the chief oil analyst for Oil Price Information Service, believes that the current swell in gas prices will likely peak at a nationwide average of $3.75 per gallon. And that peak will come as U.S. demand tapers off.

"There area lot of people who live paycheck to paycheck, and they will cut back," he said.

Gas prices are a joke ... in Norway

The highest gas price in the United States is in Hawaii, where it sells for a statewide average of $3.97 a gallon. The Aloha State is hampered by shipping and distribution costs to its remote locale in the middle of the Pacific. Prices are almost that high in California, at nearly $3.94 a gallon. Even though California is an oil-producing state, the West Coast is more remote, compared to the East Coast as far as its access to fuel imports.

But even the highest prices in the U.S. are child's play compared to Europe, even in oil producing nations like Norway. Like other members of the European Union, Norway taxes its gasoline more heavily that the U.S. That's why the current gas prices in Norway are $9.60 per gallon, which is more than California and Hawaii combined.

Households grow $2.1 trillion richer

The central bank defines household net worth as the difference between the value of assets and liabilities. In the fourth quarter, households had assets worth $70.7 trillion and liabilities totaling $13.9 trillion.

It was a good quarter for stocks, with the value of corporate equities held by American households rising $1 trillion to $8.5 trillion. The broad S&P 500 stock index gained over 10% in the last three months of 2010.

Overall, financial assets including stocks, bonds and real estate owned by households totaled $47.6 trillion in the quarter, up $2.3 trillion from the third quarter.

Household debt, meanwhile, continued to contract. In the fourth quarter, household debt declined 0.5%, marking over two years of falling debt levels.

Japan's nuclear crisis turns spotlight on U.S. plants

The reactors are designed to withstand earthquakes, sabotage and other disasters. But the difficulty the Japanese are facing in controlling their plants is raising red flags about the safety of U.S. facilities.

"The tragic events now unfolding in Japan could very easily occur in the United States," Rep. Ed Markey, a Massachusetts Democrat who sits on the House committee overseeing nuclear power, said in a statement.

Disaster hits nation's economy

Markey hasrecommended several measures that he believes should be taken bythe Obama administration and the Nuclear Regulatory Commission.

These steps include stronger safety systems in plants located near fault lines, emergency response drills that model instances when more than one disaster unfolds simultaneously, and the distribution of radiation-blocking potassium iodine pills to everyone living within 20 miles of a reactor. (Such pills are now disbursed to people within 10 miles of a reactor.)

The United States has 104 non-military nuclear reactors operating at 65 plants across the country. In addition, there are dozens of reactors, weapons labs and other nuclear facilities associated with national defense.

Most of the civilian plants are located near major population centers. They currently supply about 20% of the nation's power.

There hasn't been a new nuclear plant commissioned since the Three Mile Island meltdown in Pennsylvania in1979, although dozens that were under construction at the time have come on line.

More recently, increased electricity use, a desire to generate homegrown energy and concern over global warming have made carbon-free nuclear power more attractive.

The government has set aside$18 billion for new nuclear plants, and President Obama wants to spend an additional $36 billion.

Federal regulators are reviewing 20 applications to build new nuclear plants, and several existing facilities have applied to extend their operating licenses.

Yet concerns over safety -- as well as cost -- continue to dog the nuclear industry.

In the United States, perhaps the most vulnerableplants are the two in California built on the Pacific coast near the San Andreas fault.

Those plants were built to withstand a magnitude 7.5 earthquake, said Robert Alvarez, a nuclear expert at the Institute for Policy studies and a former senior official at the U.S. Department of Energy.

The San Francisco quake of 1906 measured 8.3, said Alvarez, while Friday's Japanese quake was a massive 8.9.

"I don't think we should renew those operating licenses," he said.

Alvarez also said the problems at the Japanese facilities highlight the catastrophic outcome of the failure of power, pumps and other infrastructure. Such system malfunctions could happen because of an earthquake or a massive terrorist attack, such as one involving airliners.

Spokesmen for the utilities that own the California plants, Pacific Gas & Electric (PCG, Fortune 500) and Southern California Edison, said Sunday the plants are designed to meet the maximum quake projected for their immediate vicinity, which is not thought to exceed a magnitude of 6.5.

In addition, tests have shown that the country's nuclear plants could withstand an impact from an airliner, said Steve Kerekes, a spokesman for industry group the Nuclear Energy Institute.

