Economy Watch: State Unemployment Inches Upward

4 min read

The Bureau of Labor Statistics reported on Friday—and got more attention than usual for it, because of the upcoming election—that regional and state unemployment rates were generally little changed or slightly higher month-over-month in July.

By Dees Stribling, Contributing Editor

Fannie, Freddie bailout terms changed

Back during the darkest days of the Panic of 2008, GSEs Fannie Mae and Freddie Mac received generous bailouts from the federal government, but at a steep cost: a 10 percent annual dividend payment from the two. Now the Treasury Department is changing those terms so that Fannie and Freddie need to pay whatever profits they make, rather than the fixed amount.

The GSEs weren’t always making enough to pay that 10 percent dividend, and so found themselves in the perverse position of borrowing periodically (from the Treasury) to pay the dividends. Going forward, when Fannie and Freddie lose money, they won’t be required to pay anything to the government. During recent quarters, however, the GSEs have been making money.

The move isn’t just to ease things for Fannie and Freddie. It also seems to be a strategy to hasten the time when the GSEs are “wound down,” because another change in the bailout terms stipulates that the two must reduce their portfolios by 15 percent a year—up from the previous requirement of 10 percent a year. In short, they need to unload their holdings more quickly, while at the same time can’t retain any of their profits, which sounds like a recipe for their eventual demise.

State unemployment inches upward

The Bureau of Labor Statistics reported on Friday—and got more attention than usual for it, because of the upcoming election—that regional and state unemployment rates were generally little changed or slightly higher month-over-month in July (“higher” is what the headline writers were interested in). There were 44 states that recorded monthly unemployment rate increases, two states and the District of Columbia that posted rate decreases and four states that had no change at all.

Nevada continued to record the highest unemployment rate among the states, a dubious distinction it’s had for some time, posting 12 percent in July. Rhode Island and California posted the next highest rates, 10.8 and 10.7 percent, respectively, and in fact those three states are the only ones that have double-digit rates any more. Because of the regional energy boom, North Dakota once again registered the lowest jobless rate, 3 percent.

Despite the monthly downtick in employment, year-over-year employment increased in 41 states and the District of Columbia and decreased in only nine states. The largest annual percentage increase happened in North Dakota (up 6.8 percent), followed by California (up 2.6 percent) and Oklahoma (up 2.4 percent). The largest year over-year percentage decrease in employment occurred in Rhode Island (down 1.6 percent), followed by Wisconsin (down 0.8 percent).

Leading indicators better in July

The Conference Board reported on Friday that its Leading Economic Index was up 0.4 percent in July to 95.8 (2004 = 100), which was a larger rise than expected, and coming on the heels of a 0.4 percent June decline in the index, but a gain of 0.3 percent in May. So the index is in something of a yo-yo mood.

Seven of the index’s 10 indicators increased in July, including weekly jobless claims and building permits, as well as the interest rate spread. The indicators that lost ground included the new-orders component of the IMS manufacturing index, along with consumer expectations for business conditions.

“The indicators point to slow growth through the end of 2012,” noted Conference Board economist Ken Goldstein in a press statement. “Lack of domestic demand remains a big issue. However, back-to-school sales are better than expected, suggesting that the consumer is starting to come back. Retail sales this time of year are often an indicator of how the holiday season will turn out.”

Gas prices creep skyward

Gas prices have been edging upward lately, inspiring worries that fuel costs will cause consumers to shop less, just when consumer spending made something of a recovery from its springtime slump. According to AAA, prices were up nationwide over the last month after dropping late in the spring and early in the summer.

According to Sunday’s AAA Fuel Gauge Report, the current average for a gallon of regular is $3.72. A month ago, the average was $3.447. Prices are still below the all-time highs of 2008, but are now higher than a year ago, when the average was $3.585.

Wall Street saw its own uptick on Friday, with the Dow Jones Industrial Average gaining 25.09 points, or 0.19 percent. The S&P 500 was up 0.19 percent and the Nasdaq advanced 0.46 percent.

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