TIME Economy

Gas Was Dirt Cheap This Weekend

Gas Prices $2
Tom Merton—Getty Images/OJO Images RF

All 48 states in continental U.S. had average prices below $3

Gas prices fell under $2.oo in 13 states across the U.S. this weekend, sending the nationwide average down to $2.55 per gallon — a low Americans haven’t seen since Oct. 2009.

Oklahoma, Louisiana and Ohio had at least one gas station each with regular gas prices below $1.90 per gallon, CNNMoney reported Monday, citing data from GasBuddy.com. Another ten states had stations with prices below $2.00 per gallon: Alabama, Arizona, Colorado, Indiana, Mississippi, Missouri, Nebraska, New Mexico, Texas and Virginia.

Meanwhile, all 48 states in continental U.S. had statewide average gas prices below $3.

The nationwide decrease in gas prices is due to falling oil prices, as economic downturns and the rise of fuel efficient vehicles slash demand for oil.

[CNNMoney]

MONEY Jobs

Here’s What To Expect From The Job Market in 2015

There should be good news for job seekers in 2015 as the US economy continues to rebound.

TIME Economy

Americans Get Sunnier About the Economy

Ahmad Ali, Ghalzal Ali
Shoppers patronize a Target store just after midnight on Black Friday, Nov. 28, 2014, in South Portland, Maine. Robert F. Bukaty—AP

Economic optimism is at its highest level in almost eight years

Americans’ confidence in the economy is returning after years of doubt and pessimism, with economic output, jobs figures and retail sales in a strong upswing.

The Thomson Reuters/University of Michigan index of consumer sentiment rose to a near eight-year high in December, according to data released on Friday, similar to levels seen in boom years like 1996 and 2004, and the best since January 2007.

The increased optimism is a result of strength in many sectors of the economy. Economists expect a sharp drop in gasoline prices to help boost the economy in the coming months. The federal government forecasts the price of a gallon of gas will drop to $2.60 nationwide next year, compared with $3.37 this year, translating to greater spending rather than savings—particularly for low-income Americans.

Reasons for concern remain, including sluggish wage growth and the plight of the long-term unemployed. The drop in oil prices is also rattling the stock market, with the Dow dropping more than 300 points on Friday.

But the most recent jobs report was promising, with 321,000 jobs added to payrolls around the country in November—the biggest monthly increase in three years—holding the unemployment rate at 5.8%. The U.S. economy grew at an annual rate of 3.9% in the third quarter of 2014, and in the second quarter GDP grew 4.6%.

“Everything is pointing in the right direction for the consumer,” chief U.S. economist at Capital Economics Paul Ashworth said, according to Bloomberg. “We expect a pretty good run for consumption growth in the fourth quarter. It is a big boost for the economy.”

Americans are finally feeling the effects of the improving economy. According to the Reuters poll’s director, Richard Curtin, more consumers had good news than bad news when asked about the economy than in any month since 1984. But the first quarter of 2014 still saw a deep contraction in the economy of 2.6%, partially due to an unusually cold winter in many parts of the country.

The improving sentiment is likely to further boost the economy and could translate into higher worker wages and more consumer purchasing.

TIME Economy

Wealth Gap Widens Between Whites and Minorities

The gap between white and black household wealth is the highest since 1989

The wealth disparity of U.S. households has widened dramatically along racial and ethnic lines during the recovery from the economic recession, according to a new report.

In 2007, at the start of the recession, white households in the U.S. had a net worth 10 times that of black households. But in 2013, white households were 13 times richer, according to the Pew Research Report out Friday. White households were eight times richer than Hispanic households in 2007 but 10 times richer in 2013.

FT_14.12.11_wealthGapRatios

Researchers note that while wealth of non-Hispanic white households increased a small amount between 2010 and 2013—2.4%—the wealth of Hispanic and black households actually fell dramatically, 14% for Hispanic households and 34% for black households.

Other racial and ethnic minorities were not broken out for analysis in the data compiled by Pew.

TIME financial regulation

Why It Matters That Congress Just Swapped The Bank Swap Rule

US-ECONOMY-FINANCE-BANKING-BOFA
NICHOLAS KAMM—AFP/Getty Images

A controversial change to the Dodd-Frank financial reforms trades more risk for taxpayers to get more profits for banks and their corporate clients

Banks may be officially allowed to get back in the casino business again soon.

Hidden as a rider in the $1.1 trillion continuing resolution omnibus bill—the hulking “Cromnibus”—that passed the U.S. House last night are a few, measly pages that pack a whole lot of punch. They repeal what’s known as the Lincoln Amendment in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Lincoln Amendment, which you’ll also see referred to in other articles as “Section 716″ or the “the swaps push-out rule,” was, if not Dodd-Frank’s heart and soul, than at least one of its vital organs. It says, basically, that banks can make risky bets on behalf of paying clients, but if they screw up and get into trouble like they did in 2008, then taxpayers aren’t responsible for bailing them out.