Responding to Congressman Markey's recommendations, Kerekes said that safety systems at U.S. plants are already robust. He said that disaster planning could always be improved upon, but that studies show there's no need to distribute iodine pills beyond the current 10 mile radius.

Congress failed to do its job

As school kids know, Congress has the responsibility to appropriate funds for the government to spend. It's right there in Article 1 of the Constitution. But this year -- and let's not mince words -- lawmakers have fallen down on the job.

"This is a measure that indicates they [lawmakers] are not doing well," said Julian Zelizer, a professor of history and public affairs at Princeton University. "Polarization in Congress is so extreme, and this reflects the difficulty lawmakers face in making decisions."

Of course, short-term spending bills are nothing new. Congress has enacted at least one every year for all but three of the past 30. But five in one year? How did it come to this?

President Obama first proposed a budget for fiscal year 2011 on Feb. 1, 2010. That was 404 days ago.

If the process worked as designed, Congress would have taken a look at the president's suggestions. Lawmakers on the budget committees would have set target spending levels, and appropriations committees would have hammered out spending plans to fit.

The result was supposed to be 12 separate appropriations bills. Congress would have voted on each, and moved them to the president's desk. That's all supposed to happen by Oct. 1, the start of the fiscal year.

Lots of talk, no action

Here's what Congress did manage to do: The House produced two of 12 appropriations bills. The Senate has not voted on a single one. Lawmakers couldn't even agree on their own legislative budget.

0:00/07:43How to cure U.S. budget 'stupidity'

And those two House votes? They happened way back in July, when Democrats had huge majorities in the House and Senate, with Obama in the White House.

Why Democrats failed to take more action when they had the chance remains somewhat of a mystery. Remember, this is the same Congress that moved heaven and earth to enact landmark health care and Wall Street reform laws.

"Certainly the White House didn't make the budget a priority," Zelizer said. "And there are divisions in the Democratic Party, and especially in the Senate, that are significant. Not everyone is on the same page."

In the absence of a full-year budget, lawmakers have instead passed five short-term spending bills called "continuing resolutions." Designed to bridge short-term gaps in appropriations, Congress has approved one after another to keep the government running. Average length: 34 days.

The budget punt has implications for effective governance.

Will spending cuts hurt the economy?

Continuing resolutions, with the exception of the most recent effort by Congress, freeze spending at the prior year's levels.

That forces federal agencies into a head snapping game of stop-and-go. Hiring is delayed, work is repeated, and agencies struggle to implement new legislation. Uncertainty is king, with agencies left to guess what their funding level for the year might be.

Just ask the Securities and Exchange Commission, which is trying to implement the new Wall Street oversight law with last year's staffing.

Add in the threat of imminent government shutdown coming around, on average, once a month, and it's easy to see why agencies are praying the budget Merry-Go-Round stops soon.

Battle lines being drawn

As if to call attention to their own failure, both Republicans and Democrats have spent months issuing high-profile calls for a return to responsible budgeting.

Yet they have made no progress.

Republicans want 10 times the budget cuts the White House wants. Last week, the Obama delegated Vice President Joe Biden to meet with the House and Senate leadership. No deal emerged, and Biden has since decamped to Europe.

On Tuesday, lawmakers put on a great show, staging Senate votes on the two competing plans. Both failed, a fate that surprised exactly nobody.

What happens next is largely unclear. One scenario is that lawmakers will pass another continuing resolution before their March 18 deadline. That would be the sixth this year, if you happen to be keeping track.

Retail Sales

Economists surveyed by Briefing.com on average had forecast an increase of 0.5% for January, compared to a 0.6% gain in sales the prior month.

Despite missing expectations, the January increase was the seventh consecutive gain in the government measure, indicating that consumers have been more comfortable shopping for discretionary goods in recent months that they were a year ago.

0:00/2:39Stores of the future

"January is generally a clearance month for leftover holiday merchandise," said Ken Perkins, president of sales tracker Retail Metrics.

"Consumers also typically take a breather in January. That is more the case this year, especially after the shopping strength that we saw in both November and December," he said.

"So I wouldn't be too concerned about the softer increases in the month," Perkins said.

Sales excluding autos and auto parts also rose a weaker-than-expected 0.3%, compared to a 0.5% increase in ex-auto sales in December.

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

The government report showed gasoline station sales increased 1.4% in January, boosted by higher gas prices in recent weeks. Grocery store sales also increased 1.4% in the month while online sales rose 1.2%.

