Author: WSJ.com: Real Time Economics

Controversial economist and author Jeremy Siegel took a lot of heat last year when markets hit bottom. The Wharton School of Business professor’s thesis that stocks always beat bonds over the long term looked shaky with bonds outperforming stocks over the previous 5, 10, 15, 20 and 25 years ending June 30, 2009. Commentators poked at his analysis of historical stock performance, including the Journal’s Jason Zweig. (Mr. Siegel responded here.)

Since then, of course, it’s been a pretty good year for stocks. And Mr. Siegel thinks there’s more room to run. Mr. Siegel was in Hong Kong talking up the virtues of stocks over bonds to institutional investors at a conference sponsored by Fidelity International. He also had something to say about Bill Gross’s “new normal,” China, and why the U.S. economy won’t enter into a Japanese-style funk.

As we approach the anniversary of the stock market bottom, it’s been a tumultuous year, hasn’t it?

Siegel: It’s been an excellent 12 months for stocks. I wouldn’t call it tumultuous. One of the biggest 12 month gains we’ve had in history. Now the preceding 12 months weren’t so good.

How were you feeling a year ago as markets hit bottom?

Siegel: Was it difficult the last year and a half? Yeah. It was difficult leading up to March 9 [2009]. I would love to say I saw it coming, but I didn’t know [the financial institutions] were holding these assets. Yes. It was very painful. The thesis “Stocks for The Long Run” seemed pretty nonsensical at that particular juncture.”

What’s your sense of market valuations today?

Siegel: We are still below the long term trend the way I measure it. I still think the market is 15% to 20% undervalued at current levels…In 2000, we were way overvalued, in 2008 we were way undervalued. What’s there to say. That’s the way the market goes….Why do stocks offer higher returns, it’s because they are so difficult to hold over long period of time…they get discounted in the marketplace. It is very difficult to hold through those periods….I still think we are undervalued based on forecast earnings we are probably selling at 13 times or 14 times. And given the level of interest rates so extraordinarily low, these are fat premiums I think. This is going to be another double digit year of stock market gains.

Japan has just finished up its second decade of stock market declines. Does it give you pause to see a big, industrialized economy deliver that kind of horrid stock performance? Could the U.S. be in a similar situation after the bursting of its stock and property bubbles?

Siegel: We never had the size of the bubble that Japan had in the 1980s. Their stock and real estate markets went much higher in terms of fundamentals than ours did… When you get 100 price-to-earnings ratio like you did in Japan, it’s not so unexpected… The Bank of Japan acted slowly in reaction to the collapse of the equity market and the economic decline, while ours acted quickly. And we have a central banker in Bernanke who is very committed against deflation and provide enough liquidity to prevent it from happening…

You’ve said Pimco’s Bill Gross is wrong about a “new normal” economy, in which the developed world grows at subpar levels as deleveraging takes place.

Siegel: He’s not right. He’s only looking at demand and when you look at long term growth you have to look at productivity. And he doesn’t look at productivity. He never enters into it. If you go back through history and talk about improvements in standards of living and long term growth, it’s all productivity growth. He’s just looking at a very short term demand oriented model. That’s very good for the short terms but it’s not applicable for the long term as he makes it out to be.

Christina Romer, one of U.S. President Barack Obama’s top economic advisers, Friday said she won’t be taking up a job at the Federal Reserve and will be staying on at the White House.

“I love my current job and I’m not going anywhere,” White House Council of Economic Advisers Chairman Romer said during a visit at the Wall Street Journal offices Friday.

After Vice Chairman Donald Kohn this week said he would step down from the Fed board in June, leaving three vacancies on the seven-member body, U.S. President Barack Obama has the chance to reshape the Fed. Romer was one of the names floating around as a possible successor following Kohn’s announcement.

Among the possibilities for the vice chairman slot are Janet Yellen, who has been president of the Federal Reserve Bank of San Francisco since 2004, and Laurence Meyer, a former board member and now a private Fed watcher.

Alan Krueger, a Princeton University labor economist who is now assistant Treasury secretary for economic policy, and Jeremy Stein, a Harvard University finance professor who did a brief turn in the Obama administration last year, are other names that have surfaced this week.

