Nowadays, news that would have been bad a couple of years ago serve as glimmers of hope in a troubled economy. Although manufacturing has shrunk again and home sales are still nowhere near they are in a strong economy, manufacturing decreased the smallest amount since August 2008 and home sales continue to creep upwards for the fourth month in a row.
 
According to the Institute of Supply Management, their factory index, which measures manufacturing, has risen in June to 44.8, with any number under 50 signaling a contraction. The National Association of Realtors has expressed a similar increase in the number of people signing home ownership contracts by 0.1 percent.
 
Analysts predict that we will continue to see a substantial improvement in the economy as a direct result of the economic stimulus programs. However, the improvement may not last until 2010 as the effect of the stimulus begins to slacken. Rising unemployment will also negatively impact consumer spending and keep much of the economy’s stabilization in check for a while as well.

Image: Flickr

The American Institute of Public Accountants reported this week that 47 percent of small- to medium-sized CPA firms believe the economy will begin to recover in the fourth quarter of 2009. Ten percent of firms believe the economy is already improving. This comes from the 2009 CPA Firm Top Issues Survey.

“The majority of CPAs in small- and mid-size firms counsel businesses on financial matters, so it is encouraging that they believe recent signs of economic improvement will continue,” said James Metzler, AICPA vice president for small firm interests.

The CPA firms surveyed reported that the biggest issues confronting them as a result of the economic crisis are strains on accounts receivable and revenue reductions because of client attrition and fee pressure. CPA employment is expected to remain steady.

The AICPA expects to announce the complete results of its 2009 CPA Firm Top Issues survey early next week. Key issues will include client retention, succession planning and marketing to new clients.

Image Credit: ansik, Flickr

Much has been said about employment and housing with regards to economic recovery . However, as important as these items are, one should not forget consumer spending. While it is good for one’s personal economy to cut back on consumer spending, it does tend to cause problems for the wider economy, since 2/3 of our economy is dependent on the spending that you and I do . Gas prices can impact how much we spend in other areas of our lives, and they can impact general feelings about and confidence in the economy. James Surowiecki points this out in The New Yorker about gas prices, consumer spending and the economy :

Although there is no one-to-one correlation between gas prices and consumer confidence, a 2007 study by the economists Paul Edelstein and Lutz Kilian showed that, historically, sharp spikes in oil prices have sent consumer confidence plummeting , and have led to outsized cutbacks in general consumer spending. This makes sense: gasoline prices are the most publicly visible prices in the economy as a whole—no other prices are displayed on the street in bold, two-foot-tall numbers—so it’s not surprising that they have a disproportionate impact on the way people feel.

Gas prices have been relatively low recently, so they have fallen off the map a little bit. But that is changing. A rally in commodities may be underway, and that means higher oil prices. And higher gas prices. The American consumers may soon find themselves pessimistic about the economy. Add rising gas prices to unemployment that is expected to reach 10%, and to still-falling home values (even as mortgage interest rate move higher), and consumers — who have only recently been opening their wallets — may feel as though it is time to close them again.

Image source: Aaron Lawrence via Wikimedia Commons

A fun rap song by radio personality Mark Kaye (featuring the rapper Flo Rida) about the economy. I thought it was a fun look at how many of the rich and famous have fallen on “hard” times since the beginning of the recession.

Enjoy what remains of the weekend, and get ready for a new week!

Tonight, on ABC, a special called UN-BROKE: What You Need to Know About Money, is going to be airing. It’s supposed to be funny and educational, with a celebrity line-up including Will Smith, Cedric the Entertaner, Seth Green, Christian Slater, The Jonas Brothers and the E*Trade Babies.

Personally, I’m looking forward to the E*Trade Babies.

I expect that the special will include a great deal of conventional wisdom and money basics. And there’s nothing wrong with that. The current financial problems we are facing stand as a testament to the fact that we need to be getting back to the basics. Just don’t expect anything really deep.

According to Federal Reserve Vice Chairman Donald Kohn, the economy is possibly showing signs of forthcoming stability. However, Kohn is not so optimistic about the strength of the economy, even after it has recovered, and has confirmed that rate hikes will not be coming any time soon.

Image: Flickr

Kohn’s comments on the economy, which he made at a conference at Princeton University, are not quite as optimistic as those made by the Federal Reserve’s staff in late April. Still, Kohn defended the governmental program to buy up toxic assets as necessary to avoid an economic crisis that could have been even worse.