But sales at electronics stores increased a modest 0.3%. Sales were up 0.5% at department stores and up 0.8% at general merchandise sellers.

Offsetting those increases, building material sales slumped 2.9%, and sales at sporting goods and music stores fell 1.3%. Also, furniture store sales dipped. And consumers cut back on new clothes, resulting in a 0.3% decline in apparel store sales.

The National Retail Federation, the industry's largest group said in a statement Tuesday that a sustained uptick in retail sales will depend on the direction of economy.

"In spite of the economic uncertainties that still exist, consumers are clearly demonstrating their desire to spend on discretionary items once again," federation CEO Matthew Shay said Tuesday.

Factors, including stock market gains, tax cuts, income growth and savings built up during the recession are contributing to the recent increase in consumer spending, the group said.

"The industry is certainly benefiting from the renewed confidence we're seeing in shoppers, although sustained growth in 2011 will largely rely on improvement in key economic indicators like employment and housing," Shay said.

Inflation (CPI)

Surging gasoline and food prices helped drive the number higher, accounting for two-thirds of the increase.

Over the past 12 months, the food index has risen 1.8%, its fastest pace since 2009, and gasoline prices have soared 13.4%.

"If you're the average household, and someone wants to tell you inflation is not an issue, you're probably a little skeptical," said Paul Ballew, chief economist at Nationwide.

But economists also look at core inflation, which strips out the volatile food and energy components. That number rose just 1% during the 12-month period, showing overall price pressures still remain tame.

For that reason, this report seems a bit "schizophrenic," Ballew said.

Commodities have surged over the last several months, driving up the costs for raw materials, food and energy. But amid high unemployment, businesses are still trying to avoid passing on all those costs.

0:00/4:50Why food prices have skyrocketed

"In manufacturing, in retail and financial services, you're seeing the need to restrain passing on costs to consumers," Ballew said

January's data did show big increases in clothing and airfare, which helped drive the core inflation number slightly higher.

Clothing prices increased 1% in January. While that may not sound significant, it is a large jump from December, when apparel prices rose only 0.1%.

And airline fares increased for the fifth month in a row, rising 2.2% in January alone.

"Those are two industries that are very dependent on commodities. For apparel, just look at cotton prices, and airlines are affected by fuel," Ballew said. "This is a reminder to us that commodity prices will at some time affect other categories."

On a monthly basis, the overall CPI rose 0.4% in January, unchanged from the previous month. Economists surveyed by Briefing.com had expected a 0.3% rise in January.

Core CPI rose 0.2% for the month, up from a 0.1% rate in December.

National debt: Where the Tea Party is wrong

Here are four assertions Tea Partiers make that don't pass the sniff test.

1. To kill debt, cut spending but don't raise taxes: A staple Tea Party promise is to cut spending and keep taxes low.

"[Americans] want spending cuts now, not in ten years. They don't want more job-killing tax increases," Rep. Joe Walsh of Illinois said in a recent statement.

Walsh went on to say that the $100 billion in spending cuts that many in the House GOP wanted to make over the next seven months "is what tackling the deficit looks like."

Not quite.

For starters, the cuts proposed by the House GOP primarily hit non-defense discretionary programs, which make up less than 15% of the total budget

Budget experts on the left and right say successful debt reduction can only occur when spending is cut across all areas of the budget.

0:00/07:43How to cure U.S. budget 'stupidity'

And excluding revenue increases from the mix is the equivalent of one hand clapping: ineffective given the size of the country's debt.

Ronald Reagan, often revered as the king of small government and low taxes, signed into law some of the biggest tax cuts in modern history. But Reagan also approved some of the biggest tax increases, too. And he did so to help reduce swelling deficits.

Reagan raised more revenue not by raising tax rates but by making it harder to evade taxes and by reducing the number of tax breaks on the books.

2. We can't move fast enough: For Tea Partiers there's no time like the present to cut spending in the name of fiscal responsibility. But they are coming up against a tough reality.

There is "an unrealistic expectation of how quickly things can change," said Robert Bixby, executive director of the Concord Coalition, a deficit watchdog group. "Some spending can't be shut off that fast, like a faucet."

That's because some spending cuts could affect benefits that people have come to rely on and changes might need to be phased in slowly to give them time to adjust.