Another name circulating as a possibility for the Fed board: Peter Diamond, 69 years old, a Massachusetts Institute of Technology professor who has had a particular interest in Social Security — and has crafted Social Security reform proposals with White House budget chief Peter Orszag.

House Financial Services Committee Chairman Barney Frank (D., Mass.) suggested on Friday he might kill the financial regulatory overhaul moving through Congress if efforts to create new consumer financial protection powers aren’t tough enough on Bloomberg Television’s “Political Capital With Al Hunt.”

Mr. Hunt asked Mr. Frank if he might “kill the whole thing and start over again” if the “consumer agency doesn’t end up the way you want.”

“Oh, I might,” Mr. Frank responded. “It depends.”

Mr. Frank passed a bill through the House of Representatives in December that would create a new Consumer Financial Protection Agency to write and enforce new financial product rules. Senate lawmakers are looking to create a new consumer protection “watchdog,” likely within an existing agency. Mr. Frank has said he wouldn’t support the creation of such a watchdog within the Federal Reserve, which is what some Senators are leaning towards doing.

The labor market for young college graduates improved last month, but for youths in general the job market still looks bleak.

The unemployment rate for college graduates between 20 and 24-years-old fell to 8.5% in February from 9.3% a month earlier as those with more education continue to fare better in a tough labor market than those with less.

People in the same age group with only a high school diploma also experienced a drop in their unemployment rate to 21.8% from 22.7%. Their jobless rate is still more than twice as high as the rate for the entire labor force.

Young people as a whole still aren’t doing well. The jobless rate for people 20 to 24-years-old, regardless of education level, was 16.6% in February. For 18 to 19-year-olds it was 25% and for those 16 or 17 years old, it was 27.4%.

Economic downturns tend to be particularly hard for vulnerable groups such as young people and minorities. During a recession, young people with few skills and little job experience are pitted against older workers who have been laid off but still have decades of experience on their sides.

The unemployment rate for all 45 to 54-year-olds, for example, was 8.4% in February — below the national average.

**Rates for people 25 years and older, not seasonally adjusted

Senate Banking Committee Chairman Christopher Dodd (D., Conn.) went to the Senate floor Friday to try and give a status report on the bill he’s working on to overhaul financial market rules. He painted a mixed picture of the status, saying he was “optimistic” but also using the word “fragile.” He described in slightly more detail than usual one of the central issues they are struggling with — how do you protect consumers in a way that doesn’t threaten the safety and soundness of banks?

“Obviously you want to do this in a way that does not in any way jeopardize the safety and soundness of institutions, and I don’t believe that necessarily there is any conflict here, although some suggest there may be. So we are trying to provide as well a mechanism to resolve when in fact you may have some conflict between safety and soundness and consumer protection. I understand that concern, we are trying to accommodate that, while simultaneously maintaining the independence and autonomy of this agency.”

The education sector has been a rare bright spot in the labor market, but as cities face mounting budget pressures the pain spread to their school systems last month, the government’s payroll tally showed Friday.

Teachers employed by local governments are feeling the jobs pinch. (AFP/Getty Images)

The education sector as a whole added a net 11,000 jobs in February, but local governments shed 24,100 positions from public education. The only industry that cut more jobs was construction, which has been hard-hit throughout the recession and may have been influenced by severe winter weather that idled workers. In contrast, public education payrolls aren’t as likely to be influenced by winter weather since teachers and principals are paid whether or not school is in session for the day.

It’s the third monthly drop in local government education payrolls and further cuts are most likely ahead. Cities are expected to see budget deficits between $12 billion and $19 billion next year.

Cutbacks are already in process in many school districts nationwide. The Los Angeles school district has begun the process of laying off 4,700 employees, including counselors, teachers and administrators. The Scottsdale, Ariz. education association is bracing for cuts that likely include firing teachers and in Monticello, N.Y. administrators are considering closing an elementary school to save between $1.2 million and $1.8 million.

State budgets are in a similarly painful budgetary situation with $103 billion in deficits expected across 42 states in 2011. Last month state employment held up fairly well, though. State governments added 6,000 jobs overall. State education added 7,000 jobs.

Economists and others weigh in on the smaller-than-expected decline in jobs and sideways move in the unemployment rate.

