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Thursday 01.19.2017

Economy near full employment, Fed’s Yellen says

The nation is near full employment and the economy is close growing steadily on its own without stimulus from the Federal Reserve, the Fed Bank’s chairwoman, Janet Yellen, said Wednesday during a speech in San Francisco.

“The economy is near maximum employment and inflation is moving toward our goal,” Yellen said in remarks prepared for her presentation to the Commonwealth Club in San Francisco. “The unemployment rate is less than 5 percent, roughly back to where it was before the recession.”

The inflation rate has remained below the Central Bank’s target of 2 percent for some time, she noted. Nevertheless, inflation has begun to creep back towards the 2 percent target as the job market continues its upswing, the Fed chief said.

The Federal Reserve, Yellen noted, has begun to increase interest rates, with the most recent hike of 0.25 percent coming in December. “It was the second such step — the first came a year earlier — and reflects our confidence the economy will continue to improve,” Yellen said during the speech. “Now many of you would love to know exactly when the next rate increase is coming and how high rates will rise. The simple truth is, I can’t tell you because it will depend on how the economy actually evolves over coming months.”

Lowe's announces nearly 2,400 layoffs for full-time workers

Mooresville-based home improvement retailer Lowe's said it's told approximately 2,400 full-time workers that they will be laid off. A statement from the store said the majority of the cuts are at the store level, with other cuts occurring at distribution centers, customer support centers and vice presidents at the company's corporate office in Mooresville.

A company spokeswoman said the layoffs are part of a new store staffing model. The new store model will result in the reduction of approximately one to two assistant store manager positions per store, the spokeswoman said.

The spokeswoman said the layoffs affect approximately 2,400 employees, which is less than 1 percent of the workforce. On its website, the company lists 2,355 stores in the United States, Canada and Mexico. The spokeswoman said it only affects stores in the U.S.

The company said it's providing the assistant managers whose positions were eliminated with a transition package including severance, outplacement resources and other support. Channel 9 reporter Dave Faherty found out that employees were meeting at the Lowe’s in Hickory around 3:30 p.m. Tuesday. A little over an hour later officials at the company’s corporate headquarters made the announcement.

Kellogg cutting 250 jobs, mostly in Battle Creek

The Kellogg Company says it’s eliminating hundreds of jobs in North America, primarily at its headquarters in Battle Creek.

The company announced the cuts Wednesday as part of a restructuring plan it dubbed “Project K.” A Kellogg spokesperson said the majority of the 250 job cuts will happen in Battle Creek.

In a statement issued to 24 Hour News 8, the president and CEO of Battle Creek Unlimited said Project K will focus on eliminating duplicated work across the company’s global, regional and business levels; cutting out work that “doesn’t drive the highest returns;” and shrinking organizational layers.

The company spokesperson said employees who lose their jobs will be offered severance benefits and resources to find another job.

David Stockman: We’ll have a fiscal bloodbath, not fiscal stimulus

FED: Wages are going up 'modestly' across most of America

The Federal Reserve says workers across much of the United Sates are seeing modest wage gains, according to its Beige Book released on Wednesday.

The Beige Book is a compilation of anecdotes on the economies in the Fed's 12 districts. This document is the Fed's first in-depth look at the economy since the Federal Open Markets Committee raised rates for just the second time since the financial crisis at the conclusion of its December 13-14 meeting. The Boston Fed prepared this edition.

Wednesday's release noted that labor markets continued to tighten and that employment growth "ranged from slight to moderate and most Districts indicated that wages increased modestly."

Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest pace across most regions from late November through the end of the year. Manufacturers in most Districts reported increased sales with several citing a turnaround versus earlier in 2016. Growth in the energy industry was mixed; two Districts reported weakness in coal production but others reported improvements in coal, oil, or gas activity. Most Districts said that non-auto retail sales had expanded, but several noted that sales over the holiday season were disappointing and reports in more than one District suggested that growth in e-commerce had come at the expense of bricks-and-mortar retailers.

With Job Announcements, Firms Appear to Seek Trump Approval

From Wal-Mart to General Motors to Amazon, a growing number of the world's largest companies appear to be trying to get in step with President-elect Donald Trump's demand that employers hire and keep jobs at home. Trump, in response, has taken to Twitter to signal his approval.

"Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!" he tweeted Tuesday afternoon.

Yet it's unclear just how many jobs are actually being saved or created as a result of Trump's push or whether his administration will hold companies accountable for their pledges. In a solid job market with just 4.7 percent unemployment, hundreds of thousands of U.S. jobs are added all the time for a broad range of reasons.

