Don't expect a Great Recovery

NEW YORK (CNNMoney.com) -- The economy may get a good report card Thursday for the first time in a long time.

Economists are forecasting that the gross domestic product, the broadest measure of the nation's economic activity, rose at an annual rate of 3.2% in the third quarter. If they're right, it will end a streak of four quarters of the most severe U.S. economic decline since the Great Depression.

Growth resulting from this year's economic stimulus package, coupled with the restart of auto assembly lines and supplier plants that were shuttered during the bankruptcies of General Motors and Chrysler Group, are two key reasons why economists have such a bullish forecast for the third quarter.

But while there is a growing consensus that the so-called Great Recession ended some point earlier this year, some economists think that one quarter of solid economic growth does not indicate that a Great Recovery has begun.

Unemployment continues to rise and about 30% of factory capacity remains idle. Credit for businesses is still tight and consumer confidence is falling.

It's also worth remembering that the economy grew as recently as the second quarter of 2008, when rebate checks sent to most taxpayers created a sugar rush of economic activity and a 1.5% rise in GDP.

Of course, that growth wasn't enough to prevent the meltdown in financial markets last fall that touched off sharp declines over the next three quarters.

Nonetheless, GDP is one of the most important and all-encompassing readings about the economy. And after failing grades in five of the last six quarters, any growth is welcome news. With that in mind, here are some of the most important details worth examining in the report.

Return of the consumers?

Consumer spending makes up about 70% of the nation's economic activity. So in order for the economy to enter a sustainable recovery, consumers are going to need to start spending once again.

There were some mixed readings on the health of the consumer during the third quarter. The government's Cash for Clunkers program caused a spike in auto purchases in July and August. But sales fell sharply in September once the program ended.

0:00/2:19Hangin' on by a thread

Some economists with doubts about the recovery don't believe that consumers are in any position to start spending freely once again. So they will be looking closely for signs of any strength outside of auto sales.

David Rosenberg, chief economist and strategist for investment bank Gluskin Sheff, said consumers are "literally in a state of shock."

"I'm sorry. I don't see what the drivers of the sustainable recovery will be. A one quarter pop in GDP doesn't do it for me," Rosenberg said.

Mark Zandi, chief economist at Moody's Economy.com, added that consumers won't start driving overall growth until there is a recovery in the battered job market.

That has yet to occur. In fact, most economists think the unemployment rate is expected to keep rising and that more people will lose their jobs.

"Unless the growth translates into more jobs, it's not going to seem like a recovery to anyone other than economists," he said.

Housing recovery

Well before the start of the recession in December 2007, the bursting of the housing bubble had already become a major drag on the economy.

As early as the beginning of 2006, the decline in home sales was starting to pull down what was still healthy growth in the economy. Once home prices started to fall later that year, the problems in real estate became one of the economy's strongest headwinds.

But there were signs of life in real estate and construction during the third quarter. Home sales and housing starts were up compared to a year ago. There also has been a recovery in some measures of housing prices.

If housing actually contributed to economic growth in the quarter, it will be seen as a sign that the battered housing market has finally hit bottom and is ready for a long-awaited turnaround.

But if housing was even a slight drag on GDP, it will raise concerns that the worst isn't over for the real estate market. That could feed into the debate about whether to extend or expand the tax credit for first time home buyers and if the Federal Reserve should continue to try and keep mortgage rates low.

Zandi said more weakness in housing "argues for why policymakers should remain very aggressive to not exit out of stimulus too soon."

Inventories

Warehouses full of goods don't get the attention of soaring home foreclosures. But the biggest drag on the economy during the past year was actually due to excess inventories caused by businesses slashing production and jobs in response to weak demand.

The severe cuts in inventory that started at the end of last year brought inventories to more manageable levels. But that drop shaved nearly 9 percentage points off of growth in the first quarter and led to a 3 percentage point hit in the second quarter.

Overall, the economy fell at a 6.4% rate in the first quarter and less than 1% in the second quarter. As such, economists say what happened with inventories in the third quarter is an important measure of the underlying level of strength in the economy.

"Inventories are going to be key, not only what it means for the third quarter, but what it means for the fourth quarter and first half of next year," said Zandi, who thinks that businesses moving to rebuild depleted inventories added about a half percentage point to growth in the third quarter.

But there's a catch. A large inventory number in the quarter could be a sign that companies are looking to replenish their product pipeline too soon. And that could mean that any gains in the third quarter may be short-lived as businesses could be forced to once again trim production.

That's why Zandi said that as long as the expected increase in third-quarter GDP isn't primarily a result of expanding inventories, that should lead to more sustainable growth ahead as businesses will be able to steadily restock supplies.

Stimulus impact

Last year's stimulus package produced only a short-lived bounce in the economy. There are some concerns that this year's economic recovery package passed will similarly distort the third quarter results, as billions flowed to state and local governments as well as public works projects and unemployment benefit extensions.

"When you consider the impressive amount of government stimulus, how could you not have a positive number this Thursday?" said Rosenberg. "The economy is on so much medication, it's very difficult to know where it stands."

But other economists argue that the difference between the two stimulus packages are significant enough to not repeat the "sugar high" that occurred in early 2008.

"It's hard to say the growth will be all stimulus on this one, because a lot of stimulus spending wasn't out in the third quarter," said Lakshman Achuthan, managing director of Economic Cycle Research Institute. 

Manufacturing (ISM)Economists say U.S. on path to recovery

Surprise drop in new home sales

NEW YORK (CNNMoney.com) -- Sales of newly built homes fell unexpectedly in September after rising for five straight months, according to government figures released Wednesday.

The Commerce Department said new home sales fell 3.6% to a seasonally-adjusted annual rate of 402,000 last month, from a downwardly revised rate of 417,000 in August. It was the first time new home sales declined since March.

Economists surveyed by Briefing.com had expected September new home sales to rise to a rate of 440,000 units.

"We're attributing most of the decline to the potential expiration of the new home-buyer tax credit," said Adam York, an economist at Wells Fargo. "It's getting harder to buy a house and no one wants to close after the credit expires," he added.

In addition to relatively low prices and attractive mortgage rates, the housing market has been supported in recent months by a temporary government tax credit for first-time homebuyers.

The tax break. The credit can be worth up to $8,000 for eligible buyers,but is set to expire at the end of November. Congress is expected to extend the credit, but the terms are still being debated.

0:00/2:24'Beautiful' homes for under $20K

Most economists believe that the drop in September's new home sales was driven primarily by the tax credit's timetable -- but not all of them agree.

Mark Zandi, chief economist at Moody's Economy.com, contends that first-time homebuyers are more likely to buy an existing home than a new home, which suggests that the tax credit is less of an issue for new home sales.

Zandi attributed the increase in new home sales over the past five months to low interest rates and more aggressive FHA lending. And he adds that these recent increases haven't been spectacular. "All we can say is the new home market is stabilized."

Foreclosures still loom. Wednesday's report highlighted concerns about the long-term outlook for the housing market, which remains challenged by rising unemployment and a glut of foreclosed properties on the market.

A separate report showed Wednesday that applications for home loans, considered a leading indicator of sales, fell for the third week in a row last week.

The Commerce Department report showed the median sales price jumped to $204,800 in September from $195,200 the month before. The average sales price rose to $282,600.

The price increase echoed an industry report released Tuesday that showed home prices in 20 major markets rose for the fourth month in a row during August.

Meanwhile, the estimated number of new homes for sale at the end of last month fell to 251,000 units on a seasonally adjusted basis. That's down from 262,000 unsold homes last month and was the lowest level since November 1982.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the drop in housing inventory means the market is moving towards a better balance of supply and demand. "But the tax credit story is the key element right now," he added.

He said that the credit's looming expiration will probably mean that home sales will fall again in October and, depending upon where the legislation stands, in November as well.

At the current sales pace, it would take 7.5 months to sell through existing inventory, according to the report. That's up from the previous month, when the there was about 7.3 months of inventory on the market.

-- CNN senior writer Jeanne Sahadi contributed to this report.  

Home sales shoot up 9.4 percent as buyers race to get tax creditRetail Sales

SEC head: Blame us for crisis too

NEW YORK (Fortune) -- Regulators were as culpable for the financial crisis as banks, mortgage originators, and the ratings agencies, Securities and Exchange Chairman Mary Schapiro said Tuesday.

In a speech for attendees at the Securities Industry Financial Markets Association, Schapiro said of the regulatory community, "Perhaps we bought into the fears about global competition or failed to appreciate the growing and concentrated risks.

"Either way, the right questions were not asked, nor were the necessary steps taken to mitigate the risk before we coasted to the brink."

At a conference that also included remarks by JPMorgan Chase (JPM, Fortune 500) chief executive Jamie Dimon and Treasury Secretary Timothy Geithner, Schapiro said that market participants and regulators need to find their way back "to a place where investors have faith that the markets are working as intended."

Noting that the SEC will play an integral role in that journey toward trust and transparency, Schapiro's remarks made note of several areas she said need greater oversight, including hedge funds, over-the-counter derivatives, asset-backed securities, and financial advisors.