3. Never compromise: The Tea Party freshmen succeeded in pushing House GOP leaders to propose deeper cuts for this year than they originally planned. And that pushed the Senate Democrats to agree to make some cuts, but they've rejected the magnitude of cuts in the House GOP bill.

National debt: 'Time for gridlock is over'

"I don't think compromise right now is the option," Rep. Scott DesJarlais, a GOP freshman from Tennessee, said last week. "What we're asking is not unreasonable. People sent us here. There was a referendum. We were sent here to cut spending."

Walsh from Illinois put it more bluntly to Time magazine: "I came here ready to go to war. ... The people didn't send me here to compromise."

Standing one's ground is one thing. Not being willing to negotiate can create a potentially destructive stalemate that perversely could end up worsening the country's fiscal situation. That's because it can divert energy from more important fiscal matters and possibly create bad blood that will make the much bigger debate over long-term debt reduction that much harder to have.

4. Lifting the debt ceiling is a license to spend more: A number of Tea Party lawmakers claim that raising the debt ceiling will just encourage politicians to spend more. Not raising it, they reason, will force Congress to deal with its spending habits.

"I am not in favor of raising the debt ceiling. In the last 10 years we have raised the debt ceiling 10 times. We are just giving the Congress a license to keep on spending," Minnesota Rep. Michele Bachmann said on NBC's "Meet the Press" on Sunday.

Raise the debt ceiling - or cut $738 billion this year

To the contrary, the need to raise the ceiling reflects previous commitments Congress made to borrow more in the future -- such as the $858 billion tax cut compromise passed in December.

If the ceiling is not raised, that can introduce a host of destabilizing factors that again could make the fiscal situation worse, not better. Among the potential fallout is higher interest rates, which hurt consumers. And if the United States ever defaulted on what it owed, that could rock world markets.

A recent report from the Congressional Research Service noted that if lawmakers didn't raise the ceiling this year, they would need to come up with $738 billion just to meet the country's bills over the next six months. And if they don't raise it by 2012? They'd need to come up with even more.

And all that assumes Congress doesn't commit to any new spending. It just reflects what the country would need to do to meet the old spending commitments on the books.

Madoff matter: SEC chief faces Congress' ire

Had she known then, what she knows now, Schapiro said: "I wish that Mr. Becker had recused himself. Absolutely."

In February 2009, Becker told Schapiro that a deceased relative had a closed account as an investor in Bernard Madoff.

Schapiro said that, at the time, it didn't raise red flags. But she expected Becker to check with the SEC's ethics officer -- who ruled that Becker could work on the case. That ethics officer reported directly to Becker, SEC officials confirmed during the hearing.

"I didn't think the account of a long-deceased relative would cloud his work," Schapiro said.

Becker then went on to oversee the SEC's legal work on the Madoff case, which included evaluating the amount victims who were account holders on the day of the fraud could claim as losses.

Last month, the Madoff trustee, Irving Picard of Baker & Hostetler, announced a $1.5 million clawback lawsuit against Becker and his two brothers -- heirs to the estate of their mother, Dorothy Becker.

Dorothy Becker had invested roughly $500,000 with Madoff. After she died, the Becker brothers had withdrawn $2 million on behalf of the estate in 2004. Picard wants the family to return everything but their original investment.

Schapiro said she now appreciates "the potential of this issue to raise the appearance of a conflict."

She pledged to work to "heighten sensitivity to issues like this" throughout the agency, recognizing that such conflicts cause the public to distrust her agency, which is tasked with watching Wall Street.

0:00/6:47Why Madoff spoke to me

"I've worked so hard in the last two years to put this agency back on the right path," she said. "It infuriates me, because most people are working their hearts out every single day."

But still, she faced more questions.

"Mr. Becker's work, in retrospect, was not a good idea," said Rep. Darrell Issa, a California Republican who runs the House Oversight Committee. "How can we know that the changes you're asking to be reviewed are going to clearly eliminate any conflicts like this in the future?"

"Well, Congressman, that's a fair question," Schapiro said. She explained that they have hired a new ethics council and would work to stamp out similar conflicts of interest.

London School of Economics director resigns

In his resignation letter, Davies said it was "reasonable" for him to have accepted money from the Libyan Investment Authority, but he acknowledged that the decision "turned out to be a mistake."

"There were risks involved in taking funding from sources associated with Libya and they should have been weighed more heavily in the balance," he wrote.

The Gadhafi regime has drawn international condemnation for its violent crackdown on anti-government rebels, who have wrested control of several large cities outside of the capital, Tripoli.

