No QE3 Just Yet, But More Twist
- Jun 21, 2012
As scheduled, the Federal Open Market Committee issued a statement on Wednesday about the economy and what it plans to do in the near future about its stubborn sluggishness. The answer (for now): more of the Twist. “The Committee… decided to continue through the end of the year its program to extend the average maturity of its holdings of securities,” the FOMC noted in its statement.
Later in the day, the FOMC released its projections for the near- and mid-term U.S. economy. Essentially, it revised projections for GDP down and unemployment up. By 2014, for example, the committee is expecting GDP growth to be 3 percent to 3.5 percent, rather than the 3.3 percent to 4 percent it was forecasting in January. The 2014 unemployment rate is expected to be 7 percent to 7.7 percent, rather than the 6.7 percent to 7.6 percent forecast in January.
Finally, chairman Ben Bernanke held a press conference in which he suggested—in as much as a Fed chairman suggests anything—that it might soon be time for QE3, if the employment numbers don’t start heading in the right direction post haste. The next opportunity to announce stepped up Fed bond buying, as opposed to mere twisting, will be after the Aug. 1 FOMC meeting, though it could also happen in September.
Shared households up since ’07
On Wednesday, the Census Bureau released “Sharing a Household: Household Composition and Economic Well-Being: 2007–2010,” which reported that the number of shared U.S. households spiked in response to the Great Recession. An entirely rational (and in some cases, urgently necessary) response, but at the same time bad for the recovery, since shared households tend to buy less of certain goods (such as furniture or electronics).
According to the bureau, a “shared household… includes at least one ‘additional adult,’ a person aged 18 or older who is not enrolled in school and who is neither the householder, the spouse, nor the cohabiting partner of the householder.” Though most of a shared household’s members tend to be related, the definition also includes roommates, housemates and boarders, whose numbers have also increased in recent years.
In spring 2007, the report said, there were 19.7 million shared U.S. households. Three years later, the number of shared households had increased by 11.4 percent, while the number of all households had increased by only 1.3 percent. About 1.2 million adult children of householders had moved back home; other relatives moving in included parents, siblings and adult grandchildren.
Mortgages delinquencies edge up
LPS reported on Wednesday that the U.S. residential mortgage delinquency rate (loans 30 or more days past due, but not yet in foreclosure) increased to 7.2 percent in April from 7.12 percent in March. The foreclosure rate for the month was 4.12 percent, just a bit lower than April’s 4.14 percent. The rate of delinquent loans peaked during the worst days of the recession at 10.97 percent, meaning that delinquencies have since fallen more than half way back to a “normal” 4.5 percent to 5 percent.
Wall Street couldn’t quite make up its mind on Wednesday about the FOMC statement and Bernanke’s pronouncements. The equities indexes dropped after the FOMC announcement, bounced back, then dropped again during the chairman’s speech. After that, the day ended with markets roughly where they started. The Dow Jones Industrial Average was down 12.94 points, or 0.1 percent, while the S&P 500 lost 0.17 percent and the Nasdaq gained a scant 0.02 percent.