Plus: Jobless Claims Fall, Durable Goods Demand Increases and Consumer Confidence Slips.
Supreme Court Upholds Health Care Overhaul
The Supreme Court on Thursday upheld the individual insurance requirement at the heart of President Barack Obama’s 2010 health care overhaul. The decision means the historic overhaul to insure another 32 million Americans will continue to go into effect over the next several years, shaping the way that countless Americans receive and pay for their personal medical care.
According to the majority opinion, the judges view the mandate on health care as a tax – nothing more. The ruling states, “The court reinforces that individuals can simply refuse to pay the tax and not comply with the mandate.”
The court also noted that existing Medicaid funds will not be taken away.
“The only setback for the act was the court’s decision that although the federal government could expand its Medicaid program as part of the law, it could not withhold funding for states if they chose not to participate,” MarketWatch explains.
Proponents of the law hailed last week’s ruling as a fundamental step forward in “attempting to fix a system that, while representing 18 percent of the economy, leaves 16 percent of Americans uninsured, a fact that sets the United States apart in the industrialized world,” Reuters notes.
Detractors of the law, including industry groups such as the National Federation of Independent Business and the National Association of Manufacturers (NAM), say it will increase costs, cause insurance premiums to rise and hurt the quality of health care. The non-partisan Congressional Budget Office says the legislation could reduce the ballooning U.S. deficit slightly over the first decade and substantially more over the second.
New Jobless Claims Drop but Remain High
Initial claims for jobless benefits decreased by 6,000 to 386,000 for the week ending June 23, the U.S. Department of Labor announced on Thursday.
The four-week average also fell, dropping by 750 claims to 386,750, but remaining near a seven-month high.
Despite the decreases, experts say the number of jobless claims signals stagnant job growth.
“Payrolls in May expanded by 69,000 workers, the slowest pace in a year, and have cooled each month since January,” Bloomberg News explains. “The jobless rate, which climbed to 8.2 percent in May, has been stuck above 8 percent since February 2009, the longest stretch of such elevated levels in the post-World War II era.”
About 5.89 million people received some kind of state or federal benefit in the week ending June 9, up 71,724 from the prior week. Total claims are reported with a two-week lag.
U.S. Durable Goods Rebound in May
Orders for long-lasting U.S. manufactured goods bounced back in May, led by a 4.9 percent jump in commercial aircraft bookings and a 4.1 percent gain in heavy equipment, the U.S. Department of Commerce reported last week. After a revised 0.2 percent drop in April, new orders for durable goods rose 1.1 percent to $217.2 billion in May.
According to Reuters, economists had expected orders to rise just 0.4 percent.
Demand for non-defense capital goods excluding aircraft – considered a proxy for business investment plans – rose 1.6 percent in May after falling 1.4 percent in April and 2.3 percent in March.
While orders declined for primary and fabricated metals, computer makers posted a 3.3 percent increase and orders rose 2.3 percent for communications equipment.
“There are caveats, however. Much of the increase was due to a 2.7 percent increase in transportation orders. When transportation orders are excluded, durable goods orders increased by just 0.4 percent,” Don Norman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), wrote in an analysis of the report. “Further the monthly durable goods orders series is volatile and a one-month gain does not constitute a trend. The June data on durable goods orders indicate that overall manufacturing sector growth continues, but at a markedly slower pace than recorded at the end of 2011 and the first two months of 2012.”
Shipments of manufactured durable goods increased 0.7 percent to $224.1 billion in May. This followed a 0.7 percent increase the prior month.
Despite strong sales, manufacturers are expressing increased caution about the economic climate, according to the most recent NAM/IndustryWeek Survey of Manufacturers, released last week.
Consumer Confidence Declines Again
The Conference Board’s Consumer Confidence Index fell 2.4 points to 62 in June, marking the fourth consecutive monthly decline as consumers’ outlook for the future grew increasingly pessimistic. However, consumers’ views of current economic conditions improved somewhat.
Respondents claiming that current business conditions are “good” increased to 14.9 percent from 13.6 percent, while those saying conditions are “bad” increased to 35.1 percent from 34.7 percent. The short-term outlook was more negative, with the number of consumers anticipating business conditions to improve over the next six months falling to 15.5 percent from 16.6 percent, and those expecting business conditions to worsen increasing to 16.2 percent from 12.9 percent.
“The slide in confidence raises the risk that the slowdown in hiring revealed by last month’s jobs report will cause households to retrench, restraining the spending that accounts for about 70 percent of the economy,” Bloomberg News reports. “The weak labor market is overshadowing the benefit of the lowest gasoline prices in five months…”
Consumers’ views on the job market were somewhat mixed. Respondents saying jobs are “hard to get” increased to 41.5 percent from 40.9 percent, while those claiming jobs are “plentiful” increased to 7.8 percent from 7.5 percent.
“The labor differential hasn’t been positive since January 2008, near the beginning of the Great Recession. In June the labor differential widened to negative 33.7 percent — the lowest since January — compared with negative 33.4 percent in May,” MarketWatch notes. “The decline in June suggests that it’s unlikely that the unemployment rate will fall soon, analysts said.”