The LSE Council also announced that it has commissioned an outside inquiry into the school's relationship with Libya and with Gadhafi's son, Saif, who received a PhD from the prestigious university in 2008.

The probe will examine, among other things, the "academic authenticity" of Saif Gadhafi's doctoral thesis. Davies said he believes the degree was "correctly awarded," though he said the school is "currently reviewing the evidence."

"And there was no link between the grant and the degrees," he said, according to the letter.

Libya: Spending oil money across the globe

In addition to Saif Gadhafi's academic record, the inquiry will look into the School's decision to accept nearly $2.5 million from the Gadhafi International Charity and Development Foundation in 2009. So far, the LSE has received about $480,000 from the charity.

It will also look into a $3.6 million contract LSE Enterprise, a commercial subsidiary of the university, had with Libya's Economic Development Board to train Libyan civil servants and professionals. That deal included about $32,000 in tuition payments for the head of the Libyan Investment Authority.

The school's acceptance of money from the Gadhafi charity to pay travel expenses for LSE academic speakers is also under investigation.

Peter Sutherland, chairman of the LSE's court of governors, said Davies had been an "outstanding director" during his eight-year tenure at the university.

"His achievements here will endure long after the current controversy has died away," Sutherland said in a statement.

Relax, Libya oil crisis is no big deal - watchdogDr. Charles P. Mouton hopes to build on Meharry Medical College’s legacy

The biggest losers in an NFL lockout? Everyone.

Today -- the expiration date for the league's current Collective Bargaining Agreement -- was to at last deliver an answer on the question that is the 2011-2012 NFL season. Though talks are ongoing, it's impossible to tell when, or whether, a deal might be reached. In other words, we may not have a resolution until the eleventh hour, late August, right before the season begins.

A ruling by U.S. District Judge David Doty in Minneapolis on Monday almost guaranteed that the wheels of progress would keep grinding slowly. Doty handed the players a major victory by ruling that the NFL's safeguard against a possible lockout -- which ensured $4 billion of TV money to the owners in the event of a stoppage -- violated the rights of the NFLPA, the players' labor union. "Today's ruling will have no effect on our efforts to negotiate a new, balanced labor agreement," the NFL insisted in a statement issued after the ruling. Sure.

Next up: a hearing to determine what reparations the NFL will now have to make to the NFLPA (in other words, where will that $4 billion go?), though the owners will almost certainly appeal. Meanwhile, the players have already voted to allow the union to decertify itself if labor chief DeMaurice Smith deems it necessary. That would nix the National Labor Relations Board's jurisdiction and allow the players to file an injunction preventing the owners from locking them out. Individual players could even sue owners, ensuring months of tedious legal wrangling.

All this could mean one thing: no NFL football games. Although a lockout had once seemed completely unthinkable, and though Doty's ruling makes it less likely (with no security trove to fall back on, the owners may be more inclined to bargain), a lockout of at least a few games is now very possible. Make no mistake: if this happens, almost everyone loses.

Rookies & endorsement deals

Newton and other hot prospects like A.J. Green and Mark Ingram are praying for resolution. "From an endorsement perspective," says Marc Ippolito of Burns Entertainment & Sports Marketing, "there's more at stake for you if you're looking for a deal or being considered. Companies are going to hold back, and won't want to spend money on a player if there's no season." This, Ippolito says, could apply to existing pros (think Michael Vick, who performed well enough that everyone expects him to get some new deals), but might apply most to big-name rookies that would be tasty bait for marketers.

"If you already have a current deal," Ippolito continues, "the marketer is fretting because they put money behind a talent, but with no season they obviously won't do much of an ad spend." Newton, for one, already sealed up a deal with Under Armour, the young company that did nearly $750 million in U.S. apparel sales in 2010. And Newton doesn't even have a team yet. The endorsement contract has been estimated at $1 million a year and CNBC's Darren Rovell has said it may be the largest deal ever given to an incoming rookie. "I can see Under Armour saying he's a big enough name that they can do ads around him regardless of the season," says Ippolito. "But if you're a top pick and expecting the usual offers, there might be a big hold back until we see a resolution." In other words, players are going to get nervous soon, and marketers already are.

Networks & advertisers

The last Super Bowl was not just the most watched ever; it was the best-rated television program of all time, according to Nielsen, with 163 million people tuning in. If there's no football, the networks lose you, the viewer. You tune into something else (like a reality show, or a sports league on another network) or abandon the tube entirely and head to the opera.