Trump has boasted that he deserves the credit based on what chief executives have told him, despite evidence to the contrary provided by those same companies. "Ask top CEO's of those companies for real facts. Came back because of me!" the president-elect declared on Twitter on Wednesday. GM announced Tuesday that it was creating or keeping 7,000 jobs, while Wal-Mart said it planned to hire 10,000 and support an additional 24,000 construction jobs with store openings and expansions.

Here’s what you paid more for in 2016 (and less)

After years of low inflation, Americans experienced the biggest increase in the cost of living in 2016 in five years. They shelled out more for gas and medical care while renters in particular were hard hit by rising prices.

The result: the consumer price index rose last year at the fastest rate since 2011. The CPI climbed 2.1% in 2016, the government reported Wednesday. Inflation might have risen even faster if not for a big drop in the price of groceries and lower costs for plane tickets, clothes, and phone and cable bills. Used cars also cost less to buy — good news for those put off by higher prices for new cars and trucks.

The cost of fuel — gasoline and natural gas for home heating — was one of the biggest drivers. Gas prices jumped 9.1% last year, for instance. Medicare care also shot up 4.1%, the biggest gain in nine years.

Renters were socked by a 3.7% spike, the largest annual gain since 2011. Builders are throwing up more apartments, but not enough to keep up with demand, especially in urban areas where young people have flocked. If you own a car, take a look at your insurance bill. Insuring a vehicle cost about 7% more in 2016, the biggest jump since 2002.

Deutsche Bank agrees to pay $7.2B for lying to investors

Eight years after the collapse of the US housing market, Deutsche Bank on Tuesday reached a final settlement with federal regulators — admitting it lied to investors about its mortgage-backed securities and agreeing to pay $7.2 billion.

The penalty — $3.1 billion in a civil penalty to the Justice Department plus $4.1 billion in homeowner relief — is in line with estimates the bank provided last month. “Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis,” Attorney General Loretta Lynch said.

Deutsche’s bankers had packaged together home loans and resold them as top quality — even though the bank’s own due diligence supervisor knew that they weren’t.

In one instance, one Deutsche Bank employee told a top exec that the mortgage underwriters would sell a house to anyone with “half a pulse,” according to the settlement.

Government watchdog: US debt is unsustainable

The ever-growing federal debt is on an unsustainable path and requires swift action from Congress, according to a new report from the Government Accountability Office. The study, which was sent to President Barack Obama and congressional leaders, said the federal government is “highly leveraged in debt by historical norms and on an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending.”

One of the leading concerns addressed by the auditors is that, given the budget is so strained, there is no wiggle room should an emergency situation — such as wars, economic, financial or weather-related crises — arise, requiring a federal fiscal response.

The government collected nearly $3.3 trillion in taxes in fiscal year 2016, which, according to the Washington Free Beacon, is $11.3 billion more than in 2015. However, the government’s gross total costs came in at around $4.5 trillion. The government’s net operating cost, the difference between the money coming in and the money going out, rose to an astonishing $1.05 trillion in fiscal year 2016 — more than double the previous fiscal year, which was $514 billion.

Furthermore, due to increased spending on health care and heightened interest rates on the national debt, the federal deficit increased to $587 billion in 2016, up from $438 billion in 2015. Despite this concerning trend, Obama’s Treasury secretary, Jack Lew, called the White House’s fiscal path a “solid foundation” for the next president. “We have built a solid foundation for continued investment in economic growth and opportunity for all, while maintaining fiscal discipline and using fiscal space appropriately to grow the economy,” he said in October.

Nomi Prins-Financial Crash possible in Last Quarter of 2017

The restaurant recession turned even more damaging in December

U.S. restaurants ended 2016 on a grim note, chalking up their weakest same-store sales in more than five years, according to industry tracker TDn2K. Same-store sales, a key retail metric that measures sales at outlets open at least a year to eliminate the effect of restaurant closures and new openings, fell 2.4% in December, the research company found in its latest Restaurant Industry Snapshot. Overall sales fell 4.3% to mark their worst performance in more than three years.

To put the second-half sales downturn into perspective, said Victor Fernandez, executive director of insights and knowledge at TDn2K, the only two quarters with comparable-store-sales declines of greater than 1% during the last five years were the 1.1% decline in the third quarter and the decline of 2.4% in the fourth quarter of 2016. “Furthermore, restaurants have now posted four consecutive quarters of declining year-over-year sales.”

The last time the restaurant industry suffered declining sales in all four quarters of a year was 2009, right after the financial crisis and the start of the Great Recession. The problems facing the sector have been well-documented by analysts describing it as a “restaurant recession.” Consumers are grappling with bigger bills for items such as gasoline, rent and prescriptions and are cutting back their spending. Eating out has become more expensive, just as at-home dining becomes cheaper as the prices of a range of foodstuffs have fallen in the last year.

