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U.S. Economy

Government Spending Cutbacks Increase Odds of Double-Dip Recession

The odds of slower economic growth or even a double-dip recession are increasing as industrial countries, led by the United States & United Kingdom, embark on the most aggressive government spending cutbacks and tightening of fiscal policy in four decades.

As they reduce or eliminate stimulus programs installed in reaction to the Great Recession that began in December 2007, governments are gambling they can pare debt without strangling an economic recovery.

Nations will reduce their primary budget deficits, excluding interest payments, by 1.6 percentage points next year, the most since the Organization for Economic Cooperation and Development (OECD) began keeping records in 1970, according to JPMorgan Chase & Co. (NYSE: JPM) economists. The budget squeeze will lop 0.9 percentage point off growth in 2011.

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We Want to Hear From You: Are Retailers' Stimulus Measures Persuading You to Spend?

Faced with a wheezing economy that can't seem to heal, big U.S. retailers like Target Corp. (NYSE: TGT) and Office Depot Inc. (NYSE: ODP) are creating their own stimulus measures to lure hesitant shoppers back into stores.

Through such tactics as loan programs, credit card rebates and gift card giveaways, top retail chains are rolling out promotional strategies, hoping to break consumers out of their anti-spending doldrums.

"A lot of the government programs have come to an end," David Bassuk, an expert from financial consultancy AlixPartners, told The New York Times. "So retailers are taking it upon themselves to do everything they can to get the consumer to spend, even opening up their wallets to give money back to the consumer."   

Sam's Club is taking an unusual approach: It's offering loans of $5,000 to $25,000 to its members, backed by the Small Business Administration. Superior Financial Group is managing the loans and will give Sam's members a $100 discount on the loan application fee and lower interest rates.

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Unemployment Report Shows Sluggish Recovery Will Take Years to Replace Jobs Lost in Great Recession

Unemployment figures released Friday confirmed that the U.S. economy is still recovering, but they also showed it will take years to replace the 8 million jobs lost during the Great Recession.

And until meaningful hiring takes place, consumers are unlikely to loosen their purse strings, the key to putting the economy back on track to full recovery.

Employment fell in June for the first time this year, reflecting a drop in federal census workers and a smaller-than-forecast gain in private hiring.

Payrolls declined by 125,000 as the government cut 225,000 temporary workers conducting the 2010 census, Labor Department figures in Washington showed. Economists projected a decline of 130,000, according to the median forecast in a Bloomberg News survey. Private employers added 83,000 to their payrolls.

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U.S. Economy: Headed For a Second-Half Slowdown

Constant stock market volatility, a crippled job market and the troubles plaguing the European markets are starting to take their toll on the U.S. economy. After the major market rally of 2009, is the U.S. economy headed for a second-half slowdown… or, worse, the dreaded double-dip recession? Read this report to find out exactly what’s in store for the U.S. economy…

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High-Yield Hangover: Cash Pouring Into Junk-Bond Funds May Signal Stormy Seas For Stocks

Investors are plowing money into junk-bond funds, which leveraged borrowers at private equity funds are using to pay dividends to themselves and to buy out more public companies.

The huge-and-growing overhang of debt-laden portfolio companies that private-equity shops want to take public – when combined with additional leveraged deals in the pipeline – will keep a lid on U.S. stock prices and could even spark a sell-off for stocks in both the United States and Europe.

Let me explain…

To understand how this push into junk bonds is magnifying stock-market risk, please read on...

We Want to Hear From You: How Do You As A Consumer Feel About the Financial Reform Bill?

With U.S. consumers still feeling the sting of the global financial crisis, consumer advocacy groups are claiming that they snagged a win with the financial reform measure approved last week by a joint House-Senate congressional committee.

The bill goes next to President Barack Obama, who is expected to sign the measure into law.

"It's historic legislation," Michael Calhoun, president of the Center for Responsible Lending, told ABC News. "It's a big win for consumers."

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Money Morning Midyear Forecast: The U.S. Economy is Headed For a Second-Half Slowdown

Most textbook economists say that the U.S. economy is engaged in a broad-based recovery. But while there's a consensus that there's no "double-dip" recession on the horizon, the evidence suggests the nation's economy is headed for a slowdown in the second half of 2010.

The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers – and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.

If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.

And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening – and a continued economic malaise.

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Buy, Sell or Hold: Enbridge Energy Partners, L.P. (NYSE: EEP) Brings Some Stability to a Volatile Market

It seems like every week there's a new development that forces investors to rethink their investment strategies.

This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.

The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.

China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.

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Can Bulls Lift a Market Threatened By Uncertainty Surrounding U.S. Stimulus Measures?

Stocks spilled the past week like water over a broken dam as investors priced in more evidence that consumers, businesses and home-buyers have gone on strike despite U.S. stimulus measures and record-cheap interest rates that have put mortgages, car loans and store-credit costs at 100-year lows. In the five-day span, the Dow Jones Industrial Average fell 2.5% and the Standard & Poor's 500 Index sank 3.6%; Nasdaq and Russell 2000 Index all fell 3.2%.

Catalyst for the latest spasm of selling came from disappointing news on durable goods sales and initial jobless claims, and weak earnings news or outlooks from consumer-facing companies Bed Bath & Beyond Inc. (Nasdaq: BBBY), Darden Restaurants, Inc. (NYSE: DRI), Lennar Corp. (NYSE: LEN) and Nike, Inc. (NYSE: NKE). 

All of the major U.S. and global indexes are now below their 200-day averages for the first time since early June.

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GOP Takes Hardline on Federal Deficit By Killing Unemployment Benefits Extension

Drawing a line in the sand over the federal deficit, Senate Republicans on Thursday killed a spending bill that included an extension of unemployment benefits and increased taxes on bonuses paid to executives at private equity firms.

The collapse of the comprehensive legislation spells the end of assistance for a total of 1.3 million unemployed Americans who were scheduled to lose their benefits at the end of last week. It also will leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid.

Even though lawmakers voted 57-41 in favor of the measure, Democrats failed to secure the 60 votes needed to end a GOP-led filibuster. The legislators split along party lines with the exception of Sen. Ben Nelson, D-NE, who voted with the Republicans. Senate Majority Leader Harry Reid, D-NV, said this third vote on the matter would be the last, and that the Senate needed to move on to legislation cutting taxes for small businesses.

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