And if a lockout does happen, the networks have big chunks of time to fill with programming that, as Bob Dorfman of Baker Street Advertising points out, "will be nowhere near as valuable as football games." Ad time is bought in May, so what do advertisers do if the season goes away? They'll have to look elsewhere to spend their money, and it would probably be a far less appealing venue. It would probably be on other networks, Dorfman explains: "Maybe all the TV networks that don't have football contracts." Imagine seeing the biggest brands -- GM (GM), Anheuser-Busch InBev (BUD), Visa (V, Fortune 500), Ford (F, Fortune 500), and others you associate with football -- placing their priciest ads during How I Met Your Mother .

NFL teams: players & owners

Owners and players alike, though they're on opposite sides of the table, would suffer in some of the same ways if games get axed. Teams would be unable to hold training camp or any activities of any kind. They couldn't sign new guys. They couldn't make any personnel moves.

In addition, once the CBA expires, players will technically be unbound from league rules, so there is some concern that many could start violating NFL conduct standards or find themselves in trouble normally punishable with league fines or suspensions. Realistically, no one believes players are looting alcohol cabinets, but Dorfman does point out, "They could start doing ads for casinos, or for liquor. That may seem unlikely, but some players need the money."

The owners, led by the likes of New England's Bob Kraft and Dallas's Jerry Jones, feel they've had to spend too much on stadiums and increased costs. It's why they protected themselves with the $4 billion insurance chest that Judge Doty deemed unethical. The players, meanwhile (represented by NFLPA executive director DeMaurice Smith) have been getting nearly 60% of overall NFL revenues, which the owners feel is too high. An 18-game season, which Commissioner Roger Goodell and the owners have been pushing for, makes the revenue pot bigger so that players could go home happy even if their percentage share goes down. But two more games also means two more weeks of risk to their health. In light of rabid press about football concussions, it's two more games many players have said they don't want to put their bodies through.

Scott Boras, MLB super agent whose clients have included A-Rod and Matt Holliday, is watching the negotiations with years of experience from similar strikes in baseball. "I think [the owners' $4 billion war chest] turned out to be a costly maneuver that eroded legally," he says. "It was a tactical mistake. And now time is operating against the owners, not the players. The players can go back to work in a matter of weeks. The owners have to have the TV contracts and the advertising and all of that in place long before the season begins."

Boras believes the owners could be causing damage to the league that will last beyond the coming season. "There comes a point in collective bargaining where things don't make sense, because what you're risking and what you're gaining is not worth it for the league."

Meanwhile, although many teams are privately financed cash cows -- most of them are valued around $1 billion -- quite a few had abysmal ticket sales the past couple seasons. Teams like the Detroit Lions (who went 0-16 in the 2008 season), Tampa Bay Bucs, and Oakland Raiders all had crushingly low attendance last season, in a league that expects sellouts every week. They need to rebuild, but instead, they face an off-season that could put them in direr straits.

Fans

This means you, red-blooded American football viewers, and don't underestimate your own role in this. No season means no fantasy football leagues -- that's less traffic to sports news web sites, and less money circulating via office pools (see: Was my sports bet legal?). It means no Sunday night (or Monday night) watching parties, which brings a hit on supermarkets, corner stores, and any other businesses that sell beer, M&Ms, chips and dip. And it means your workweek becomes a little drearier without the playoffs to look forward to, or team records to brag about at the water cooler.

Moreover, consumers of media will go hungry. Think of your favorite sports columnist in the local paper. If she's a pro football beat writer, expect a lot of stories about furloughed assisstant coaches. ESPN's SportsCenter loses, daily papers with strong sports sections lose, reporters and broadcast pundits lose, and readers lose. If things drag on, the appetite for strike news could gradually be overtaken by apathy towards the whole spectacle, and a long climb back into the public consciousness when games finally restart.

Boras points to this as a significant hit: "The value of Internet properties would be dramatically affected [by a lockout] because all the content available on Internet and cable that's associated with analysis, if that goes away you have a massive content void. The online and TV content has become part and parcel of the culture." Indeed, as the biggest fans know, watching a game is just half of the experience. Then there are columns to read the next day, videos to watch, and highlights to email, Facebook share, and tweet about.