And in a nod to critics that accused the regulator of being asleep at the wheel on the Bernie Madoff Ponzi scheme, Schapiro said that the standard of conduct set by the SEC, "by itself, does not eliminate fraudsters." The rules must be coupled with an effective and harmonized regulatory body that oversees investment advisors and broker-dealers, she said.

Schapiro arrived at the SEC this January amid a hailstorm of criticism of the financial regulatory community. Not only had Madoff's investment business been revealed to be an enormous fraud, major institutions had failed, including Bear Stearns, Lehman Brothers, AIG (AIG, Fortune 500), Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500), and Merrill Lynch. The capital markets were frozen, and the recent era of deregulation was repeatedly blamed for the mess.

In order to toughen up the commission, Schapiro hired Rob Khuzami -- a former federal prosecutor who had focused on white collar crime, insider trading, and accounting fraud -- to head up the SEC's enforcement division.

Schapiro noted in her speech that the SEC has issued 448 formal orders since the beginning of this year, compared with 181 in 2008. It has opened 713 investigations in the past nine months, compared with 663 in all of last year. And it has received disgorgements and penalties of $1.8 billion, compared with $865 million last year. 

Companies’ earnings forecast is full of low-ballingHouse to take on ‘too big to fail’

Job Growth

NEW YORK (CNNMoney.com) -- Employers cut more jobs from their payrolls in September and the unemployment rate hit another 26-year high, as the long-battered U.S. labor market took an unexpected turn for the worse, according to a government report Friday.

The Labor Department said there was a net loss of 263,000 jobs in the month, up from a revised loss of 201,000 jobs in August. Economists surveyed by Briefing.com had forecast losses would fall to 175,000 jobs.

This is only the second time this year that job losses rose from the previous month, as the labor market had shown slow but relatively steady improvement since a loss of 741,000 jobs in January.

September marked the 21st consecutive month that the number of workers on payrolls has shrunk, a period during which 7.2 million jobs have been lost.

Even though many economists, including those at the Federal Reserve, have said there are signs that the economy is growing once again, Friday's jobs report shows that job losses could continue well into the recovery, limiting the strength of any economic turnaround.

"This report is dismal and disappointing," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "The 'green shoots' in the economy are withering. Technically, the economy may have bottomed, but the job market is lagging behind and struggling."

U.S. stocks fell in early trading following the report and closed the day slightly lower.

The unemployment rate rose to 9.8% in September from 9.7% in August. That was in line with economists' forecasts, but the unemployment rate is now the highest since June 1983.

Speaking to reporters, President Obama called the report a "sobering reminder that progress comes in fits and starts.

"I've made the point that employment is often the last thing to come back after a recession, and that's what history shows us," Obama said. "But our task is to do everything we can possibly do to accelerate that process."

The average work week also fell to a record low of 33 hours, down from 33.1 hours in August. In addition, the number of workers who want full-time jobs who are only able to find part-time work rose to a record 9.2 million.

Counting these involuntary part-time workers and those without work who have stopped looking for jobs and are not counted in the unemployment rate, the so-called underemployment rate rose to 17%, the highest reading in the 16 years it's been calculated.

Dent to recovery hopes?

With the average hourly wage up only a penny, the reduced hours resulted in a $1.54 drop in the average weekly paycheck. John Silvia, chief economist with Wells Fargo Securities, said the shorter hours and the downward pressure on wages are a major concern.

"It's a huge challenge to consumer spending," he said. "It's going to be a tough Christmas for a lot of families, a lot of retailers and any businesses that depends on the consumer."

0:00/3:47Jobs won't return until 2010

Silvia said his firm wasn't forecasting any job gains until next spring, but even that turnaround may get pushed back if wages and hours remain under such pressure.

Silvia is also concerned about the continued growth in long-term unemployment, which he said will make it difficult for people to start spending again, even if they get a job.

A record 5.4 million people have now been out of work for six months or more, up 350,000 from the previous record high reading in August. The average time a jobless person has been out of work crossed the six-month mark for the first time on records that go back 61 years.

"The longer people are without a job, the more difficult it is to pay their bills, their credit cards, their mortgages and home equity loans," he said. "That hole keeps getting deeper and broader too, affecting more households. This isn't just a blue collar recession."

Other experts said there were some glimmers of hope in the report, however. Tig Gilliam, CEO of Adecco Group North America, a unit of the world's largest employment staffing firm, said much of the unexpected rise in job losses was due to a decline of 53,000 government jobs.

"State and local governments are stretched," he said. "No one was expecting them to be an engine for job growth. But what we need to focus on is the private sector."

He was also encouraged by the fact that there was a net loss of only 1,700 jobs among temporary employees. He pointed out that once there is a gain in temporary workers, that is typically an early sign that employers are getting ready to add jobs again.

"Let's not panic about this report. It's really not getting worse in most respects," he said. "We should see an end to job losses by the end of the year. I expect in three to four months, we'll be talking about jobs being added. I hope." 

Job GrowthJobless rate dips in most of Tennessee

House to take on 'too big to fail'

WASHINGTON (CNNMoney.com) -- One year after risky practices by the nation's biggest banks almost brought down the economy, many of those institutions are even bigger -- and some say even riskier.

This week, a key committee is set to release legislation that finally addresses the issue, according to House aides.

The legislation, from the House Financial Services Committee, would aim to better watch and take over those institutions currently deemed "too big to fail."

The watching over part is called "systemic risk" regulation and the taking over part is called "resolution authority."

Financial experts and economists agree that this part of regulatory reform is among the most critical to preventing the kinds of problems that caused the financial crisis.

Most observers, including those in the financial services industry, agree government officials didn't have the right tools to properly manage the failures of giants Lehman Brothers and American International Group.

"To address the extremely serious problem posed by financial firms perceived as 'too big to fail,' legislative action is needed to create new mechanisms for oversight of the financial system as a whole," said Federal Reserve chairman Ben Bernanke in a speech last week.

0:00/04:39'Break up the banks'

Despite the expected movement in the House, it's a preliminary step in a process expected to take months. House leadership has said they hope to have a final vote on all the different parts of regulatory reform before Thanksgiving. Meanwhile, the Senate has yet to release any legislation on the topic, but several senators have talked about ideas that clash with those in the House and the White House.

The Obama's administration proposed legislation on the topic, released this summer, was over 250 pages and proposed a lot of changes. The House version is expected to reflect many of the same ideas with some tweaks. Expect to see:

Stronger, and in some cases, new federal supervision for the largest nonbanking financial firms that previously weren't regulated.Creation of a new oversight council that would look out for major problems at these nonbanking firms.Stronger capital requirements for the largest financial intuitions.New powers to allow government agencies the same kind of ability to take over giant financial firms the way the Federal Deposit Insurace Corporation (FDIC) does over smaller failed banks.

One of the trickiest parts is the last one, called resolution authority.

"I think the resolution authority is probably the hardest," said Rep. Barney Frank, chairman of House Financial Services, last Thursday, after his committee passed the new Consumer Financial Protection Agency, which he called the "second hardest."

His concern is the same as many economists and financial experts watching these things: Finding the right balance.

"Finding the balance, so you have effective resolution authority, but without money going to people who shouldn't get it -- without rewarding people who screwed up, that's an intellectually difficult issue that we're making some progress on," Frank said.

There is also a concern about giving government too much authority to pick winners and losers after a failure -- for example, deciding which creditors get paid and how much.

"It's a very useful authority to have, to be able to tell debt holders, you're going to get 80 cents instead of 100 cents.....or turning an insolvent firm into a solvent firm," said Phillip Swagel, an economist and former assistant Treasury Secretary who teaches at Georgetown University. "But the potential for mischief is very high." 

Bernanke urges Congress to enact reformsInsurers say health bill would jack up premiums

Manufacturing (ISM)

NEW YORK (CNNMoney.com) -- Manufacturing activity ticked down slightly in September but still marked a second straight month above contraction levels, a purchasing managers' group said Thursday.

The Tempe, Ariz.-based Institute for Supply Management's (ISM) manufacturing index reading of 52.6 missed estimates from economists, who expected a jump to 54 from August's 52.9, according to a Briefing.com consensus survey.

"It appears the fundamentals for continuing recovery are still at work," said ISM chairman Norbert Ore, in a prepared statement.

August's report snapped 18 straight months of contraction in the sector. Manufacturing is a considered a key gauge of the strength of the overall economy.

The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing field. Index readings above 50 indicate growth, while levels below 50 signal contraction. Readings below 41.2 are associated with a recession in the broader economy.

"The ISM index remained in expansion territory ... with [some] positive signals," said Wells Fargo economist John Silvia, in a research note. "Yet employment still lags ... The jobless recovery continues."

The data track new orders, production, employment, supplier deliveries, inventories, customers' inventories, the backlog of orders, prices, new export orders, imports and buying policies.

Of the 18 manufacturing sectors reporting, 13 posted growth -- including categories such as apparel, transportation equipment and paper products. Sectors reporting contractions included furniture, plastics and machinery.

New orders slip: The key new orders component fell by 4.1 percentage points in September, to 60.8. New orders are a gauge of manufacturing activity in the near future.

Despite the slip from August, this is the third consecutive month signaling growth in new orders. A reading above 48.8, over time, is generally consistent with an increase in the Census Bureau's data on manufacturing orders.

