Economy

Consumer confidence hit its highest level in more than two years this month, according to a survey released Friday. 

Consumer sentiment rose to 75.5, the highest level since January 2008, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment Friday. 

June's numbers rose more than expected from the 73.6 posted in May, a reflection that consumer confidence hasn't taken hit from negative news, specifically the European debt crisis. 

The unexpected fall in retail sales in May shows that consumers will likely need to see an improvement in employment levels and income growth to continue providing the economy with a needed boost. 

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Retail sales unexpectedly tumbled by 1.2 percent last month, the largest decline in eight months, creating new worries that the economic recovery is lacking a foothold. 

Consumers cut spending across the board for the first time since September 2009, when sales dropped 2.2 percent, the Commerce Department said Friday. 

Economists had expected a slight increase in spending, which had been building steam and aiding the nation's economic recovery during the past several months, despite high levels of unemployment and a stock market shaken by the European debt crisis. 

Year-over-year sales were up 6.9 percent, as April sales numbers were revised up to 0.6 percent, better than the 0.4 percent estimated gain. 

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President Barack Obama on Friday pressed Congress to pass a new set of small-business tax breaks and loan incentives he says will help spur job creation. 

The legislation, which is sitting in a House committee, could be taken up on the House floor next week. Similar legislation is expected to be taken up in the Senate soon. 

"I’m eager to sign this tax relief and additional lending into law," he said in remarks in the Rose Garden following a meeting with small-business owners. "That’s how we can continue to move our economy forward — to continue on the path from recession to recovery, and ultimately to prosperity."

Obama's comments come on the heels of a worse-than-expected May jobs report that showed private sector firms only hired 41,000 new workers over the course of the month. 

Republicans have blamed Democratic legislation, such as the stimulus package and the healthcare law, for stunted job growth. But Obama said those bills have kept the economy afloat and helped it to create jobs instead of lose them. 

"These and other steps are making a difference. Little more than a year ago, the economy was in freefall. Today, it’s growing again," he said. 

However, Obama cautioned that more needs to be done, such as the new small-business bill, before the economy is fully recovered. 

"But even though we are digging out from this recession, we still find ourselves in a pretty deep hole," he said. "As small-business owners like Prachee and Bobby and Steve will tell you: we may be recovering, but we are not recovered. We have to keep moving forward."

Cross-posted from the Briefing Room 

Treasury Secretary Tim Geithner wavered Thursday on when he'll release a report on China’s currency policies.

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House Majority Leader John Boehner (R-Ohio) on Thursday told President Barack Obama that cuts in federal spending would boost the economy and create private sector jobs. 

"I gave the President a statement by more than 100 economist urging both parties to cut spending now to boost private sector job creation," he said in prepared remarks. "The need is clear." 

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Exports dropped for the second time in three months as the U.S. trade deficit rose to the highest level in nearly two years, a possible sign that Europe's economic troubles are affecting the nation's expanding manufacturing sector. 

The trade deficit widened to $40.3 billion in April, up 0.6 percent from $40 billion in March, according to a Commerce Department report released Thursday. 

The U.S. manufacturing sector is doing the heavy lifting so far in the nation's economic recovery — adding jobs and expanding production through most of 2010.

Exports fell to $148.8 billion in April on drops in consumer goods, foods, feeds and beverages. Farm products fell by $647 million. 

Imports slipped to $189.1 billion while demand for consumer goods, mostly pharmaceutical products, fell by $741 million. 

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New jobless claims dropped by 3,000 last week — still not enough to show the labor market is hiring. 

Claims dropped to 456,000 for the week ending June 5, which is not low enough to show sustained job growth, according to Labor Department figures released Thursday. 

The four-week moving average, which smooths out the volatility of the weekly number, rose 2,500 to 463,000. 

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. 

The U.S. economy grew in April and May for the first time in more than two years, bolstered by increases in consumer spending, real estate sales and manufacturing, the Federal Reserve said Wednesday in a business report. 

"Economic activity continued to improve since the last report across all 12 Federal Reserve Districts, although many Districts described the pace of growth as 'modest,'" the Fed said in its Beige Book on Wednesday. The survey of businesses is published throughout the year, two weeks before the Federal Open Market Committee (FOMC) meets to set monetary policy. 

Consumer spending improved from the last report but spending was still concentrated in necessities instead of discretionary big-ticket items. Retail sales were up in the two months covered by the report, although gains were reported as "uneven across months," the report said. 

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House leaders are hoping to move legislation as early as this week that provides tax relief and loan opportunities to small businesses. 

Ways and Means members met this morning with representatives from the House Financial Services Committee to hear about the loan provisions that will be in the bill. 

"It will [include] money that will be lent to small businesses," Ways and Means Chairman Sandy Levin (D-Mich.) told reporters. "It actually has a provision for money to the states to help them provide collateral support." 

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Sen. Charles Schumer (D-N.Y.) on Wednesday promised to move legislation hitting China for its currency policy in the next two weeks.

His legislation would allow the United States to consider a country’s monetary policy when calculating trade duties on imports, and could lead to higher tariffs on products from China.

Schumer previously promised a vote on his legislation before May, but that never happened.

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