The cost of food purchased for home use — in other words, groceries — was down 2.2% in the past year, according to the November consumer price index. “Household borrowing is soaring, and paying off that debt is limiting spending on a wide variety of goods and services,” said Joel Naroff, president of Naroff Economic Advisors and an economist for TDn2K.

Pension Funds Need Gold before It’s Too Late

Tens of millions of Americans and their employers pour money into pension plans each month, counting on those funds to grow and to be there when needed at retirement. But a time bomb awaits. The bulk of U.S. pension funds are dangerously underfunded, and the assets are often invested in securities that have bleak prospects for providing income that keeps up with a general decline in purchasing power.

A pension plan requires an employer to make contributions into a pool of funds set aside for a worker’s future benefit. In 1875, when the American Express Company established the first private pension plan in the United States, the face of retirement was fundamentally changed. Before that time, private-sector pension plans did not exist, as most employers were small “mom-and-pop” businesses.

The innovation at American Express caught on. By 1929, 397 private sector pension funds were in operation throughout the United States and Canada. As of 2011, according to the Bureau of Labor Statistics, 18% of private sector workers are covered by pension plans. At the end of 2015, the value of U.S. pension funds was $21.7 trillion.

Millions of Americans will rely on pensions once they’ve reached the age of retirement. Pension fund managers have a fiduciary duty to safeguard funds against foreseeable risk. With the practices of today’s Federal Reserve, there is no risk more foreseeable than inflation, but these fiduciaries are not fulfilling their duty to protect against this significant risk by investing in assets which are specifically suited to defend against the perpetual loss of the dollar’s purchasing power.

Foreclosed Mall Once Valued At $190M Is Auctioned for $100

One of the biggest indoor malls in Pennsylvania sold at auction Wednesday for $100. The 1.1 million-square-foot Galleria at Pittsburgh Mills was bought by Wells Fargo Bank, which foreclosed on it last year.

Wells Fargo was the only bidder and essentially bought the mall from itself. The mall, which opened in 2005 and is located along Route 28 in Frazer Township, was developed by Johnstown-based Zamias Services Inc. and Mills Corp., a Virginia firm that has since gone bankrupt.

The mall was once worth $190 million but recently appraised at just $11 million. Pittsburgh Mills Limited Partnership, which is owned by Zamias, owes Wells Fargo about $143 million including deferred payments and interest on a $133 million loan taken out in 2006.

According to the public sale notice, Wells Fargo is allowed to buy the property from itself without paying any cash, instead crediting the purchase against the $143 million owed.

Jamie Dimon Says He's Not for "Wholesale" Throwing Out of Dodd-Frank

Robots will start delivering food to doorsteps in Silicon Valley and Washington, D.C.

Starting today, residents and businesses in Redwood City, Calif., and Washington, D.C., can get food delivered right to their doors — via robot. Starship Technologies, an Estonia-based startup created by two Skype co-founders, Ahti Heinla and Janus Friis, will put its autonomous ground-delivery robots to work delivering food with Postmates in Washington, D.C., and DoorDash in Redwood City, Calif.

The six-wheeled robots are a little under two feet tall, weigh about 40 pounds empty and travel four miles per hour — walking speed. The idea is that one day soon these autonomous rovers will share sidewalk space with pedestrians on their own, but for now they’ll be accompanied by handlers — people walking alongside each robot as it makes its deliveries. The handlers will take notes on how well Starship’s robots perform and intervene if something goes wrong.

Each rover works like a delivery person: It goes to the restaurant to get loaded up (with its handler in tow), delivers to the address and then goes to the next restaurant to do it again. Neither Postmates nor DoorDash will charge extra for the robot experience. And Postmates lets customers opt out if robotic delivery isn’t their bag; DoorDash doesn’t give an option. The robots are expected to make around 10 deliveries a day.

Starship announced it received $17.2 million in seed funding last week, backed by Daimler AG, Shasta Ventures, Matrix Partners and others. Its robots have made deliveries in more than 40 cities in Europe and work with Just Eat and Pronto in London, where they have been delivering food since last summer.

Farmworker visas more than doubled in Arizona, nation in recent years

The number of H-2A visas issued to agricultural workers in Arizona has more than doubled in the past five years, mirroring a national increase in the temporary “guest worker program” for non-citizens.

The U.S. Department of Labor certified 5,391 H-2A workers in the state in fiscal 2016, compared to just 2,110 that were certified in fiscal 2011, according to department data. Nationally, the number jumped from 77,246 workers to 165,741 in the same period.

Farmers said the workers are vital to their operations and the program is working well, providing a badly needed source of labor. However, labor advocates said the visa program is growing for all the wrong reasons by keeping wages low and workers powerless.