"This index suggests improved investment spending in the fourth quarter," said Wells Fargo's Silvia.

Employment: The employment component fell to 46.2 in September, down 0.2 points from the previous month.

That marks the 14th consecutive month of decline in employment. Consistent readings above 49.7 are generally tied to an increase in government data on manufacturing employment, the report said.

The employment index is one of the "bumps along the path to growth," Silvia said. "This is consistent with our estimate of a jobless first year of recovery."

We want to hear about the most outrageous consumer rip offs and price gouging that you've come across. E-mail your story to julianne.pepitone@turner.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.  

Manufacturing (ISM)New jobless claims rise more than expected to 531,000

Pay czar: Next ruling may carry more clout

WASHINGTON (CNNMoney.com) -- The next round of executive pay decisions for companies that have received substantial government bailout funds could have a more lasting impact on pay practices nationwide, the special master on pay for the bailout said Tuesday.

Kenneth Feinberg, the so-called pay czar of the Troubled Asset Relief Program (TARP), last week imposed caps on those who hold the top 25 positions at seven companies in which the government has a substantial stake, including AIG (AIG, Fortune 500), Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500). He also demanded that each of the bailed-out companies reduce compensation for the 25 highest-paid employees by an average 50%.

His next round of edicts, due in December, will set guidelines, as opposed to dollar amounts, for those who occupy the next tier of jobs, or the top 26 through 100 employees.

Feinberg, speaking at a Georgetown University symposium in Washington, said the guidelines will reflect already established principles, with reduced cash salaries and more emphasis on tying pay to long-term company performance.

"I think that the most likely area where I'll have long-term impact is, frankly 26-100," he said. "The compensation structures that I have to come up with will be sort of a blueprint that these companies have to follow in setting their own compensation for their other employees."

"Maybe, there, other companies and regulators will pick up on what I'm doing, " Feinberg added.

He said a wider impact could follow if the Securities and Exchange Commission, (SEC) the Federal Reserve, Treasury and his office, all work together to create a broader effort to regulate executive compensation.

While the agencies are talking about their efforts on executive pay right now, they haven't started coordinating in such a way yet. However, last week, on the same day that Feinberg's announcement came out, the Fed released its plans. It will review pay practices at 28 of the nation's largest banks to make sure employees are not tempted to make the kinds of risky bets that helped sink firms such as Lehman Brothers.

0:00/3:10Exec pay battle just beginning

Feinberg noted that critics have predicted that his recent decision capping executive pay will have little to no impact on pay practices in the private world. But he said that's he's hopeful.

"Maybe there will be some private voluntary effort to restructure and better regulate, privately, corporate pay," he said.

The pay caps announced last week take effect in November and serve as a base for executive pay in 2010.

President Obama appointed Feinberg in June to review compensation practices at the seven companies, which the government has the greatest stake in.

Feinberg stressed that the law limited his job in scope and he said that his orders were in no way "vindictive."

"I'm not riding into this on a white charger," he said. "My goal is implement the law. . .I'm acting pursuant to Congress." 

Wall Street fat cats fear the pay czarPay cuts run risk of talent exodus

Wall Street plays new game of risk

NEW YORK (CNNMoney.com) -- Hey there risk. Welcome back. What's shaking?

Banks and other financial stocks have soared this year and have helped lift the broader market.

Shares of top Internet companies are surging too. And while some of them appear to be reasonably valued -- if not necessarily cheap -- the fact that the dot-coms are on the march again is clearly a sign that investors have regained their appetite for riskier assets.

That's not all. Stocks in emerging markets like Brazil, China and India have fared even better than their U.S. counterparts. And commodities are once again becoming uh, hot commodities, now that the dollar is getting dumped.

So much for the notion that investors were scared witless by the near collapse of the financial system last fall and earlier this year. Lehman who? AIG what?

"What we thought were powerful and painful investment lessons on the dangers of taking risk too casually turned out to be less memorable than we expected. Risk-taking has come roaring back," wrote Jeremy Grantham, chief investment strategist with money management firm GMO and an influential value investor, in a note to clients published Tuesday.

It's a good idea to be somewhat skeptical of the rally. It does seem like stocks have come too far too fast.

"The forces of herding and momentum are also helping to push prices up, with the market apparently quite unrepentant of recent crimes and willing to be silly once again," Grantham wrote.

In addition, the easy money may have already been made. Momentum is fickle and anyone rushing in to buy stocks that have already doubled and tripled on the hopes of even bigger gains ahead may be fooling themselves.

"Ten months ago everybody was running away from risk. That was the time it made the most sense to embrace it," said Mark Oelschlager, a fund manager with Oak Associates, an Akron, Ohio-based investment firm focusing on growth stocks. "Now that people are seeking more risk, you could make the argument that this should be a red flag."

Oelschlager said that he isn't predicting a big crash for stocks in the coming months. But he said that investors would be wise to take some money off the table from stocks that have already enjoyed big gains.

He added that with interest rates now at zero for almost a year, it looks like the Federal Reserve is encouraging people to take more risks. That could get the economy get back on track in the short-term, but also could create more significant long-term problems.

"The Fed does seem to be intent on reflating the economy. That's helping to restart activity but it sows the seeds for a possible replay of some sort of bubble," Oelschlager said.

0:00/3:11Average Bob sees no jobs

Still, investors shouldn't dismiss what's going on in the market either. After all, there is evidence that the economy is really, seriously, we're not pulling your leg or making this up improving.

Housing prices appear to be stabilizing. According to the widely-watched S&P Case-Shiller Home Price Index, prices in 20 major markets were up in August on a monthly basis for the fourth straight month.

And even though prices are still down 11.3% from a year ago, that is the smallest year-over-year decline since January 2008.

What's more, economists are predicting that the nation's gross domestic product (GDP) rose 3.2% on an annualized basis in the third quarter. That would be the strongest level of growth in two years. The official number comes out Thursday.

Of course, it's debatable whether this growth is sustainable. It may be merely the byproduct of government stimulus and Cash for Clunkers and not a real sign of a healthy long-term recovery.

"The key for advisors and their clients is determining whether such growth is a head-fake or the beginning of sustainable organic growth. I continue to find myself on the head-fake side of this argument," wrote Bob Andres, a consultant for PMC, the investment advisory unit of money manager Envestnet, in a note to clients last week.

Along those lines, there are no signs of improvement just yet in the one part of the economy that matters most to people: the labor market.

The national unemployment rate is expected to hit 10% before long. And job fears appear to be outweighing any good news about the housing market and enthusiasm on Wall Street. Consumer confidence took an unexpected drop in October according to a report from the Conference Board Tuesday.

While confidence is admittedly a touchy-feely figure that doesn't always accurately predict future consumer spending, it is telling that consumers felt less confident about the economy considering the recent market rally. Confidence does tend to often follow the direction of stocks.

In this case though, consumers might be right to doubt the rebound in stocks. Grantham, who like Oelschlager is not predicting a return to the market lows of last March, wrote that he does think a "painful" drop of about 15% to 20% from current levels is probably in the cards.

His reasoning is that there will be more "disappointing economic and financial data that will begin to show the intractably long-term nature of some of our problems."

That's why he added that he thinks investors need to steer clear of riskier stocks and gravitate more towards quality stocks, i.e. companies with strong balance sheets and a history of stable returns.

Grantham didn't mention specific stocks, but it's worth pointing out that the firm's five largest holdings as of mid-year were Microsoft (MSFT, Fortune 500), Johnson & Johnson (JNJ, Fortune 500), Wal-Mart (WMT, Fortune 500), Pfizer (PFE, Fortune 500) and Coca-Cola (KO, Fortune 500), according to data from FactSet Research.

Andres is even more blunt. He wrote that unless economic fundamentals show meaningful improvement, then stocks are going to eventually head lower again.

"Investor risk is increasing rapidly and is associated with growing expectations that earnings and the economy are about to reverse the missteps of the last two years," he wrote. "Extreme movements in either direction usually do not have a long shelf life and we all know that the ride up is more fun than the ride down."

Talkback: Have companies, investors and consumers learned any lessons from last year's crash? Or are businesses and individuals taking on too much financial risk again? Share your comments below. 

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Job Growth

NEW YORK (CNNMoney.com) -- Employers cut more jobs from their payrolls in September and the unemployment rate hit another 26-year high, as the long-battered U.S. labor market took an unexpected turn for the worse, according to a government report Friday.

The Labor Department said there was a net loss of 263,000 jobs in the month, up from a revised loss of 201,000 jobs in August. Economists surveyed by Briefing.com had forecast losses would fall to 175,000 jobs.

This is only the second time this year that job losses rose from the previous month, as the labor market had shown slow but relatively steady improvement since a loss of 741,000 jobs in January.

September marked the 21st consecutive month that the number of workers on payrolls has shrunk, a period during which 7.2 million jobs have been lost.

Even though many economists, including those at the Federal Reserve, have said there are signs that the economy is growing once again, Friday's jobs report shows that job losses could continue well into the recovery, limiting the strength of any economic turnaround.