Stadium cities & employees

Forget economic impact to cities that host a Super Bowl (hint: it's enormous and although estimates can vary wildly, this year's game brought at least $100 million to the Dallas area). It's regular home games that bring steady cash flow to the Foxboros, East Rutherfords, and Arlingtons of the football world. Eight home games means eight Sundays of fans filling up at nearby gas stations, buying hot dogs from street vendors, and going out to bars afterwards. There's big money spent before and after the game at apparel stores near the stadium, by people who need a jersey or hat.

Then there's the mega business inside the stadium. Food and drink vendors like Aramark (RMK) thrive not just from running food stands but also by catering luxury suites. With no season, that all goes away, and worst of all, so do four months of work for stadium employees. Jobs will be lost. Gil Brandt, who was vice president of player personnel for the Dallas Cowboys for almost 30 years, tells Fortune : "I went through two of these before when I was with the Cowboys, and the people you feel for are the ones we employ at training camp, or the ones with seasonal jobs that work in the refreshment stands. Those are people that don't stand to gain anything from these talks, all they do is lose."

The NFL generates somewhere around $10 billion in revenue each year. This is a league that knows how to squeeze money out of every corner possible, a league that let the Cowboys charge fans $200 last season to watch the game on a screen outside the stadium. Most players have pretty big financial cushions, and owners would survive as well (though they have more fiscal and operational burdens to deal with than players). It's stadium employees and the many small businesses in and around football stadiums who don't have the margins to lean back on.

Merchandisers

An obvious side effect of a lockout would be merchandise sales. Matt Powell of SportsOneSource says, "We could see declines in the 50% range," though it will depend on whether games are canceled for a month or for a whole season.

"People get really mad at the teams, you know," says Powell. "If they feel mad at the owners for locking the players out, they won't want to support them by buying jerseys. It's also important to remember a lot of people buy this merchandise because they're going to a game, or because the team is doing well."

Meanwhile, apparel sales were already on the decline before this drama. Powell estimates that U.S. NFL merchandise sales last year were $2.1 billion. In the 2009 season, that number was $2.5 billion. "It's gone down steadily, but every league has taken a bit of a hit due to the recession," says Powell. "Apparel is a discretionary purchase. If people are short on cash it's the first thing to go." Short on cash, or short on actual games to watch, either way it means jerseys stay on the rack.

Does anyone win ?

The one market that might stand to benefit from a lockout -- though you can trust that they're hardly rooting for it -- could be college sports.

Dan Fulks, an accounting professor and athletics adviser at Transylvania University in Lexington, Kentucky, who conducted economic impact studies for the BCS, sees a lockout having a real effect on college football players. "Kids won't be quite as eager to leave school early and enter the draft," he predicts. Still, that hardly makes them total winners in this scenario. Take those who have already signed up for the draft for this coming season -- where do they go?

"These kids made a decision based on information they had, and they signed with agents, and now if there's a lockout they've got nowhere," says Fulks. "I wonder if the NCAA would give them some kind of relief, assuming they haven't already taken money. The fair thing to do would be to let the kids go back to play in college." Unlikely.

Still, with no NFL, viewers could quite plausibly turn to college -- that old standby for seeing "the purity of the game" -- for their football fix. During the MLB strike of 1994, fans rediscovered the minor leagues. And not just college football, but even pro sports could benefit. In winter months, in lieu of the NFL playoffs, the NBA might get the fan runoff. United Football League, anyone?

Boras acknowledges the potential benefit to the MLB. "The whole focus would move to the baseball postseason and to college football," he predicts. "And advertising dollars would float over to the MLB as well."

Ippolito agrees about advertisers looking to both pro baseball and college football, and the reason is a lack of uncertainty. "An advertiser making decisions might say, 'Hey, we know that season is happening at least.' There could be new sponsorship potential for college football as well." Dorfman jokes that all sorts of dark horse companies, like The Home Depot (HD, Fortune 500), could benefit, too. "Players [not to mention former football fans] might spend Sundays working on their houses."

But get real -- no one wants a lockout to happen. And it isn't just about the massive amount of money on the table here; people love football. Everyone is hoping the owners and players hold this truth above all others.

Stream video of games, eventsObama’s budget to target education Pell grants

Inflation (CPI)

Surging gasoline and food prices helped drive the number higher, accounting for two-thirds of the increase.

Over the past 12 months, the food index has risen 1.8%, its fastest pace since 2009, and gasoline prices have soared 13.4%.