It did that by requiring that banks set up two big buckets: one that was backed by taxpayers (FDIC-insured), and one that was not. The idea was that banks would keep all of their normal, plain-vanilla banking activities in the FDIC-insured bucket, and then “push out” swaps and other risky contracts, like exotic, customized, and non-cleared derivatives, into the other bucket. (Swaps are contracts that allow banks to hedge their risks or speculate on everything from interest rates to currency prices. Credit default swaps contributed to blowing up the economy in 2008. Warren Buffet once called these sorts of derivatives “financial weapons of mass destruction.”)

If the Cromnibus passes the Senate in the form that it passed the House last night, the Lincoln Amendment will be officially repealed. Dead. Kaput. Gonzo. The swap casino will again operate with the tacit backing of taxpayers. If markets go haywire, as they did in the last financial crises, taxpayers may again find themselves forced with a choice between bailing out the casino owners and a systemic financial collapse.

The Bipartisan Policy Center, which is generally in favor of financial regulation, says people shouldn’t overreact to that news. It released a statement yesterday saying, in essence, “Relax, we still have the Volcker rule,” a reference to a different provision of Dodd-Frank that bans banks from using taxpayer-backed accounts to make their own bets on the future movement of markets.

But as the folks at the Roosevelt Institute point out, that argument doesn’t really make sense. It’s like saying that because you’re wearing a t-shirt, you don’t need a sweater. It’s true that the Lincoln Amendment and the Volcker rule overlap in some ways, but their coverage is different.

The heart of the Volcker rule is all about proprietary trading, which is when banks trade for their own profits and not on behalf of their customers. It’s similar to the Lincoln Amendment in that it doesn’t specifically outlaw anything; it says that banks can proprietary trade all they want, but if they get into trouble, taxpayers aren’t bailing them out. Lots of people in the financial world think that the Volcker rule is the most important part of Dodd-Frank, but it doesn’t cover everything.

The Volcker rule, for example, doesn’t apply to all risky financial products, like exotic and uncleared credit default swaps. That’s where other regulations, including the Lincoln Amendment, took up some of the slack. Unlike the Volcker rule, the Lincoln Amendment did apply to exotic and uncleared credit default swaps, and required that banks “push out” swaps into a bucket that was not backed by the taxpayers.

The best argument for not freaking out about the repeal of the Lincoln Amendment is that it wasn’t nearly as strong as its drafters intended it to be. The final version had loopholes the size of Montana. For example, while the Lincoln Amendment was intended to lasso all risky instruments, by the time all was said and done, it really only applied to about 5% of the derivatives activity of banks like Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, according to a 2012 Fitch report.

In other words, the banks are in the casino business whether or not the Lincoln Amendment is repealed. But liberal Democrats, including Senators Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts as well as a handful of conservative Republicans, like Rep. Walter Jones of North Carolina, say 5% of protection is better than none at all. They oppose the Cromnibus so long as that rider is in it.

House Republicans, for their part, say eliminating the Lincoln Amendment would streamline regulation, boost the economy, and “protect farmers and other commodity producers from having to put down excessive collateral to get a loan,” according to a summary statement. The bill is expected to pass the Senate, rider and all.

TIME Economy

Congrats, World, You’re Getting a Raise Next Year

coin-stacks
Getty Images

Salaries are expected to increase by 5.4% on average globally in 2015, a report says

Here’s some good news for everyone: salaries are expected to increase by 5.4% on average globally in 2015.

That’s the key finding in a study from Hay Group, a global management consultancy firm, which was published this week. The results represent an increase from last year when the global average rose 5.2%.

The U.S. is expected to see a modest increase of 3%, according to the report, up slightly from 2014’s 2.8% increase. And when that increase is adjusted for inflation, you should only expect a 1% bump on average.

The data were taken from Hay Group’s PayNet, which manages data for over 16 million workers in 24,000 organizations in 110 countries. The report also draws on inflation data from the Economist Intelligence Unit to determine just how effective the salary increases will be for each country surveyed.

While the global figure may show an optimistic outlook overall for workers, inflation rates, especially in some emerging economies, will mean lower paychecks for some.

“This average masks a significant slowdown in emerging markets like Brazil, Russia and Ukraine, which have been the key drivers of growth in recent years,” the report said.

Workers in these countries can expect to see salary rises of 6.1%, 6.8% and 6.8%, respectively. However, when adjusted for inflation, which is expected to be high in these countries, workers will actually experience real wage cuts of 0.4%, 0.7% and 3.9%.