"This report is dismal and disappointing," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "The 'green shoots' in the economy are withering. Technically, the economy may have bottomed, but the job market is lagging behind and struggling."

U.S. stocks fell in early trading following the report and closed the day slightly lower.

The unemployment rate rose to 9.8% in September from 9.7% in August. That was in line with economists' forecasts, but the unemployment rate is now the highest since June 1983.

Speaking to reporters, President Obama called the report a "sobering reminder that progress comes in fits and starts.

"I've made the point that employment is often the last thing to come back after a recession, and that's what history shows us," Obama said. "But our task is to do everything we can possibly do to accelerate that process."

The average work week also fell to a record low of 33 hours, down from 33.1 hours in August. In addition, the number of workers who want full-time jobs who are only able to find part-time work rose to a record 9.2 million.

Counting these involuntary part-time workers and those without work who have stopped looking for jobs and are not counted in the unemployment rate, the so-called underemployment rate rose to 17%, the highest reading in the 16 years it's been calculated.

Dent to recovery hopes?

With the average hourly wage up only a penny, the reduced hours resulted in a $1.54 drop in the average weekly paycheck. John Silvia, chief economist with Wells Fargo Securities, said the shorter hours and the downward pressure on wages are a major concern.

"It's a huge challenge to consumer spending," he said. "It's going to be a tough Christmas for a lot of families, a lot of retailers and any businesses that depends on the consumer."

0:00/3:47Jobs won't return until 2010

Silvia said his firm wasn't forecasting any job gains until next spring, but even that turnaround may get pushed back if wages and hours remain under such pressure.

Silvia is also concerned about the continued growth in long-term unemployment, which he said will make it difficult for people to start spending again, even if they get a job.

A record 5.4 million people have now been out of work for six months or more, up 350,000 from the previous record high reading in August. The average time a jobless person has been out of work crossed the six-month mark for the first time on records that go back 61 years.

"The longer people are without a job, the more difficult it is to pay their bills, their credit cards, their mortgages and home equity loans," he said. "That hole keeps getting deeper and broader too, affecting more households. This isn't just a blue collar recession."

Other experts said there were some glimmers of hope in the report, however. Tig Gilliam, CEO of Adecco Group North America, a unit of the world's largest employment staffing firm, said much of the unexpected rise in job losses was due to a decline of 53,000 government jobs.

"State and local governments are stretched," he said. "No one was expecting them to be an engine for job growth. But what we need to focus on is the private sector."

He was also encouraged by the fact that there was a net loss of only 1,700 jobs among temporary employees. He pointed out that once there is a gain in temporary workers, that is typically an early sign that employers are getting ready to add jobs again.

"Let's not panic about this report. It's really not getting worse in most respects," he said. "We should see an end to job losses by the end of the year. I expect in three to four months, we'll be talking about jobs being added. I hope." 

Jobless rate dips in most of TennesseeJob Growth

Jobs outlook brightens

NEW YORK (CNNMoney.com) -- In another sign of economic recovery, U.S. companies are planning to hire and invest more in the near future, according to a survey released Monday.

The National Association for Business Economics said the number of employers planning to hire workers over the next six months exceeded the number expecting job cuts for the first time since the recession began in December 2007.

The survey of 78 NABE members also showed more companies increased capital spending during the third quarter of 2009 than cut spending. It was the first time that happened since October 2008.

"NABE's October 2009 Industry Survey provides new evidence that the U.S. recovery is underway," said William Strauss, a senior economist at the Federal Reserve Bank of Chicago.

NABE said job losses "appear to be slowly abating" with the percentage of firms cutting payrolls falling to 31% in the quarter from 36%. The percentage of firms adding jobs doubled from an all-time low of 6% to 12% in October. (See the best jobs in America)

Unemployment stands at a 26-year high of 9.8% in the United States. Economists surveyed by Briefing.com expect another 175,000 jobs were lost in October after employers shed 263,000 jobs in September.

0:00/3:06New recession, same mistakes

Companies indicated that material costs continued to rise in the third quarter. But prices have also increased, which has allowed profits to improve, Strauss noted.

Credit conditions eased slightly, according to the survey, although many businesses reported that borrowing costs remain high.

NABE said all 78 members now expect U.S. gross domestic product, the broadest measure of economic activity, to be positive in 2010. A majority of respondents expect GDP to expand between 1% and 3% next year.

The government is expected to report Thursday that third-quarter gross domestic product grew at an annual rate of 3.2%, according to economists surveyed by Briefing.com. In the second quarter, GDP shrank at a 0.7% rate.

Talkback: Have you become a saver? What clever tips do you have for saving a buck? E-mail realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here. 

Economists say U.S. on path to recoveryIndustrial Production

Inflation (CPI)

NEW YORK (CNNMoney.com) -- A smaller rise in energy prices resulted in a slower increase in overall prices in September, according to a government report Thursday.

The Consumer Price Index, the government's key inflation measure, is now down 1.3% over the past 12 months, driven by a 30% drop in the price of gasoline and a 2.5% drop in food prices during that time.

So-called core CPI -- which strips out food and energy prices -- is up 1.5% during the same period.

For September, prices rose 0.2%, down from the 0.4% rise posted in August. The increase was in line with forecasts of economists surveyed by Briefing.com. Core CPI for the month rose 0.2%. That increase was up from only a 0.1% rise in both July and August. Economists had forecast another 0.1% increase.

The drop in prices means that 57 million Americans who get Social Security benefits will not receive a rise in their benefits next year. This is the first time there will not be an increase since automatic adjustments for cost of living were put in place in 1975.

Social Security benefits increased by 5.8% in 2009, due to the large spike in gasoline prices recorded in 2008. That was the largest increase since 1982.

The lower prices are generally seen as another result of the severe recession, as job losses and reduced hours cut the money consumers had to spend, which in turn forced businesses to cut their prices.

Even though there is growing consensus that the recession ended earlier this year, the recovery has yet to lead to a significant increase in income or spending needed to raise prices once again.

Deflation fears: Beyond the impact on Social Security benefits, lower prices raise concerns among economists about the risk of deflation.

Deflation can cause the economy to slow further. If businesses expect prices to fall, they may cut production, which in turn leads to more job losses and even lower prices in the future

But economists generally watch core prices more closely than the overall prices, which can be affected by wide swings in food and energy prices.

The 12-month rise in core CPI is seen as in the middle of the 1% to 2% range generally seen as the Federal Reserve's target for that reading.

"This is a Goldilocks number that was not too hot for inflation hawks and not too cold for those worried about deflation," said Robert Dye, senior economist with PNC.

Future inflation risk: Over the past year, the Fed has cut its key interest rate to nearly 0% and injected more than $1 trillion into the economy through the purchases of securities backed by mortgages and other consumer loans. It has also increased purchases of U.S. Treasurys.

Some economists are worried that the Fed will have to move quickly to unwind those efforts to avoid inflation. But economists said Thursday that they don't think there's anything in the latest report to move the Fed in that direction.

"With inflation still well behaved, the Federal Reserve will be in no rush to increase rates," said Bernard Baumohl, chief global economist for the Economic Outlook Group. "Our forecast calls for the Fed to begin lifting the Fed Funds rate by next fall." 

New jobless claims rise more than expected to 531,000Inflation (CPI)

15 best places for green jobs

(NEW YORK) Fortune -- Dear Annie: I graduated from college with a civil engineering degree last spring, and I'm planning to go to architecture school. I want to focus my training on learning how to retrofit existing buildings and power plants to be more energy-efficient.

I'm looking at schools in different parts of the U.S. (I really could move anywhere at this point) and wondering: Where would be my best bet for finding a job when I graduate? Is California the best state for green jobs? What about Michigan (where I live now)?

Also, I will have student loans to pay off, so do you know where I could get information about what kind of starting salary might be reasonable to expect? - Maria in Motown

Dear Maria: Your timing is terrific. Many experts believe that, in the words of a new study by green-industry research firm Clean Edge, "we are just at the beginning of the 'clean tech' job creation era" and that renewable energy, environmentally-friendly building and manufacturing, and all aspects of energy efficiency will offer "the greatest opportunity for wealth and job creation since the advent of computers and the Internet."

Already, the economy is generating about 1.3 million new "green collar" jobs per year, says outplacement firm Challenger Gray & Christmas. By 2030, the number of U.S. jobs directly or indirectly related to energy efficiency and conservation will reach 40 million, according to the nonprofit American Solar Energy Society. Incidentally, their site, www.ases.org, includes a clean-tech job board you might want to check out.

And consider this: The Pew Charitable Trusts estimated in June that green jobs right now account for about 770,000 jobs in the U.S. - comparable to employment in mature industries like telecommunications (989,000 jobs) and far more than such established businesses as biotech (200,000).

And while most observers expect a boom, clean energy employment already rose by 9.1% between 1998 and 2007, the Pew report found, versus 3.7% growth for all jobs during the same period.