"If you're the average household, and someone wants to tell you inflation is not an issue, you're probably a little skeptical," said Paul Ballew, chief economist at Nationwide.

But economists also look at core inflation, which strips out the volatile food and energy components. That number rose just 1% during the 12-month period, showing overall price pressures still remain tame.

For that reason, this report seems a bit "schizophrenic," Ballew said.

Commodities have surged over the last several months, driving up the costs for raw materials, food and energy. But amid high unemployment, businesses are still trying to avoid passing on all those costs.

0:00/4:50Why food prices have skyrocketed

"In manufacturing, in retail and financial services, you're seeing the need to restrain passing on costs to consumers," Ballew said

January's data did show big increases in clothing and airfare, which helped drive the core inflation number slightly higher.

Clothing prices increased 1% in January. While that may not sound significant, it is a large jump from December, when apparel prices rose only 0.1%.

And airline fares increased for the fifth month in a row, rising 2.2% in January alone.

"Those are two industries that are very dependent on commodities. For apparel, just look at cotton prices, and airlines are affected by fuel," Ballew said. "This is a reminder to us that commodity prices will at some time affect other categories."

On a monthly basis, the overall CPI rose 0.4% in January, unchanged from the previous month. Economists surveyed by Briefing.com had expected a 0.3% rise in January.

Core CPI rose 0.2% for the month, up from a 0.1% rate in December.

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

China targets 7% growth

The government also forecasted a big rise in household income, which would gain more than 7% during the next five years.

The forecasts were made as part of the Chinese government's "Outlines for the 12th Five-Year Plan on National Economic and Social Development," a document the government submitted to the National People's Congress for approval.

As Western economies have struggled to regain their footing following the financial crisis of 2008, China plowed ahead, and has helped support the rest of the global economy. China now holds more than $1 trillion in U.S. Treasuries.

China recently passed Japan as the world's second-largest economy, though remains a distant second to the United States, at roughly a third of the size.

-- CNN Producer Steven Jiang contributed to this report.

China currency report delayedChina raises reserve requirement again

Consumer confidence spikes to three-year high

Lynn Franco, director of the board's Consumer Research Center, said the CPI spiked "due to growing optimism about the short-term future."

"Consumers' assessments of current business and labor market conditions has improved moderately, but still remains rather weak," Franco said. "Looking ahead, consumers are more positive about the economy and their income prospects, but feel somewhat mixed about employment conditions."

Bank critic praises credit card companies

The CPI's forward-looking Expectations Index also rose, to 95.1 from 87.3 in January. 

Conference Board sees consumer confidence, but not as much as past 2 monthsConsumer Confidence

GDP

But that's still weaker than expectations. A group of 27 economists surveyed by CNNMoney had predicted GDP growth of 3.5%.

"The U.S. economy is finally, after three years, producing as much as it did before the Great Recession hit. But this is by no means 'mission accomplished,'" Economic Policy Institute economist Josh Bivens said in a research note.

"The 3.2% growth registered in the last quarter of 2010 would, if sustained over the next year, provide almost no downward push to the unemployment rate," he said.

The faster pace came mainly on the backs of American consumers, who headed back to the shopping malls during the holiday season. Personal consumption, a measure of consumer spending, jumped by 4.4% in the fourth quarter -- the strongest increase in that reading in at least four years.

"Consumer spending had an outstanding quarter," said Scott Brown, chief economist with Raymond James. "While some of that is due to a drop in the savings rate -- which isn't really sustainable -- it could also be a sign that consumers are less worried about losing their jobs."

Spending on so-called durable goods like cars and furniture rose a whopping 21.6%. Spending on nondurable goods like food and clothing was up 5%.

While the U.S. is struggling with a massive trade deficit, it improved slightly in the fourth quarter, lifting the overall GDP number. Exports increased at a rate of 8.5%, while imports decreased by 13.6% -- slightly narrowing the trade gap.

Not all cylinders of the economy were firing away though.

0:00/1:59State of the Economy (in 2 mins)

A slower pace of business inventories was the main drag on the overall number. Private businesses increased inventories by $7.2 billion in the fourth quarter, a stark contrast to $121.4 billion in the third quarter and $68.8 billion in the second.

Commercial and residential construction activity also decelerated significantly.

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

For the year as a whole, real GDP was up 2.9%, a complete turnaround from the 2.6% decrease seen in 2009.  

Car sales indicate a strong OctoberGDP