• The U.S. labor market dodged a big fat snowball in February, managing to lose only 36,000 jobs despite a string of major snowstorms that blanketed the nation. When combined with an upward revision of 35,000 jobs to earlier months, the interpretation is not bad at all. –Eric Lascelles, TD Securities
• The “not at work due to bad weather” series contained in the household survey — our favorite proxy for weather-related influences on the payroll data — soared to 1.1 million in February. This is the highest February reading on record (the data stretch back 1976). And, for any month over the course of the last 28 years, it is surpassed only by the 1.9 million posted in January 1996 (the so-called “Storm of the Century”). We were expecting a reading closer to 650,000 in February and believed — based on some simple historical correlations — that this translated into about a 100,000 subtraction for February payroll employment. Thus, it appears that the subtraction was even larger than we had anticipated — perhaps as much as 150,000. –David Greenlaw, Morgan Stanley
• It is impossible to extract the economic signal from the weather-related noise in this report. However, there is plenty of evidence that the storms had a major impact on the labor market and, therefore, that this trend-like decline in jobs actually masks a significant increase in employment. –RDQ Economics
• The results in the household survey were impressive. After sliding from 10.0% in December to 9.7% in January, the unemployment rate held steady in February at 9.7%. Household employment rose by 308,000 in the month on top of January’s 784,000 surge (adjusted for population controls). The labor force increased similarly in February, rising by 342,000 (which is why the unemployment rate held steady). In any case, over the first two months of 2010, the household survey shows more than a million jobs created. In 2003 (and to some degree in prior cycles), household employment began to rise well before payrolls. So, the strong improvement seen in the household employment figures recently provides an encouraging sign that payroll employment will soon turn up decisively. –Michelle Girard, RBS
• The growth bulls will interpret the modest loss in jobs as a sign that if it had not been for the weather the economy would have added workers in February and yet the initial unemployment claims have clearly bottomed out at a very high level. The growth bulls will also look at the second consecutive month of rising household employment as a sign that smaller firms are beginning to add workers. Even though this may simply reflect self employed workers who have given up on finding a job and have decided to try and go it alone and see what they can find in service jobs. As such, the increase in household employment exactly matched the increase in the labor force. –Steven Ricchiuto, Mizuho Securities
• For the second consecutive month, the manufacturing sector (the most volatile) and the services sector (the biggest) both posted payroll gains, which is the first time in recent memory. That’s a sign that labor market stabilization is relatively broad based. We take heart in that news and continue to see slight consistent job growth beginning with April’s numbers. Keep in mind, however, that the return of jobs always occurs at a much slower pace than the loss of jobs, meaning that it’ll be until 2012 before we see what might be described as “strong” labor markets. –Guy LeBas, Janney Montgomery Scott
• Growth was also healthy Another big drop of 64,000 in the construction industry once again offset gains in private sector services (+42,000) and manufacturing (+1,000). The manufacturing gain was accompanied by a 9,000 upward revision to January to bring that month’s gain to 20,000. As a result, manufacturing payrolls now have the biggest back-to-back gains in four years. –David Resler, Nomura Global Economics
• If we dig down into the report, the data is a bit less encouraging. Notably, job growth continues to fairly concentrated. The construction sector lost another 64,000 jobs while manufacturing added just 1,000 jobs. Certainly the service sector added 42,000 jobs, but that was concentrated in temporary help services which added another 48,000 jobs and education and health services (+32,000). Over the last five months, temporary jobs have risen by 285,000 jobs. Outside of those areas, the service sector still appears to be fairly weak although for those retail inclined, Department stores added jobs for the second consecutive month. Our least favorite government institution, the Postal Service, shed another 9,000. –Dan Greenhaus, Miller Tabak
• Problems remain abundant in the labor market. Those marginally attached or working part time for economic reasons increased to 16.8%. Forty percent of unemployed workers face duration of unemployment that exceeds 27 weeks. While, workers are beginning to trickle back into the workforce it is entirely probable that the unemployment rate will move higher later this year as confidence in a modest recovery takes hold and individuals look to find suitable employment either by choice or because their unemployment benefits have been exhausted. –Joseph Brusuelas
• The March report should show solid growth, boosted by Census Bureau hiring, some payback for February’s weather effects, and stabilization in private payrolls. Still, job creation needs to accelerate over the next several months to complete the economy’s transition from recovery to a self-sustaining expansion. – Aaron Smith and Ryan Sweet, Moody’s Economy.com