So where are all these green jobs? The Clean Edge study lists 15 metropolitan areas that are "current hotbeds of clean-tech job activity," based on the number of existing green jobs, the amount of green investing going on, and clean-tech employers' growth projections. (You'll notice that your hometown is No. 14 on the list, so you may choose not to move at all.) The top 15 right now:

1. San Francisco -- Oakland -- San Jose, CA

2. Los Angeles -- Riverside -- Orange County, CA

3. New York -- Northern New Jersey -- Long Island, NY, NJ, CT, PA

4. Boston -- Worcester -- Lawrence -- Lowell -- Brockton, MA, NH

5. Washington -- Baltimore, DC, MD, VA, WV

6. Denver-Boulder-Greeley, CO

7. Seattle -- Tacoma -- Bremerton, WA

8. Portland -- Salem, OR

9. Chicago -- Gary -- Kenosha, Il, IN, WI

10. Sacramento -- Yolo County, CA

11. San Diego, CA

12. Austin -- San Marcos, TX

13. Phoenix, AZ

14. Detroit -- Ann Arbor, MI

15. Houston -- Galveston -- Brazoria, TX

Still, clean-tech jobs aren't expected to be concentrated in one particular area. The researchers note that "the clean-tech revolution is a highly dispersed phenomenon, unlike the earlier high-tech revolution with its epicenter of Silicon Valley. No one place or region will control any one clean-tech sector."

As for what kind of starting salary to expect, the study - "Clean Tech Job Trends 2009" and downloadable for free - lists a sampling of current green-collar jobs and what they pay. A LEEDS-certified architect, such as you aspire to be, earns an average salary of $58,700. (LEEDS, as you probably know, stands for Leadership in Energy and Environmental Design, a designation developed in 1993 by the nonprofit U.S. Green Building Council.)

Good luck!

Talkback: Would you like to get a "green" job? Do you have one? How is it working out for you? Tell us on Facebook below. 

Economists say U.S. on path to recoveryJob Growth

Consumer protection agency moves ahead

WASHINGTON (CNNMoney.com) -- A key House committee on Thursday approved the most high-profile part of the White House plan to prevent future financial collapse: The creation of a new agency to regulate consumer financial products.

The House Financial Services committee voted along party lines 39-29 to empower a Consumer Financial Protection Agency to watch out for consumers.

The vote marks one of the most significant steps yet in congressional efforts to reform regulation in response to the financial crisis.

After more than a week of debate and changes, lawmakers and consumer advocates claimed victory. Most of the financial industry lobbied to kill it, calling it an unprecedented step toward government intrusion on business.

"This bill has now passed a major hurdle and this step sends an important signal to the American people that we will not stand by and allow big financial firms and their lobbyists to mobilize against change," President Obama said in a statement.

However, the bill was watered down in some key areas from the original Obama administration proposal.

The consumer agency would be a brand new regulator whose chief concern is looking out for consumers. It would write rules aimed at ensuring that financial products like mortgages and credit cards are fair, more transparent and more easily understood.

The biggest change was to allow 98% of the banking industry -- some 8,000 community banks and credit unions -- to keep their current regulators when it comes to enforcing new consumer rules.

"That was a compromise I thought was necessary to get the bill out," said House Financial Services Chairman Barney Frank, D-Mass., at a press conference Thursday. "That's the major area where many of us would like to change that."

Another change: lawmakers allowed some special exceptions to allow federal regulators to overrule stronger state consumer protection laws on a case-by-case basis. The original White House proposal called for empowering states to create tougher laws for the banking industry, even if state laws clashed with weaker federal laws -- a reversal from current practices.

Earlier this month, the panel had already agreed that the panel would not have the ability to mandate simple standardized financial products.

Also, several types of businesses, including some originally envisioned as coming under the agency's authority, would not be subject to its rules. Among these are retailers, auto dealers, lawyers, title insurers and accountants.

Even auto dealers' financing products, which help consumers buy cars, have been exempted. Frank said they plan to fight to reinstate that when the bill goes to the floor.

One amendment to the bill that failed to win enough support would have allowed the agency to do a "financial autopsy" on the problem of bankruptcies and foreclosures, to discern whether financial products were the cause. The bill would then have allowed the agency to ban products.

0:00/5:30Financial product safety

The next step for the proposed Consumer Financial Protection Agency is a vote before the full House. Also, the Senate has yet to release its proposed bill on the issue, although Banking Committee Chairman Sen. Chris Dodd, D-Conn., has praised the idea in the past. 

Insurers say health bill would jack up premiumsHow Main Street banks get what they want

Consumer protection agency moves ahead

WASHINGTON (CNNMoney.com) -- A key House committee on Thursday approved the most high-profile part of the White House plan to prevent future financial collapse: The creation of a new agency to regulate consumer financial products.

The House Financial Services committee voted along party lines 39-29 to empower a Consumer Financial Protection Agency to watch out for consumers.

The vote marks one of the most significant steps yet in congressional efforts to reform regulation in response to the financial crisis.

After more than a week of debate and changes, lawmakers and consumer advocates claimed victory. Most of the financial industry lobbied to kill it, calling it an unprecedented step toward government intrusion on business.

"This bill has now passed a major hurdle and this step sends an important signal to the American people that we will not stand by and allow big financial firms and their lobbyists to mobilize against change," President Obama said in a statement.

However, the bill was watered down in some key areas from the original Obama administration proposal.

The consumer agency would be a brand new regulator whose chief concern is looking out for consumers. It would write rules aimed at ensuring that financial products like mortgages and credit cards are fair, more transparent and more easily understood.

The biggest change was to allow 98% of the banking industry -- some 8,000 community banks and credit unions -- to keep their current regulators when it comes to enforcing new consumer rules.

"That was a compromise I thought was necessary to get the bill out," said House Financial Services Chairman Barney Frank, D-Mass., at a press conference Thursday. "That's the major area where many of us would like to change that."

Another change: lawmakers allowed some special exceptions to allow federal regulators to overrule stronger state consumer protection laws on a case-by-case basis. The original White House proposal called for empowering states to create tougher laws for the banking industry, even if state laws clashed with weaker federal laws -- a reversal from current practices.

Earlier this month, the panel had already agreed that the panel would not have the ability to mandate simple standardized financial products.

Also, several types of businesses, including some originally envisioned as coming under the agency's authority, would not be subject to its rules. Among these are retailers, auto dealers, lawyers, title insurers and accountants.

Even auto dealers' financing products, which help consumers buy cars, have been exempted. Frank said they plan to fight to reinstate that when the bill goes to the floor.

One amendment to the bill that failed to win enough support would have allowed the agency to do a "financial autopsy" on the problem of bankruptcies and foreclosures, to discern whether financial products were the cause. The bill would then have allowed the agency to ban products.

0:00/5:30Financial product safety

The next step for the proposed Consumer Financial Protection Agency is a vote before the full House. Also, the Senate has yet to release its proposed bill on the issue, although Banking Committee Chairman Sen. Chris Dodd, D-Conn., has praised the idea in the past. 

Supreme Court watch - Pay caps

(Fortune Magazine) -- Even as the Obama administration is unveiling plans to impose unprecedented pay caps on top officials at the seven U.S. companies receiving the largest federal bailouts, the U.S. Supreme Court is preparing to hear a case that turns on whether to apply analogous pay caps on certain financial advisers.

Even more important, the court's ruling in the case known as Jones v. Harris Associates -- being argued November 2 -- will provide insight into how the current roster of justices view the economic question of our day: When should market forces be reined in by government?

Typically, when directors pay a CEO a suspiciously bloated salary, the action raises only state-law questions, not warranting the Supreme Court's attention.

The upcoming case, however, raises a closely analogous issue that does happen to be controlled by federal law: What happens when ostensibly independent directors of a mutual fund approve bloated fees for the fund's financial adviser -- the same adviser who most likely created the fund and, in most cases, still oversees it? (A 1970 amendment to the federal Investment Company Act imposes a fiduciary duty on fund advisers not to accept excessive compensation and empowers investors to enforce that duty in court.)

The facts of the case are these: In 2004 investors in three Oakmark mutual funds -- which had, ironically, each just completed three years of stellar performance -- sued the funds' adviser, Harris Associates, for allegedly accepting too much in fees during that time. (The investors' law firm also brought similar cases against 11 other leading fund advisers, including those for American Century, Fidelity, Janus (JNS), and Putnam.)

0:00/1:03Another bank makes billions

Citing the fact that Oakmark's fees had been fully disclosed and were well within industry standards -- roughly 1% of assets for the first $2 billion invested -- the district judge threw the case out before trial in 2007.

Last year the federal appeals court in Chicago affirmed that decision. U.S. Circuit Judge Frank Easterbrook, one of the most eminent jurists of the conservative Chicago School of Law and Economics, explained his ruling bluntly: "A fiduciary must make full disclosure and play no tricks but is not subject to a cap on compensation." Ho-hum.

Then things took a turn toward the extraordinary. In August 2008, when the full Seventh Circuit Court of Appeals declined to rehear the case, five judges signed a rare dissenting opinion. More remarkable still, the dissent was authored by Judge Richard Posner, another towering intellect of the free-market Chicago school.

Perhaps undergoing a mid-financial-crisis crisis, Posner urged that market forces could not be trusted in this situation. In his view Judge Easterbrook's analysis was "ripe for reexamination" because of the "feeble incentives of boards of directors to police compensation." He stressed that Harris charged mutual fund investors roughly twice what it charged independent institutional investors.