As far as the lack of any foreseeable rate hikes, Kohn suggests that near-zero rates strengthen the healing effect of economic stimulus packages, meaning that the two should come hand-in-hand.

Source: Wire Reports

In the wake of surprisingly high first-quarter losses, Saks Inc. plans to drastically reduce its overhead costs through a variety of measures. Among these, the department store giant plans to cut staff salaries, adjust their merchandise to each individual region’s tastes, and incorporate lower-priced merchandise throughout its stores.

Image: Flickr

Although Saks has traditionally strived to maintain its status as a luxury retailer, the state of the economy has made it necessary for the company to diversify its merchandise so that a wider group of shoppers can afford their wares. Unfortunately for Saks, walking the tightrope between luxury and affordability has been less than successful.

Employees will receive pay cuts ranging from 3% to 7% starting in June. In addition, 9% of Saks employees, a total of 1,100 jobs, are expected to be cut. Through these and other cost-reducing measures, Saks hopes to shave about $60 million off of its overhead.

As the economy continues to struggle, only time will tell if shoppers will continue to avoid high-priced retailers like Saks in favor of more budget solutions.

This is National Small Business Week and the Small Business Administration is hosting a conference in Washington, D.C.  This week I will be bringing you some of the highlights of that conference, including tips from speakers and small business award winners.  I also have been told that SBA Director Karen Gordon Mills will release details of the new SBA loan program, America’s Recovery Capital this week.  The program will provide qualified small businesses with up to $35,000 of emergency loan money.  I will let you know when I get the details, later this week.

Why the attention on small businesses?  Well, the National Small Business Week conference is held every year, but this year in particular it is important.  Small businesses, “the economic backbone of our economy” (Scott McClellan - 1968) need help getting back on track.

So why are small businesses so important?  From the Small Business Administration, here are the facts.  Small businesses:

• Represent 99.7 percent of all employer firms.
• Employ half of all private sector employees.
• Pay 45 percent of total U.S. private payroll.
• Have generated 60 to 80 percent of net new jobs annually over the last decade.
• Create more than 50 percent of nonfarm private gross domestic product (GDP).
• Supplied more than 23 percent of the total value of federal prime contracts in FY 2004.
• Produce 13 to 14 times more patents per employee than large patenting firms. These patents are twice as likely as large firm patents to be among the one percent most cited.
• Are employers of 41 percent of high tech workers (such as scientists, engineers, and computer workers).
• Are 53 percent home-based and 3 percent franchises.
• Made up 97 percent of all identified exporters and produced 26 percent of the known export value in FY 2002

“If you look back over the last 20 years, the Fortune 500 companies in this country have created zero net new jobs. But at the same time, smaller businesses have created tens of millions of jobs. So if we care about growing our economy, as I believe we must, we really need to look at the challenges facing small business.”   (Senator Evan Bayh, Indiana )

Encouraging and supporting small businesses like yours is the job of everyone.  When Calvin Coolidge said, “the business of America is business,” I believe he meant small businesses.

Happy Small Business Week!

Image: newscom

Many people are concerned about the recession and their finances. So it is probably with some relief that many people heard the news that Fed Chair Ben Bernanke believes that the recession will soon be coming to an end.

Citing the probability that the recent contraction in the economy is slowing, and that he feels that an economic bottom is practically eminent, Bernanke is cautiously optmistic that an economic recovery will begin by the end of the year. Of course, the beginning of a recovery may mean that the recession is ending, but it will be quite some time beyond that before the economy is actually significantly recovered. (I’m sure Obama hopes recovery is apparent by 2012.)

At any rate, there are still economic issues to contend with, including continued foreclosures and increasing unemployment. But consumer confidence is up, and there is evidence that people are buying homes again (according to the March pending sales data). If tax cuts and confidence inspire consumer spending, it could be that things start to turn around — at least that’s what Bernanke thinks. So it could be that the end of the recession is in sight and things could start picking up. The other issue, of course, is whether or not you believe Bernanke…

Do you think the end of the recession is near?

image source: Wikipedia

To keep up with competitors and avoid bankruptcy, which has been affecting so many print media companies, the Boston Herald has decided to raise prices of the daily newspaper from 35 cents to a $1 an issue.

The price increase will take start on May 11 within the 30-mile Boston radius, though the prices outside this 30-mile area will remain the same price. Prices have already been $1 or more per issue outside of Boston.

The Sunday Herald price remains $2, while The Boston Globe will also up their prices from 75 cents to $1 for people in the city and $1 to $1.50 outside of the city. The Sunday Globe prices will also increase

Image via bostonherald.com.