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“The number of unemployed U.S. workers claiming an initial week of jobless aid unexpectedly rose last week by 7,000, taking a four-week average of claims to the highest level since October, the government said Thursday.

First-time claims for state unemployment benefits increased to a seasonally adjusted 336,000 in the week ended May 27, the Labor Department said. The increase was at odds with Wall Street forecasts for a drop to 320,000.”

Source: CNNMoney

“The dollar pared early losses Tuesday on news that Goldman Sachs Chairman and CEO Henry Paulson will be named to replace outgoing Treasury Secretary John Snow.”

“The dollar was sharply lower earlier after the New York Times said that Don Evans, a former U.S. commerce secretary, may fit the profile of past Treasury secretaries who have favored a weaker dollar, given his political background.”

“However, the greenback’s losses were pared after a Wall Street Journal report said Bush was leaning toward naming Paulson to succeed Snow.”

Source: CNNMoney

Europe will cancel plans for punitive tariffs on U.S. imports, if Congress repeals legislation that grants tax breaks to U.S. companies such as Boeing Co.

The European Union’s decision could end one of the most contentious and costly trans-Atlantic trade disputes. It also could warm relations strained by stalled global trade talks.

If signed into law, the measure would end a U.S. tax break that the World Trade Organization ruled illegal despite numerous revisions. It also would cut short a lengthy phase-out plan that the WTO also ruled illegal. Sometimes called the foreign sales corporation export subsidy, the rule has been in dispute for decades in various guises.

Source: WSJ

The U.S. trade deficit narrowed sharply by surprise during March, but analysts predict mounting oil prices will widen the gap going forward.

The U.S. deficit in international trade of goods and services shrank by 5.6% to $62 billion from $65.64 billion in February, the Commerce Department said Friday. Exports rose, but the value of imports fell as oil prices dipped, Commerce data showed.

The $62 billion gap was the smallest since $58.46 billion in August 2005. A separate report Friday, though, showed petroleum import prices surged last month. That could cause the trade deficit to resume rising.

Friday’s trade report showed U.S. exports increased by 1.9% to a record $114.66 billion in March from $112.52 billion in February.

Exports increased by $510 million for capital goods, including industrial machines and computer accessories. Exports rose by $181 million for consumer goods, like diamonds and toys. Sales of industrial materials like fuel oil were up $1.25 billion. Exports of foods and beverages increased by $213 million. Foreign sales of autos and parts fell $377 million.

Imports fell by 0.8% to $176.66 billion.

Source: WSJ

Stocks moved down Friday afternoon, as a surprising jump in import prices drove up Treasury yields and kept inflation fears in focus. Sustained dollar weakness contributed to these worries.

Source: BusinessWeek

April retail sales rose less than expected, sparking hopes the Fed may pause its tightening cycle. Crude futures surged near $74

Stocks were trading modestly lower early Thursday, as investors weighed a tame retail sales report and surging oil prices. A lower-than-expected increase in April retail sales is being taken as a sign of less pressure for the Federal Reserve to keep raising interest rates, but concern is growing that the stock market is due for a correction.

Source: BusinessWeek

The Fed has raised rates 1/4 pt. to 5.00%. They also said that some further policy firming may yet be needed. Timing of future firming depends on data.

The Federal Reserve’s Federal Open Market Committee meets to discuss monetary policy. An announcement by the Fed will come Wednesday at 2:15 p.m. Economists polled by Action Economics unanimously believe the central bank will raise the federal funds rate by 25 basis points. The current funds rate is 4.75%. Following Chairman Bernanke’s Apr. 28 testimony before Congress, economists now believe the Fed will not make a move in June.

Today is a big week for numbers. Wednesday sees the numbers on mortgage application volume and the federal budget. Thursday brings the latest figures on jobless claims, retail sales, and business inventories. And Friday the University of Michigan’s Survey Research Center will report its initial reading of consumer sentiment for May.

Source: BusinessWeek

Gold prices surged to a new quarter-century high of $700 an ounce Tuesday as funds bought into the market, driven by tension between the United States and Iran and expectations of a pause in interest rate hikes.

June gold futures on the New York Mercantile Exchange rose to $700 an ounce in late-morning trading, a level not seen since late 1980. That’s up more than $20 from Monday’s closing price of $679.90.

Source: Forbes

The Social Security Administration announced Friday that their cost of living adjustment, or COLA, for more than 50 million beneficiaries would increase 4.1% in January. The average Social Security check will increase from $963 to $1,002. Of course, this is driven by the CPI increase (aka inflation); more specifically: energy prices. The average recipient will see a $39 increase in their monthly check.

Source: USAToday

“So let me make sure I understand this: U.S. consumer prices rose at the fastest pace in 25 years, and that is somehow a positive for the economy and/or the markets?” Barry Ritholtz points out that despite what the BLS says, there certainly is inflation. He takes a lookat the core commodities price increase, core services, increase and decrease in worker earnings related to inflation. Put simply: “So the only place where there is no inflation is in the pocketbooks of the consumer, whom I must remind you accounts for 70% of the economy”.

Barry is a must-read.

Source: The Big Picture

The economy received another inflation warning on Wednesday, when a survey of industry executives showed that energy costs drove prices higher in September while the services sector slowed. Yahoo

This gives more reason to believe the Fed will continue to raise rates while the economy deals with hurricane-related costs.

It was noted that inflation was nearing the high end of the Fed’s comfort zone (meaning more short term interest rate increases).

The Wall Street Journal reports that the Bush administration is looking at a few additional candidates:

For months, the three candidates cited most frequently have been economists Martin Feldstein of Harvard University, Glenn Hubbard of Columbia University and Ben Bernanke, chairman of President Bush’s Council of Economic Advisers. … Among other candidates the administration is considering is former Bush adviser Lawrence Lindsey. Vice President Dick Cheney and National Economic Council Director Allan Hubbard are leading the search, one former administration official says.

Obviously this will be one of Bush’s biggest economic decisions given the amount of influence on the world’s economy. In addition, the Chairman has freedom from the President and Congress in decision making.

…gee, perhaps thats why Mr. Cheney is leading the search?

AP - World leaders scaled back goals for relieving African poverty and combatting global warming under U.S. opposition to British Prime Minister Tony Blair’s ambitious objectives.

Blair is in charge this year and is looking primarily at aid for Africa. He’d like the nations to double their support by 2010 and increase foreign aid to 0.7-percent of each nation’s income by 2015. Bush is in favor of doubling the aid to $8.6 billion in Africa (which activists suggest is about $6 billion too little) but is opposed to the 0.7-percent aid. He doesn’t want to give money to “countries that are corrupt”. This is all in addition to the plan that would eliminate the debt of 18 countries ($40 billion).

Also on the agenda is global warming negotiations. Bush is ready to push the alternative-fuel approach.

The WSJ reports on the CPI increase reported today:

Consumer prices jumped 0.6% in March from February, the Labor Department said Wednesday, mostly because of higher energy costs. But even excluding the volatile food and energy categories, “core” prices rose a relatively sharp 0.4%, after a 0.3% increase in February. The two-month increase in core prices is the largest in four years, according to Nomura Securities.

There’s some discussion as to how much the hotel industry has skewed things… needless to say prices rise for the spring.

Before the Fed decides whether more aggressive rate increases are needed, it will likely consider one-time effects in the latest report, and await the Commerce Department’s lesser known price index of consumer expenditure, which the Fed considers a better gauge of the cost of living.

..ironically enough, my macroeconomics course has never once mentioned such an index. Good thing I spend more time online then in class, right?