Compiled by Phil Izzo

Last month’s blizzards clouded the February employment report, making it impossible to know how much payrolls would’ve changed without the snow that blanketed much of the country and shut down businesses. But several components likely would’ve been influenced by the weather. Among them:

• Payrolls: A decline of 36,000 payroll jobs is encouraging considering some analysts expected losses above 100,000 due to weather. A decline that small suggests payrolls might have increased if not for the weather. But how much is uncertain: The government’s survey of employers covered the pay period that included February 12. The Labor Department said a worker who received pay for any part of the reference period — even one hour — is counted as employed.
• By Industry: One might expect that outdoor industries would be hit harder by bad weather. That wasn’t necessarily the case in prior snowstorms, perhaps because many of those sectors would already be off due to weather. In February, mining and logging jobs increased by 3,000 after a gain of 4,000 in January and a flat December. Construction fell 64,000 — better than the loss of 77,000 in January but worse than December’s 36,000 decline. Manufacturing gained just 1,000 jobs during the month — following a 20,000 increase in January and loss of 18,000 in December. Meanwhile, private service businesses overall increased 42,000 after January’s 20,000 gain. Included in that group: temporary help services, which increased by 47,500 jobs — roughly in line with the prior two months. That sector presumably would have increased if businesses were not shut by the storms. The Labor Department noted that some industries — such as those involved in cleanup and repair from the snowstorms — would have added workers, offsetting those that lost jobs.
• Hours worked: The average workweek fell to 33.8 hours from 33.9 hours. The average factory workweek appears to have been hit particularly hard by weather, dropping to 39.5 hours from 39.9 in January. Total hours worked declined 0.3% from the prior month after a 0.3% gain in January.

The unemployment rate was probably affected least by the snowstorm. The Labor Department said people who miss work due to weather-related events are counted as employed whether or not they’re paid for the time off. In prior snowstorms the unemployment rate barely moved even as payrolls showed large swings due to weather.

One important sign of hope for the labor market: In the household survey, from which the jobless rate is calculated, 1.1 million people reported they were unable to work last month due to weather, compared to the average of 290,000 for February. Morgan Stanley economist David Greenlaw notes that for any single month in the past 28 years, February’s reading was surpassed only by the 1.9 million people in January 1996 saying they were not at work due to bad weather. He says, based on historical correlations, that the February figure translates into payrolls (in the separate establishment survey) being depressed by as much as 150,000 last month due to weather. Under that view, payrolls would’ve increased sharply last month — and would be expected to show strong growth in the March report.

The U.S. jobless rate was unchanged at 9.7% in February, following a decline the previous month, but the government’s broader measure of unemployment ticked up 0.3 percentage point to 16.8%.

The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs. Though the rate is still 0.6 percentage point below its high of 17.4% in October, its continuing divergence from the official number (the “U-3″ unemployment measure) indicates the job market has a long way to go before growth in the economy translates into relief for workers.

The 9.7% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things.

The U-6 figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.

A U-6 figure that converges toward the official rate could indicate improving confidence in the labor market and the overall economy. This month pushes convergence even further away.

Scientists are puzzled why new H1N1 swine flu cases dwindled this winter, with regular seasonal flu hardly appearing at all.

Fewer jobs mean less flu. (Associated Press)

Perhaps the economy has something to do with it – with unemployment high, fewer people are sniffling around the water cooler. In fact, research from Emory University economists Sara Markowitz, Erik Nesson and Joshua Robinson finds that changes in the labor market significantly affects the spread of the flu.

With data from the Centers for Disease Control and the Labor Department’s household survey of employment, the economists used regional differences in flu cases and employment rates to calculate how increased hiring can lead to a rise in the number of people in bed with the flu. Then they crosschecked their results with a similar calculation using Google Flu Trends, which uses flu-related web searches as a measure of the number of flu cases by state. Their finding: For every 100,000 new employees, there are 2,246 new flu cases during flu season.