“Real pay is now rising in many European markets, but in key emerging economies, which have been the boom area of the last 10 years, real wages are falling,” said Ben Frost, a consultant at Hay Group, in a statement.

Countries such as Greece, Ireland and the U.K. got a shout out in the report for “signs of hope” after struggling economically recently. The countries are expected to see significant salary bumps.

Breaking the findings down by region, those living in Asian countries should be especially pleased, with real incomes in those areas set to get the biggest boost globally, rising 3.1% on average.

This article originally appeared on Fortune.com.

TIME Economy

Number of Job Openings in U.S. Hits 13-Year High

A hopeful sign for both the U.S. economy and the job market

The number of job openings in the United States rose to a near 13-year high in October, according to the Labor Department’s latest Job Openings and Labor Turnover survey.

The jump in job openings is a hopeful sign for both the U.S. economy and the job market.

Employers not in the farming sector had 4.83 million positions waiting to be filled during October, up from 4.69 million in September, according to the Labor Department.

Job openings across the U.S. economy have jumped since April, according to Reuters, and the number of open slots in October was just shy of the 4.85 million jobs available in August, which was the highest reading since 2001.

The report follows the November employment figures, released last Friday, which showed a jump in job creation last month.

—Reuters contributed to this report.

This article originally appeared on Fortune.com

TIME Economy

Here’s an Upbeat Economic Indicator: the Office Holiday Party is Back

Nine out of 10 companies plan to throw holiday parties in 2014, a survey shows, up from previous years

Nine out of ten employers are planning to host a holiday party this year, up from previous years and the latest sign of the economy’s improving fortunes.

According to a survey by global outplacement consultancy Challenger, Gray & Christmas, which polled human resources professionals, 89% of companies are planning to host a holiday or year-end party this year. That figure is an improvement on 82% in 2012, and 68% in 2011. The survey wasn’t conducted last year, and a Challenger spokesman said this year’s holiday party survey was the rosiest since 2007.

The more festive mood shouldn’t come as a huge surprise, especially after several stellar months of job growth and some fresh all-time highs for the stock market. Those factors mean healthier profits for companies and have lifted optimism for both companies and individuals. Fortune last week reported that in the past 11 months, U.S. employers have added nearly 2.7 million jobs — the fastest job growth we’ve had since 1999.

Corporate offices are not only planning to throw more parties, they’re also planning to spend more on this year’s festivities, according to Challenger. And fewer companies are planning to host their shindigs on-site: around 30% said they will host their parties on corporate premises (down from 55% in 2012).

While it appears positive for companies to want to celebrate a good year, it’s important to remember that holiday parties don’t cost a lot.

“The memories of the most recent and very painful recession still may be too fresh for most companies to return to the type of decadent parties that were more common prior to the economy’s meltdown,” Challenger said. “But there clearly is a sense that it is okay to loosen the budget reins a bit to hold a respectable holiday party.”

This article originally appeared on Fortune.com

TIME Know Right Now

Know Right Now: Why Gas Prices Are at the Lowest Point in 4 Years

Gas prices have dropped significantly for Americans, and several factors are driving the change in prices

American drivers may have noticed a smaller bill at the pump recently– that’s because the average price of U.S. regular gas has recently reached $2.72 a gallon, the lowest it’s been in four years.

In the last two weeks alone, the average price has dropped 12 cents. But what is the reason for these dropping prices? Watch this video to find out what’s causing the cheaper fuel, and where you can find the most affordable gas in the country.

TIME Opinion

Determined to Cut Taxes Once Again, Republicans Use New Math to Reshape Reality

CBO Director Elmendorf Releases Budget And Economic Outlook For 2014-2024
CBO Director Elmendorf on Aug. 27, 2014, in Washington, DC. Alex Won—Getty Images

"Republicans and Democrats inhabit different factual universes"

In 2004, an unnamed senior White House staffer, widely thought to be political adviser Karl Rove, gave a famous interview to Ron Suskind, “The aide,” Suskind wrote, “said that guys like me were ‘in what we call the reality-based community,’ which he defined as people who ‘believe that solutions emerge from your judicious study of discernible reality.’”

But, the anonymous man told Suskind, that wasn’t the way the world worked. “We’re an empire now,” he’s quoted as saying, “and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.’”

The staffer may not have known it, but he was identifying one feature of the kind of crisis era into which the United States had just entered. Great political crises like those of the American Revolution, the Civil War, the Depression and the Second World War, and the one that began in 2001 and continues today are also struggles over the meaning of words—words like democracy and dictatorship, freedom, free enterprise and socialism, and so on. They also become struggles over the most basic facts. Writing during the great worldwide crisis of the Second World War, George Orwell identified a number of competing world views whose adherents could not accept various obviously true statements about the world around them. Within ten years more—that is, by the mid-1950s—that was no longer the case. Victory in war and postwar economic growth had created a new consensus in the western world.

