Economy

President Barack Obama will frame the upcoming midterm elections in a speech Wednesday as a choice between the economic progress Democrats want and the Republican policy of tax cuts and deregulation that's been tried before.

"As November approaches, leaders in the other party will campaign furiously on the same economic argument they’ve been making for decades," Obama will say at Carnegie Mellon University in Pittsburgh, Pa., according excerpts of his prepared remarks. "Fortunately, we don’t have to look back too many years to see how it turns out."

The speech is likely to please Democrats on Capitol Hill, who have pressed Obama to go directly after Republicans instead of blaming Washington in general for slowing down Democratic measures on the economy.

Pending home sales rose in April for the third consecutive month as the housing market showed sustained growth.

Construction spending rose in April by the largest amount in nearly 10 years, possibly signaling that the nation's hardest-hit sector could finally be recovering from the protracted recession. 

Construction activity jumped 2.7 percent in April, bringing spending to $869 billion compared to a revised 0.4 percent gain in March, the biggest single-month surge since August 2000, according to figures released Tuesday by the Commerce Department. 

March figures were revised up from an initial 0.2 percent, providing additional evidence of improving sector strength. 

Residential construction rose 4.4 percent to a seasonally adjusted annual pace of $263 billion, as home building was bolstered by tax incentives of up to $8,000 for purchases through April 30. Economists have expressed concern that building and sales could drop, hurting the housing recovery, with the expiration of the tax credits. 

White House Budget Director Peter Orszag urged new college graduates entering a tough labor market to be resilient.

"The labor market, though recovering, is still not strong," Orszag said Saturday in a commencement speech at Rensselaer Polytechnic Institute in upstate New York. "Too many of you despite the world-class educations you have and the skills you've acquired here at RPI are headed back home without a job, or back to school out of necessity without a choice."

Orszag urged the graduates to embrace risk and learn to adapt, telling them that the "adversity quotient" matters more than IQ, the intelligence quotient.

"Ultimately, it is that stubborn refusal not to be deterred that has built America," he added.

Orszag, who graduated from Princeton and has a doctorate in economics from the London School of Economics, also called on graduates to "be empirical," using actual evidence and not just theory as they made decisions in life.

He knocked a central tenet of classical economics holding that each person behaved like a "rational supercomputer" that would take the path that best furthers self-interest when all of the information is available.

"I think most of you would agree that this rational assessment of costs and benefits is not quite how you wound up with a cap and gown today," Orszag said. "Instead, there were a host of factors including the norms of those around you that excited you about computer engineering and science, who made it clear that doing well academically was not just a necessity but actually cool."

Orszag has boosted ideas favored by behavioral economists in the Obama administration, including in budget proposals a plan to require firms to automatically enroll employees in 401k accounts as a way to increase retirement savings.

"The bottom line is that as you pursue whatever field you will from this day forward, always try to square the theory with actual observation," Orszag said. "Ask the tough questions about conventional wisdom. Often the result will be to go down unexpected paths and even bigger rewards."

The House Labor chairman says unemployed continue to look for work while getting benefits.

Another $600 million in funding was made available Friday for states' capital investment and surface transportation projects.

The Transportation Investment Generating Economic Recovery grants (TIGER II) will be awarded on a competitive basis to projects that have a "significant impact on the nation, region or metropolitan area and can create jobs," Transportation Secretary Ray LaHood announced Friday.

"This money will go to the kinds of projects that will help spur lasting economic growth, reduce gridlock, provide safe, affordable and environmentally sustainable transportation choices and create jobs," LaHood said in a statement.  

The first round of $1.5 billion in TIGER grants garnered 1,400 applications from 50 states, worth an estimated $60 billion. 

"The enormous numbers of of applications we received for the first round of TIGER grants shows that we have a backlog of worthwhile transportation projects waiting for funding," LaHood said.

Weekly jobless claims dropped by 14,000 last week, but the economy expanded more slowly than expected in the first quarter as gross domestic product was revised slightly downward Wednesday.

First-quarter GDP was changed from 3.2 percent to 3 percent, while 460,000 new jobless claims were filed last week, in line with most economists' expectations, according to releases from the Labor and Commerce departments Thursday. 

The four-week moving average of new unemployment claims rose by 2,250 to 456,500. 

Overall, the labor market is showing slow improvement, as the number of continuing claims dropped last week to 4.607 million from 4.656 million the previous week. But weekly claims need to drop into the low 400,000s or even high 300,000s for job creation to begin making a dent in the job market that has lost 8 million jobs during the past couple of years. 

May unemployment numbers are due out next week, and the jobless rate is likely to remain around 9.9 percent, although 500,000 jobs are expected to be added. 

Action on European proposals to restructure the financial system will boost market confidence, a top Obama administration official said Wednesday. 

"It's a good program and it has 'the right elements'" but markets are looking for the $1 trillion plan to be put into action, Treasury Secretary Timothy Geithner said Wednesday after meeting with his counterpart, U.K. Chancellor of the Exchequer George Osborne. 

American markets have fluctuated widely on rising fears of a European debt crisis, with the Dow Jones industrials dropping more than 1,000 points in the past month. 

Spurred by Greece's debt concerns, the International Monetary Fund and the European Commission provided funds for a program to help euro-zone governments if they have trouble raising funds from capital markets.  

The CBO projects that 3.7 million jobs could be attributed to the stimulus by the end of September.

Stocks took a nosedive Tuesday morning, dropping more than 2 percent in early trading amid tensions between North and South Korea and global economic concerns. 

The Dow Jones industrials fell sharply to around 9,800 and then began a slow creep upward as the markets weighed concerns over the European debt crisis and the falling value of the euro that was nearing a four-year low, as well as military tensions as North Korean leader Kim Jong-il put his troops on combat alert. 

European markets also fell and major indexes in Japan and Hong Kong were off by more than 3 percent. 

European Union leaders warned today of economic stagnation unless governments are proactive in promoting growth, although several countries are experiencing severe debt issues, making it difficult to provide stimulus to prop up those economies. 

After the market closed Monday at 10,066, the Dow was down 1,139 points from its April 26 high of 11,205.