Seeing the deep rift within the Seventh Circuit and a conflict with other circuit court rulings, the Supreme Court snatched the case up in March.

Even aside from its implications for CEO pay, Jones v. Harris Associates directly affects the $10 trillion mutual fund industry in which 92 million investors participate. At least 14 outside groups have filed friend-of-the-court briefs.

Jones's supporters include Vanguard founder John C. Bogle, AARP, and the U.S. Securities and Exchange Commission. Rooting for Harris Associates, on the other hand, are various industry trade groups and the libertarian Cato Institute.

We're wagering that the court will reject Judge Easterbrook's view -- that virtually any fee, so long as it's disclosed, is okay -- but still won't find Oakmark's fees to have been illegally out of whack.

Of greater interest will be the straw poll of the Supreme Court's views on laissez-faire capitalism itself. Is it, too, "ripe for reexamination"? 

Bank in Florida is 100th to close this yearHow Main Street banks get what they want

Manufacturing (ISM)

NEW YORK (CNNMoney.com) -- Manufacturing activity ticked down slightly in September but still marked a second straight month above contraction levels, a purchasing managers' group said Thursday.

The Tempe, Ariz.-based Institute for Supply Management's (ISM) manufacturing index reading of 52.6 missed estimates from economists, who expected a jump to 54 from August's 52.9, according to a Briefing.com consensus survey.

"It appears the fundamentals for continuing recovery are still at work," said ISM chairman Norbert Ore, in a prepared statement.

August's report snapped 18 straight months of contraction in the sector. Manufacturing is a considered a key gauge of the strength of the overall economy.

The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing field. Index readings above 50 indicate growth, while levels below 50 signal contraction. Readings below 41.2 are associated with a recession in the broader economy.

"The ISM index remained in expansion territory ... with [some] positive signals," said Wells Fargo economist John Silvia, in a research note. "Yet employment still lags ... The jobless recovery continues."

The data track new orders, production, employment, supplier deliveries, inventories, customers' inventories, the backlog of orders, prices, new export orders, imports and buying policies.

Of the 18 manufacturing sectors reporting, 13 posted growth -- including categories such as apparel, transportation equipment and paper products. Sectors reporting contractions included furniture, plastics and machinery.

New orders slip: The key new orders component fell by 4.1 percentage points in September, to 60.8. New orders are a gauge of manufacturing activity in the near future.

Despite the slip from August, this is the third consecutive month signaling growth in new orders. A reading above 48.8, over time, is generally consistent with an increase in the Census Bureau's data on manufacturing orders.

"This index suggests improved investment spending in the fourth quarter," said Wells Fargo's Silvia.

Employment: The employment component fell to 46.2 in September, down 0.2 points from the previous month.

That marks the 14th consecutive month of decline in employment. Consistent readings above 49.7 are generally tied to an increase in government data on manufacturing employment, the report said.

The employment index is one of the "bumps along the path to growth," Silvia said. "This is consistent with our estimate of a jobless first year of recovery."

We want to hear about the most outrageous consumer rip offs and price gouging that you've come across. E-mail your story to julianne.pepitone@turner.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.  

New jobless claims rise more than expected to 531,000Manufacturing (ISM)

Gas jumps nearly 18 cents in 2 weeks

(CNN) -- Gasoline prices jumped nearly 18 cents over the past two weeks, the first two-week rise since early August, according to a survey published Sunday.

The average price of a gallon of self-serve regular was $2.655 as of October 23, said Trilby Lundberg, author of the Lundberg Survey. Since the October 9 survey, the average price per gallon has climbed by 17.82 cents. The current price is 12.3 cents less than the price a year ago.

The retail price of diesel fuel jumped a similar amount in the past two weeks -- 16.75 cents. The price of diesel fuel is $2.817, Lundberg said.

There has been no significant increase in the demand for crude oil, nor large decrease in supplies of crude that can explain almost a $9 per barrel jump in the past two weeks, according to Lundberg. Crude oil now costs $80.50 a barrel.

However, future perceptions may have an impact.

Traders buying futures contracts on the New York Mercantile Exchange anticipate that the price of crude oil will keep rising every year. For instance, they are betting that the price of crude will climb to $98 per barrel by 2017, an increase of about $18, Lundberg said.

Prices in earlier years also are high -- the expected price in 2011 is $87.67. "The oil futures market looking out into the future is seeing higher prices, not lower prices," she said.

It also is possible that traders fear dollar weakness in future years, Lundberg said. Both of these factors may be contributing to today's prices, she added.

Among U.S. regions, the West has the most expensive gasoline at an average of $2.86 per gallon. That compares to $2.67 in the Midwest; $2.62 on the East Coast; $2.52 for the Gulf Coast; and $2.51 in the Rockies.

The city with the highest average price in the most recent survey was Anchorage, Alaska, at $3.25 per gallon. The cheapest gas was in Tucson, Arizona, at $2.24.

Prices in some other cities were:

San Francisco, California, $3.06

Seattle, Washington, $2.77

Burlington, Vermont $2.72

Indianapolis, Indiana, $2.68

Fargo, North Dakota $2.61

Atlanta, Georgia $2.55

Baton Rouge, Louisiana $2.48

Tulsa, Oklahoma $2.45 

Oil briefly above $80 as earnings beat forecastsInflation (CPI)

Job Growth

NEW YORK (CNNMoney.com) -- Employers cut more jobs from their payrolls in September and the unemployment rate hit another 26-year high, as the long-battered U.S. labor market took an unexpected turn for the worse, according to a government report Friday.

The Labor Department said there was a net loss of 263,000 jobs in the month, up from a revised loss of 201,000 jobs in August. Economists surveyed by Briefing.com had forecast losses would fall to 175,000 jobs.

This is only the second time this year that job losses rose from the previous month, as the labor market had shown slow but relatively steady improvement since a loss of 741,000 jobs in January.

September marked the 21st consecutive month that the number of workers on payrolls has shrunk, a period during which 7.2 million jobs have been lost.

Even though many economists, including those at the Federal Reserve, have said there are signs that the economy is growing once again, Friday's jobs report shows that job losses could continue well into the recovery, limiting the strength of any economic turnaround.

"This report is dismal and disappointing," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "The 'green shoots' in the economy are withering. Technically, the economy may have bottomed, but the job market is lagging behind and struggling."

U.S. stocks fell in early trading following the report and closed the day slightly lower.

The unemployment rate rose to 9.8% in September from 9.7% in August. That was in line with economists' forecasts, but the unemployment rate is now the highest since June 1983.

Speaking to reporters, President Obama called the report a "sobering reminder that progress comes in fits and starts.

"I've made the point that employment is often the last thing to come back after a recession, and that's what history shows us," Obama said. "But our task is to do everything we can possibly do to accelerate that process."

The average work week also fell to a record low of 33 hours, down from 33.1 hours in August. In addition, the number of workers who want full-time jobs who are only able to find part-time work rose to a record 9.2 million.

Counting these involuntary part-time workers and those without work who have stopped looking for jobs and are not counted in the unemployment rate, the so-called underemployment rate rose to 17%, the highest reading in the 16 years it's been calculated.

Dent to recovery hopes?

With the average hourly wage up only a penny, the reduced hours resulted in a $1.54 drop in the average weekly paycheck. John Silvia, chief economist with Wells Fargo Securities, said the shorter hours and the downward pressure on wages are a major concern.

"It's a huge challenge to consumer spending," he said. "It's going to be a tough Christmas for a lot of families, a lot of retailers and any businesses that depends on the consumer."

0:00/3:47Jobs won't return until 2010

Silvia said his firm wasn't forecasting any job gains until next spring, but even that turnaround may get pushed back if wages and hours remain under such pressure.

Silvia is also concerned about the continued growth in long-term unemployment, which he said will make it difficult for people to start spending again, even if they get a job.

A record 5.4 million people have now been out of work for six months or more, up 350,000 from the previous record high reading in August. The average time a jobless person has been out of work crossed the six-month mark for the first time on records that go back 61 years.

"The longer people are without a job, the more difficult it is to pay their bills, their credit cards, their mortgages and home equity loans," he said. "That hole keeps getting deeper and broader too, affecting more households. This isn't just a blue collar recession."

Other experts said there were some glimmers of hope in the report, however. Tig Gilliam, CEO of Adecco Group North America, a unit of the world's largest employment staffing firm, said much of the unexpected rise in job losses was due to a decline of 53,000 government jobs.

"State and local governments are stretched," he said. "No one was expecting them to be an engine for job growth. But what we need to focus on is the private sector."

He was also encouraged by the fact that there was a net loss of only 1,700 jobs among temporary employees. He pointed out that once there is a gain in temporary workers, that is typically an early sign that employers are getting ready to add jobs again.

"Let's not panic about this report. It's really not getting worse in most respects," he said. "We should see an end to job losses by the end of the year. I expect in three to four months, we'll be talking about jobs being added. I hope." 

Hand sanitizer in short supply as swine flu hits

NEW YORK (CNNMoney.com) -- Demand for hand sanitizer has gone through the roof since the first cases of swine flu broke out earlier this year, and some makers of the germ-fighting gels are scrambling to keep up.