The H-2A program is for seasonal workers, generally for a period of 10 months or less, to provide farms with “short-term agricultural labor when the number of available domestic workers is insufficient.” Employers who want to hire workers on H-2A visas first have to apply with the U.S. Department of Labor, which looks to make sure there are not enough able U.S. workers to fill the jobs and to make sure hiring foreign workers won’t hurt wages or working conditions for U.S. workers. If OK’d by the Department of Labor, the employer then applies with Customs and Immigration Services for the visas, which workers can apply for in their home countries.

Are Half of Americans Approaching Retirement with No Savings?

The U.K.’s Guardian tells us, “Yet another study – this one from no less an authority than the non-partisan US Government Accountability Office (GAO) – is here to remind us that we’re woefully unprepared, financially speaking, for retirement…. [T]he truth is that as many as half of all households with Americans 55 and older have no retirement savings at all. Nothing. Zip. Nada. Not a dime.”

The Guardian is describing a GAO study entitled “Most Households Approaching Retirement Have Low Savings” – so you can’t say the Guardian missed the message the GAO was trying to convey. But is it true?

The answer is no, at least not in any rational sense. The GAO measures one source of retirement income, which is retirement accounts like 401(k)s and IRAs. And by that definition the GAO is correct. If you look in the Federal Reserve’s Survey of Consumer Finance for 2013, 53% of households aged 55 to 64 had savings in retirement accounts. So yes, almost half have nothing -- in retirement accounts, that is. But that’s about all I can say for the number.

Why? Well for one thing, the percentage of near-retirees with retirement account savings is at near-record levels. The 53% figure for 2013 is statistically indistinguishable from the record figure of 54% in 2004. More importantly, retirement account ownership in 2013 was more than double the 22% rate in 1989.

US homebuilder confidence, sales outlook slip in January

U.S. homebuilders are feeling slightly less confident this month about their sales prospects, a pullback from December when builders' confidence reached the highest level in 11 years.

The decline in builder confidence comes amid heightened concerns about mortgage rates, which have been mostly rising since early November. Higher mortgage rates make home loans more expensive, which could dampen sales.

The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday fell to 67 this month. That's down two points from a revised reading of 69 in December.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September. Builders' view of sales now and over the next six months also fell, as did a gauge of traffic by prospective buyers.

Reality Check: Commit a Crime? Just Say You're Trans!

War on Cash: World Economic Forum champions U.S. ban on cash

At first, the World Economic Forum warned that it wants to reform capitalism in the wake of a populist revolt. Now it wants to amplify the war on cash by prohibiting the use of physical money in the United States and establish a transition into a digital currency. What a group of evil and controlling minds they are.

During the first day of the Davos event, Joseph Stiglitz, Nobel Prize-winning economist, argued the case for phasing out currency and shift into a digital economy. This, he said, would have far more benefits that “outweigh the cost.”

Following India’s move to remove close to 90 percent of the nation’s currency from circulation, Stiglitz and Mark Pieth from the Basel Institute of Governance presented the argument that you can eliminate corruption, tax evasion and tax avoidance by banning cash and moving into a cashless society.

“You can put it into the context of one of the big issues being discussed in Davos this year – the backlash against globalization, the darker side of globalization … The lack of transparency in global financial markets, the secrecy havens that the Panama Papers exposed, just reinforced what we already knew … There is a global framework for both corruption and tax evasion and tax avoidance,” he said.

ATMs and lattes: How banks are changing customer service

If you’re like many Americans, you may be making fewer trips to the bank and instead taking care of check deposits with a mobile app or tracking account balances with a few mouse clicks.

Digital banking is undeniably gaining ground over the old brick-and-mortar process. But about 84% of banking customers still visit branches at least occasionally, according to a March 2016 Federal Reserve report. For example, you may want to talk to a rep in person to ask about retirement planning, sign mortgage papers or connect with someone about a financial decision. Today’s bank branch, though, may look more like a coffee shop or a modern boutique than a traditional marble affair.

Cafes that sell pastries, stores with yoga rooms inside, postage-stamp-sized branches: These are some of the innovations that may become common in the bank branch of the future. Capital One has begun using cafe-style branches, as pictured at top, to promote its brand as an internet bank and keep in touch with customers. It has 10 cafes in Boston, Chicago, Los Angeles and other cities.

The cafes have no teller windows or marble columns. Visitors can use free Wi-Fi or buy a cup of Peet’s coffee and pastries from local bakeries. They can work on their devices, lounge around or recharge their phones. Staffers called “coaches” and “ambassadors,” rather than tellers and bankers, answer questions and demonstrate online banking or banking apps on a tablet — but they promise not to initiate any financial conversations unless the customer asks first.

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