Photo Credit: Wikimedia Commons
At the last Friday before Christmas —parking lots are jammed, end-of-year lists are proliferating and consumer-focused retailers are in full swing. Aside from the usual pre-holiday business stories (I wouldn’t want to be in charge of Target’s PR right now), there have been some of the year’s most significant economic news coming across the wire.
Home sales declined to their slowest pace in the last two years, but housing price gains continue. The Federal Reserve announced it would finally begin reducing its stimulating bond buying in January. Meanwhile, the Dow Jones Industrial Average cheered the news by spiking above 16,000. Congress even signed its first bipartisan budget since the 1980s! Grab yourself an adults-only eggnog* and let’s get to it.
Existing-home sales fell in November, something several analysts predicted due to the shortened selling month and the impact of the government shutdown back in October.
According to the National Association of Realtors, existing-home sales dropped by median prices continued their strong year-over-year growth. The number of existing-homes sold dropped 4.3 percent, to a seasonally adjusted annual rate of 4.90 million — down from a rate of 5.12 million in October. It’s the first drop in the last 29 months, but shouldn’t be anything to panic about, as the market still looks strong. New-home sales are still growing.
The Big Taper
Markets have been recoiling and advancing in anticipation of this move for at least a year and now it’s official: in his last action as the Chairman of the Federal Reserve, Ben Bernanke, announced the Fed will reduce its monthly bond buying by $10 billion in January, followed by further reductions every month after that.
It’s a sign of the American economy’s growth, but every whisper of its eventual reduction has caused drops in the stock market. This time, given the gradual nature of the reduction, global stock markets rejoiced. This gradual plan reflects solid jobs growth, and there’s little reason to think the incoming chair Janet Yellen would significantly change course. She’s openly pro stimulus, with an intense focus on improving the country’s employment situation.
An excerpt from the report:
“The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced.”
The big dog of economic indicators — the unemployment situation has taken a few small steps back after beating expectations in November. The latest data from the Department of Labor shows that for the week ending December 14, seasonally adjusted claims hit 379,000, an increase of 10,000 from the previous week’s 369,000.This latest move bumps the four-week moving average up to 343,500, an increase of 13,250 from the previous week’s 330,250.
Zooming out, our unemployment claims figures have stalled just above the plateau that the country rode from 2004 until the beginning of the Great Recession. This doesn’t mean the employment situation is solved, and all economists will be hoping for further jobs improvement in the coming year.
— Tom Kaiser
* Here’s a great story on how to make President Eisenhower’s famous eggnog. Beware: this one is definitely not for the kiddos.