Market research firm Panjiva recently estimated that 3 million kilograms of hand sanitizer were shipped in the third quarter, compared with 1 million kilograms in the same quarter last year.

Josh Green, chief executive of Panjiva, said concern about the H1N1 virus, also known as the swine flu, is the "most likely explanation" for the surge in volume.

And demand is only expected to rise given the outlook for an exceptionally bad flu season.

In response, the companies that make and distribute Purell, themost popular name-brand hand sanitizer, are ramping up production and urging customers to not hoard the product.

Heavy demand

Johnson & Johnson (JNJ, Fortune 500), which makes Purell and distributes it to retailers, does not provide figures on sales or shipments of items such as hand sanitizer. But the company said demand for Purell has been "heavy" since the first cases of swine flu broke.

"Due to the influenza A (H1N1) virus outbreak this past spring and resurgence this fall, Johnson & Johnson Consumer Companies Inc. has experienced heavy demand on supplies of Purell," said J&J spokesman Marc Boston in a statement.

The company is working to increase production for the remainder of the year and the beginning of 2010, but Boston acknowledged that supplies may be limited in some areas.

"Because of this increase in demand, consumers may currently find limited supplies of Purell Instant Hand Sanitizer at certain retailers," he said.

Don't stockpile

GOJO Industries, the company that invented Purell and distributes it in professional markets, described the increase in demand as "unprecedented."

The Akron, Ohio-based company said it has been running its plants "24/7" and has hired additional workers to help increase output.

"Even with increased manufacturing capacity, there is a limit to how much we can produce in a short period of time," Mark Lerner, GOJO's chief operating officer, said in a prepared statement.

0:00/1:14Travel suffers from swine flu

GOJO said it will provide U.S. distributors with more than their normal supply of Purell, but warned that it may not ship the full quantity ordered.

Lerner said the backlog is temporary and that GOJO expects to increase overall production "significantly" through 2010. "There is absolutely no need to stockpile product," Lerner said. "In fact, stockpiling could cause an actual shortage which, in turn, could threaten public health."

Nearly 400,000 people worldwide have contracted laboratory-confirmed cases of swine flu and more than 4,700 people have died from the illness since it was first identified in Mexico and the United States in April, the World Health Organization (WHO) said earlier this month.

Many countries have stopped counting individual cases, particularly of milder illness, according to the WHO. That means the total case count could be significantly lower than the number of swine flu cases that have actually occurred. 

TN starts giving swine flu vaccine to health-care workersIndustrial Production

How Main Street banks get what they want

WASHINGTON (CNNMoney.com) -- In the wake of the financial meltdown, Wall Street banks remain pariahs in Washington. But Main Street banks are winning big.

The most recent win came this week, when a proposal to establish a new consumer watchdog agency passed a key House vote. Because of some savvy lobbying, the final version of the bill exempts thousands of small banks and credit unions from heightened examination and enforcement.

Earlier this year, credit unions helped ring the death knell for a Senate proposal that would have opened the door for judges to lower mortgage balances for bankrupt homeowners. Separately, small banks convinced the FDIC to reduce their insurance fund fees, saving them millions.

Experts say that banks of all kinds let their guard down in making loans during the boom. But the storyline these days on Capitol Hill is that Main Street banks were the good guys who didn't engage in the kinds of practices that nearly brought down the entire system.

And the smaller players are not only winning their own battles. When the interests of big and small banks align, the Main Street banks are often used as the frontpiece of lobbying campaigns to smooth the way for what the entire sector wants.

"The Wall Street banks that brought down our nation's economy through risky practices, they're radioactive," said Ed Mierzwinski, the consumer program director for U.S. Public Interest Research Group. "When Congress has a choice, Congress will help the little guys. They have a lot of influence."

One underlying reason for the lobbying prowess of some 8,000 Main Street banks is their sheer numbers and roots in local communities.

Bankers are often the business leaders in town, so they tend to be close to their members of Congress, said Steve Verdier, a top lobbyist for the Independent Community Bankers of America.

"The people who run those banks tend to be pretty important in the same way that auto dealers are, so they end up totally out-punching their weight in Congress," said Raj Daté, who runs nonprofit financial regulation research firm Cambridge Winter.

Indeed, small banks and credit unions aren't the biggest spenders in the political money game.

Three groups representing credit unions and small community banks spent about $880,000 in campaign contributions through the end of September and $5.7 million on lobbying in the first half of 2009, according to data analyzed by the Center for Responsive Politics.

By comparison, the financial sector as a whole spent $59 million in campaign contributions and $224 million on lobbying over the same period.

Main Street banks instead flexes muscle in face time on Capitol Hill.

For example, the three associations for small banks and credit unions have sent hundreds of financial executives to knock on lawmakers' doors since September. In the past week, the Credit Union National Association just dispatched execs from Massachusetts, Rhode Island and New Hampshire, spokesman Patrick Keefe said.

"Credit unions did not cause this crisis -- period," said Dan Berger, chief lobbyist for National Association of Federal Credit Unions, which brought 300 executives to Washington in September for a congressional caucus. "So, a good story to tell, combined with strong grass roots, makes for a very compelling political and policy position in Washington."

Frenemies on the Hill

Sometimes the entire financial sector benefits from the power of Main Street banks. Veteran financial lobbyists say that Wall Street can get what it wants by hiding behind Main Street.

A case in point was last spring's fight over so-called mortgage cramdown.

Last April, credit union groups were tapped to negotiate a compromise on a bill that would have allowed judges to lower mortgage balances for homeowners in bankruptcy. The credit unions wouldn't budge.

Even though a few big Wall Street banks, like Citigroup (C, Fortune 500), had agreed to negotiate on the issue, most big banks had no interest in seeing such legislation pass. The proposal hasn't moved forward in the Senate, and the entire industry benefited from the credit unions' stance.

Sometimes, the two sides are at odds, as happened this spring when Main Street won at the expense of Wall Street.

After some 1,400 small bankers sent letters and e-mails to the Federal Deposit Insurance Corp., regulators changed the way assessments to the deposit insurance fund are calculated to benefit smaller banks. The change would only be a one time special assessment for the fund that protects investors when banks fail. But small banks saved millions. Big banks paid more.

Latest win

The Consumer Financial Protection Agency was proposed to establish a new regulator solely dedicated to watching out for consumer interests on mortgages, credit cards and other consumer products.

But after lobbying by small banks, the House Financial Services Committee carved out all 8,000 Main Street banks, or 98% of all banks and credit unions, saying they could keep their regulator for examination and enforcement.

0:00/5:30Financial product safety

The move left only the largest institutions -- about 110 banks and 80 credit unions -- to face the new oversight. Lawmakers defended the move, pointing out the companies that would receive an extra layer of scrutiny control around 80% of bank assets nationwide.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, explained the change by pointing out that community banks and credit unions don't make subprime mortgages and charge skyrocketing credit card fees. He later acknowledged that the House had "restricted the role" of the agency but he felt the compromise was "necessary to get the bill out."

Not one Democrat spoke against the change at the time, but several Republicans said it smacked of hypocrisy.

"If everyone cheated, and there's all this sin that's going on out there ... how then can you go back and say for 98% of the cases, don't worry," said Rep. Scott Garrett, R-N.J.

The consumer agency proposal must still be approved by the full House and Senate. Despite the legislative win, the credit union and the small bank associations continue to oppose the consumer agency in its current form. 

Bernanke urges Congress to enact reformsAlexander warns Obama shows Nixon tendencies

British economy shrinks unexpectedly

LONDON (CNN) -- Britain's gross domestic product suffered another decline in the third quarter of 2009, figures showed Friday, meaning the country remains mired in recession.

GDP decreased 0.4% in the third quarter, according to preliminary estimates from Britain's Office of National Statistics.

Some analysts had expected Friday's GDP figures to show the recession in Britain was over.

The British economy officially entered recession in January after two consecutive quarters of negative GDP growth, which is the traditional definition of a recession.

For the third quarter of 2009, statistics showed the biggest declines occurred in the hotel and restaurant industry, which fell by 1%; construction, which decreased by 1.1%; and agriculture, forestry and fishing, which declined by 1.6%.

There was zero growth in government and other services -- a marginal increase from the previous quarter -- with the health industry making the largest contribution to that figure, statistics showed. 

New jobless claims rise more than expected to 531,000Industrial Production

Industrial Production

NEW YORK (CNNMoney.com) -- Industrial production rose more than expected in September and recorded its largest quarterly gain in more than four years, government figures showed Friday.

The Federal Reserve said industrial production rose 0.7% last month after an upwardly revised increase of 1.2% in August. Economists surveyed by Briefing.com had forecast a 0.2% rise.

The better-than-expected figures suggest that economic growth in the third quarter could be stronger than anticipated. In the second quarter, U.S. gross domestic product shrank at a 0.7% annual rate.

Output for the entire third quarter rose at an annual rate of 5.2%, the first quarterly gain since the first quarter of 2008 and the largest increase since the first quarter of 2005, according to the report.

The capacity utilization rate increased to 70.5%, up from a revised 69.9% in August. However, capacity utilization was 10.4 percentage points below its average for the years 1972 through 2008. 