But today, divisions over reality are as deep as they have been for a very long time, and Republicans and Democrats inhabit different factual universes. One obvious area of disagreement is climate change. While President Obama seeks agreements with foreign nations to reduce greenhouse gas emissions, Republicans almost unanimously reject the consensus of scientific opinion and argue that those emissions have not been proven to heat up the planet. Another very important area of disagreement concerns fiscal and economic policy — and this week it became clear that some Republicans are struggling to make their version of economic reality prevail in Washington, too.

The New York Times reported on a campaign by prominent Republican conservatives and some Tea Party Congressmen to replace the director of the Congressional Budget Office, Douglas W. Elmendorf, with someone who would calculate the effects of tax cuts in a different way. Led by the anti-tax activist Grover Norquist and the Heritage Foundation, these Republicans specifically want a new director who would use what they call “dynamic scoring” to predict the impact of tax cuts. “Dynamic scoring” is based upon the theory of supply-side economics. That theory, first popularized under Ronald Reagan, held that tax cuts, particularly on the highest income brackets, would unleash extraordinary economic growth, and therefore bring in more, rather than less, revenue within a few years. Dynamic scoring is a theoretically more sophisticated application of this idea. Rather than simply deduct the projected cost of tax cuts from federal revenues to estimate their future impact, dynamic scoring actually predicts how much new tax cuts will increase GDP by unleashing economic growth, and how much they will tax revenues and mitigate the effect of the cuts upon the deficit. Since the new Republican majorities in Congress are determined to cut taxes yet again while claiming to move closer to a balanced budget, this is an idea they need to validate in order to justify their plans.

The history of dynamic scoring is closely tied to the history of Republican economic policy since Ronald Reagan. When Reagan took office in 1981, the federal deficit was $79 billion. His Administration immediately adopted policies based on supply-side economics. It didn’t work. When he left office eight years later after several rounds of tax cuts on the higher brackets, the annual deficit was $152 billion, down from a peak of $221 billion in 1986. Despite George H. W. Bush’s tax increases, which split the Republican Party, a severe recession had raised the deficit back up to $255 billion when he left office in 1993.

Bill Clinton began his Administration with an income tax increase on nearly all Americans. It helped cost the Democrats the House of Representatives in 1994. It was at that point that Newt Gingrich, then the new Speaker of the House, and his fellow Republicans began to advocate dynamic scoring as a means of calculating the impact of further tax cuts. Once again, they claimed they could accurately estimate the beneficial impact of leaving more money in the hands of the wealthy and ease fear of deficits. But Clinton refused to go along, and eventually, the Clinton Administration ran a budget surplus in fiscal 2000.

George W. Bush inherited a deficit of only $32 billion in 2001, and came into office determined to cut taxes again. By 2003, the Bush Administration was basing calls for a second round of cuts on dynamic scoring estimates that once again claimed that the cuts would generate increased revenue. The cuts passed, but their impact, combined with the Iraq war and the Great Recession, was to balloon the deficit up to $641 billion in fiscal 2008, and $1.55 trillion in fiscal 2009. Together, President Obama and the Republican Congress have now reduced the deficit to $483 billion in the fiscal year that was just completed. This pattern actually dates from the 1950s. Beginning with Dwight D. Eisenhower, every Republican President has substantially increased the federal deficit, while every Democratic President except Jimmy Carter has reduced it during his term of office.

Few theories of public policy have been tested so repeatedly and failed tests so spectacularly, as the idea that tax cuts in the high brackets will ultimately increase revenue and lower deficits. But led by Representative Paul Ryan, the Republican majority, by pushing for personnel changes that will lead the non-partisan Congressional budget office to adopt dynamic scoring, is eager to try it again. It is hard for me to believe that any Republican activists seriously believe that a new round of top-bracket and corporate tax cuts will increase revenues. Their real agenda, I suspect, is the one that Grover Norquist—a prime mover in the campaign to replace Elmendorf—has repeatedly spoken of: to force further reductions in government spending by reducing government revenues still further. Meanwhile, wealthy Republican donors will get even wealthier, and, presumably, even more generous in their contributions. Once again the Republicans are trying to create their own reality: a world in which making the rich richer will bring down deficits, while only a few poor benighted members of the “reality-based community” take the trouble to notice that this is not so.

David Kaiser, a historian, has taught at Harvard, Carnegie Mellon, Williams College, and the Naval War College. He is the author of seven books, including, most recently, No End Save Victory: How FDR Led the Nation into War. He lives in Watertown, Mass.

This post has been updated to include additional economic data.

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