Economy

The Economic Advisory Committee of the American Bankers Association this week said the economy is on a solid path toward recovery and predicted that bank credit to consumers and businesses would pick up this year and increase more rapidly in 2011. 

"Bank lending is growing and will help finance the economic expansion," said Stuart Hoffman, committee chairman and chief economist of PNC Financial Services Group, in prepared remarks. 

The prediction on credit comes after the House passed legislation providing incentives for banks to loan to small businesses. The Senate is expected to take up the bill after it completes work on the so-called tax extender bill. 

Unemployment rates dropped in 37 states in May but improvements still aren't considered a signal that job creation is rooting nationwide. 

Six states saw an increase in the jobless rate and seven saw no change, according to a report from the Labor Department on Friday. 

Nonfarm payrolls rose in 41 states and in Washington, D.C., while only five states showed drops. The nation's most populated states — California, Texas and New York — added the largest number of jobs, but Delaware, Maine and Rhode Island added the most jobs in percentage terms.

President Barack Obama said "more needs to be done" to bring jobs and economic growth to those fams and communities not yet seeing it, during a speech Friday in Columbus, Ohio.

The White House on Friday released a letter from President Barack Obama to G-20 leaders that urges them to continue efforts to shore up the global economy as they head to the summit in Toronto.

"Our highest priority in Toronto must be to safeguard and strengthen the recovery," the June 16 letter states. "We worked exceptionally hard to restore growth; we cannot let it falter or lose strength now."

New jobless claims rose unexpectedly by 12,000 last week, reflecting continued weakness in the job market. 

Claims increased to a seasonally adjusted 472,000 for the week ending June 12, the highest level in a month, according to Labor Department figures released Thursday. 

The four-week moving average, which smooths out the volatility of the weekly number, dropped 500 from the previous week's revised average of 464,000. 

The number of people receiving unemployment insurance fell 255,000 to 4.46 million, the lowest level since December 2008. 

Economists argue that jobless claims need to drop into the low 400,000s or high 300,000s to reflect stronger job growth in the private sector. 

The unemployment rate dropped to 9.7 percent in May on the creation of more than 400,000 jobs. But most of those jobs were temporary government jobs for the federal Census, not from the private sector. 

Spirit Airlines and the union representing striking pilots reached a tentative agreement Wednesday.

The Florida-based airline said on its website it will start flying again Friday, nearly a week after pilots walked out over a salary dispute.  

The Air Line Pilots Association announced the deal Wednesday afternoon and said details were still being worked out on an agreement, but final negotiations were expected to move along smoothly. Details of the accord weren't available. 

The strike began last Saturday and negotiations re-started Tuesday. 

Spirit and its pilots have spent nearly three years trying to work out a deal on raises. Although the airline had offered more money, the pilots argued that pay was lower than their discount-airline counterparts such as AirTran and JetBlue Airways. They complained that they would have to fly more to get extra money and the increases were spread out beyond the proposed five-year contract. 

The strike unexpectedly grounded Spirit, leaving stranded the approximately 16,000 people they fly daily. 

The House is expected to complete work Thursday on legislation that creates a $30 billion fund to boost lending to small businesses struggling to get credit. 

The measure, which is designed to help small businesses hire and expand operations during the economic downturn, was briefly delayed when it headed back to the House Rules Committee Wednesday for minor technical tweaks to a couple of amendments. 

The legislation is set for floor action Thursday, according to a Democratic aide. 

The $30 billion fund could provide as much as $300 billion in lending to small businesses, according to the Independent Community Bankers Association. 

Banks will less than $1 billion in assets could receive capital investments up to 5 percent of their risk-weighted assets. Those with between $1 billion and $10 billion in assets could receive up to 3 percent. 

House leaders on Wednesday postponed votes on legislation providing greater loan opportunities to small businesses. 

The Rules Committee is expected to meet on the bill and "tweak" it, according to a committee spokesman, because there are paygo issues with the proposal.

Speaker Nancy Pelosi (D-Calif.) earlier Wednesday had expected to pass the bill from her chamber that day. 

Home construction plummeted in May to the lowest levels since December, renewing concerns about the sluggish housing market after the expiration of a federal tax credit. 

Housing starts dropped 10 percent last month to a seasonally adjusted annual rate of 593,000 units, the Commerce Department reported Wednesday. 

Housing starts are up 7.8 percent compared with performance a year ago. 

Single-family homes took a big hit, sinking 17.2 percent between April and May to a seasonally adjusted rate of 468,000 units. 

Analysts expected a drop although not one this severe as builder confidence in the market remains shaky with the expiration of the homebuyers tax credit and a higher number of less expensive existing houses for sale. 

Earlier this week, the National Association of Home Builders reported a drop in confidence in June. 

In a sternly worded letter, Democratic Sens. Charles Schumer (N.Y.), Ron Wyden (Ore.) and Mark Begich (Alaska) on Tuesday sharply criticized BP CEO Tony Hayward for possibly depositing the estimated $2.6 billion dividend payment to shareholders in an escrow account to ensure it would eventually be received by investors.

"We find this option as unacceptable as the company's original plan to go ahead with its dividend payment as scheduled," the senators wrote. "A backdoor payment to shareholders would still drain BP of billions of dollars that may be needed to pay for spill-related damages. This proposal seems like little more than a thinly veiled attempt to spare BP a public backlash while proceeding with business as usual." 

House Financial Services Chairman Barney Frank (D-Mass.) on Monday disagreed with Republicans who dubbed legislation providing loan assistance to small businesses "TARP Jr."

"This is very different than TARP," he said, adding, "I will say this, if the banks in this program repay as great as the TARP banks repaid, than we'll make money on it."

The exchange between Frank and Republicans occurred during the Rules Committee debate on the bill. The House is expected to vote on the legislation later this week, assuming it passes out of committee.