New jobless claims rise more than expected to 531,000Industrial Production

Bernanke urges Congress to enact reforms

NEW YORK (CNNMoney.com) -- Federal Reserve chairman Ben Bernanke said Friday that the turmoil in the financial system is "abating," but urged lawmakers to enact comprehensive reforms to help prevent future crises.

In a speech to central bankers in Massachusetts, Bernanke said legislative action is needed to ensure that banks have sufficient capital reserves, and to limit the risks that financial institutions can take.

The Fed chief also called on Congress to create new mechanisms to deal with the systemic risks posed by financial institutions deemed "too big to fail."

"As we work together to build on the progress already made toward securing a sustained economic recovery, we cannot lose sight of the need to reorient our supervisory approach and to strengthen our regulatory and legal framework to help prevent a recurrence of the events of the past two years," he said.

The remarks came one day after the Federal Reserve proposed a review of pay practices at 28 of the nation's largest banks to make sure employees are not tempted to make the kinds of risky bets that helped sink firms such as Lehman Brothers.

"Compensation, not only at the top but throughout a banking organization, should appropriately link pay to performance and provide sound incentives," Bernanke said.

0:00/2:28Feinberg defends pay crackdown

Bernanke also said more should be done to help protect consumers from "unfair and deceptive practices." He said the Fed has written rules providing "strong substantive protections" for mortgage borrowers and credit card users.

"We have seen that flawed financial instruments can both harm families and impair financial stability," the official said.

Building on the success of this year's bank stress tests, Bernanke said the central bank will conduct "more frequent, broader, and more comprehensive" examinations of the U.S. financial system.

Bernanke said a new "resolution regime" is necessary to wind down non-bank financial firms, such as insurance companies, that could destabilize the financial system and the economy. Any costs resulting from such a resolution should be paid by the financial industry and not the taxpayers, he added.  

Pinnacle CEO sees little indication of recovery in NashvilleWall Street fat cats fear the pay czar

Manufacturing (ISM)

NEW YORK (CNNMoney.com) -- Manufacturing activity ticked down slightly in September but still marked a second straight month above contraction levels, a purchasing managers' group said Thursday.

The Tempe, Ariz.-based Institute for Supply Management's (ISM) manufacturing index reading of 52.6 missed estimates from economists, who expected a jump to 54 from August's 52.9, according to a Briefing.com consensus survey.

"It appears the fundamentals for continuing recovery are still at work," said ISM chairman Norbert Ore, in a prepared statement.

August's report snapped 18 straight months of contraction in the sector. Manufacturing is a considered a key gauge of the strength of the overall economy.

The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing field. Index readings above 50 indicate growth, while levels below 50 signal contraction. Readings below 41.2 are associated with a recession in the broader economy.

"The ISM index remained in expansion territory ... with [some] positive signals," said Wells Fargo economist John Silvia, in a research note. "Yet employment still lags ... The jobless recovery continues."

The data track new orders, production, employment, supplier deliveries, inventories, customers' inventories, the backlog of orders, prices, new export orders, imports and buying policies.

Of the 18 manufacturing sectors reporting, 13 posted growth -- including categories such as apparel, transportation equipment and paper products. Sectors reporting contractions included furniture, plastics and machinery.

New orders slip: The key new orders component fell by 4.1 percentage points in September, to 60.8. New orders are a gauge of manufacturing activity in the near future.

Despite the slip from August, this is the third consecutive month signaling growth in new orders. A reading above 48.8, over time, is generally consistent with an increase in the Census Bureau's data on manufacturing orders.

"This index suggests improved investment spending in the fourth quarter," said Wells Fargo's Silvia.

Employment: The employment component fell to 46.2 in September, down 0.2 points from the previous month.

That marks the 14th consecutive month of decline in employment. Consistent readings above 49.7 are generally tied to an increase in government data on manufacturing employment, the report said.

The employment index is one of the "bumps along the path to growth," Silvia said. "This is consistent with our estimate of a jobless first year of recovery."

We want to hear about the most outrageous consumer rip offs and price gouging that you've come across. E-mail your story to julianne.pepitone@turner.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.  

New jobless claims rise more than expected to 531,000Manufacturing (ISM)

Retail Sales

NEW YORK (CNNMoney.com) -- Retail sales fell in September after a popular program aimed at boosting auto sales ended, but the drop was smaller than economists had expected, government data showed Wednesday.

The Commerce Department said total retail sales fell 1.5% last month, down sharply from an increase of 2.7% in August, when overall sales were boosted by the government's Cash for Clunker's program.

Economists surveyed by Briefing.com had forecast a decline of 2.1% in September sales.

Sales excluding autos and auto parts rose 0.5%, compared to a 1.1% increase in August. Economists expected a gain of 0.2% in September sales, excluding auto purchases.

Consumer confidence growing. The stronger-than-expected gain in sales outside the auto industry suggests that consumers are gradually becoming more confident as the U.S. economy emerges from a deep recession.

"Today's report is broadly reflective of what we're seeing in other areas of the economy, and that is a slow and gradual recovery," said Tim Quinlan, an economist at Wells Fargo.

Looking ahead, the improved sales data means retailers could see "modest continued growth" in months ahead, Quinlan said.

Fingers crossed for fourth-quarter boost. That bodes well for the retail industry, which brings in the bulk of its profit during the fourth quarter, as record high unemployment threatens to damp holiday sales.

Furniture sales jumped 1.4% and clothing sales rose 0.5% in September.

Total retail sales jumped in August as auto sales surged on the Cash for Clunkers program, which paid buyers up to $4,500 for their used cars when they purchased more fuel-efficient models.

But auto sales plunged after the popular program ended Aug. 24. Car sales were down 10.4% in September, according to the Commerce Department.  

New jobless claims rise more than expected to 531,000Industrial Production

Insurers not improving nation's health care

NEW YORK (CNNMoney.com) -- The quality of health care for millions of Americans insured through commercial or public plans has stopped improving for the first time in more than a decade, according to an industry accreditation group's report issued Thursday.

The across-the-board trend in care quality provided to people with private coverage as well as in Medicare and Medicaid was virtually stagnant in 2008, according to the 13th annual "State of Health Care Quality" report from the National Committee for Quality Assurance (NCQA).

The NCQA is an independent non-profit association that accredits and certifies health care organizations and physicians on patient experience and delivery of clinical care.

"This breaks a 12-year run of significant progress," Margaret O'Kane, NCQA's president, wrote in the report. "While it could be a one-year blip, I fear it may be the beginning of a troubling trend."

"Commercial health plans, with a significant push from large employers, have achieved some remarkable results year after year," she said. "But [in 2008], that progress has halted."

Also troubling, the report noted, was the third consecutive year of "meager progress" in quality for Medicare and Medicaid beneficiaries served by health plans.

Overall, the report found that the quality of care for many health conditions -- including mental health and diabetes care -- declined, and that overuse of imaging for lower back pain and breast cancer screening grew.

The report also showed that only 34.1% of children prescribed medication to treat attention deficit hyperactivity disorder (ADHD) are seeing a doctor for follow-up care.

Failing to improve

Richard Sorian, vice president of public policy with NCQA, said two key factors -- the economy and health care's pay-for-service model -- have hurt the performance of health plans.

"In many cases employers and health plans have taken their eye off quality to focus on cost-cutting," Sorian said. And with health care's pay-for-service model, Sorian said there's no incentive to improve the quality of care.

NCQA assesses quality in terms of whether an insured patient is getting the right care at the right time.

"For example, we look at child vaccination rates before the age of two," explained Sorian. "Of those kids covered by a health plan, what percentage got these vaccinations. It's a clear black-and-white measure."

The report examined the performance of 979 managed care plans that voluntarily submitted information on quality of care, access to care and member satisfaction. In total, these plans cover about 116 million Americans.

"No segment of health care is more committed to advancing quality than insurers," said Susan Pisano, a spokeswoman for America's Health Insurance Plans, a group representing the industry.

"The fact that 979 plans covering 116 million people publicly reported their scores and have been doing so over the past 10 years, with significant year-over-year improvement [in the scores] is proof," said Pisano.

But she added that other players in the health care system, primarily providers, should also report their quality scores publicly and be held accountable. "Without accountability from all, there's a limit on what can be achieved in terms of quality improvement," she said. "It should not be health plans alone that are driving the quality agenda."

Insurers did log some improvements, including "near universal high-quality care" for Americans with asthma and a 12 percentage-point increase in the number of Medicare beneficiaries who persistently received essential medication for six months after a heart attack.

Sorian worries that by insurers failing to improves their quality grades, it means that consumers are not getting care at the right time.

"The consequence of this is that their health suffers," he said. "Consumers need to be more demanding of the system."

But falling grades also hold serious consequences for health plans, he said. "Many insurers have large corporations such as Fortune 500 companies as their clients," he said. "Companies build performance measures into their contracts with insurers."

So if an insurer's quality grades are falling, Sorian said clients can withhold part of the premiums they pay to insurers or take their business elsewhere.

"Failing to improve their [quality] grades is a very serious issue for everyone," said Sorian. 

Insurers say health bill would jack up premiumsFed sees modest economic improvement