The economists didn’t apply their results to what’s happening now, but we can: Nearly 3.9 million fewer people working in January than a year earlier translates into about 87,000 fewer flu cases. Nothing to sneeze at.

Pouring government stimulus funds into clean technology may be a great way to boost the economy’s potential. But it isn’t the best way to create jobs, according to the consultants at McKinsey & Co.

The McKinsey Global Institute, the firm’s research arm, has produced a new tome of advice for governments as they become more deeply involved in markets and the economy. One message: Policy makers can have a bigger immediate impact on jobs by focusing their efforts on service businesses — such as retail and telecoms — than by trying to boost manufacturing or innovative technologies.

To offer a sense of how much difference an emerging sector such as clean tech can have on jobs, the authors look to the example of the highly successful semiconductor industry. In the U.S., they note, the semiconductor sector accounts for 0.3% of total nonfarm employment. That compares to 11.3% for retail trade. Even India’s dynamic software industry accounts for only 0.1% of that country’s employment.

“While many policy makers see innovative technologies as the answer to the challenge of job creation, our analysis indicates that governments are likely to be disappointed in such hopes,” the authors write.

Governments can get more bang for their buck, the authors say, by finding ways to promote growth in service sectors, which have generated more than 100% of net job growth in wealthy countries over the past couple decades (goods-producing sectors lost jobs). In telecommunications, they recommend policies to increase the availability of broadband. In retail, they note that employment tends to be greater in countries that have low minimum wages and allow part-time employment.

But won’t such policies lead to a proliferation of “McJobs” that offer low wages and little security? James Manyika, one of the report’s authors and San Francisco-based director at the institute, says that isn’t true of all service sector jobs. Beyond that, he says, the advice on the labor market wasn’t aimed at countries such as the U.S. that already have flexible labor laws.

Policy makers looking for a simple prescription to boost growth and competitiveness across an entire economy will be disappointed. Each sector requires its own approach, says Mr. Manyika. A country’s success, he says, depends much less on what it does than on how well it does it: “All too often policy makers think ‘Do we have the right mix of industries?’ and don’t think ‘Are those industries globally competitive?’”

The retirement of Federal Reserve Vice Chairman Don Kohn has the Obama administration searching for economists to fill one or more of the three openings of the seven-member Fed board. Among the possibilities for the vice chairman slot are a couple of alumni of the Greenspan Fed board: Janet Yellen, who has been president of the Federal Reserve Bank of San Francisco since 2004, and Laurence Meyer, a private, Washington-based Fed watcher.

You may have to take a pay cut, but you get to work in the Fed building in Washington. (Getty Images)

Among other names surfacing: Alan Krueger, a Princeton University labor economist who is now assistant Treasury secretary for economic policy, and Jeremy Stein, a Harvard University finance professor who did a brief turn in the Obama administration last year. Yellen and Krueger both did stints in the Clinton administration: Yellen as chair of the White House Council of Economic Advisers and Krueger as the chief Labor Department economist.

Daniel Tarullo, the Obama appointee to the Fed board, seems to prefer being the Fed’s banking czar to the vice chairman’s duties. And word is that Christina Romer, the economic historian on leave from Berkeley to chair the White House Council of Economic Advisers, isn’t interested in a move to the Fed. Kohn’s retirement, at age 67, leaves Chairman Ben Bernanke the only economist on the Fed board.

Elevating a Fed staffer to the Board is an option. Among the possibilities: Brian Madigan, chief of the Fed’s Division of Monetary Affairs, a post Kohn once held; John Williams, research director at the San Francisco Fed who would be a contender for Yellen’s job if she left; and Jeffrey Fuhrer, the Boston Fed’s research director.

One rub for some potential candidates: The pay cut.

The law sets the salary of members of the Federal Reserve Board — and the vice chairman — at $179,700 a year, which sounds like a nice wage to the typical American worker, but is lower than many potential nominees currently earn. That could pose a problem in recruiting for the three openings on the seven-member board. Salaries for presidents of the 12 regional Fed banks, whose pay is set by their private-sector boards of directors, ranged in 2008 (the latest publicly disclosed) from $293,000 in Atlanta to $411,200 in New York. (Tim Geithner took a big pay cut when he surrendered the New York Fed presidency to become Treasury secretary, which pays $199,700, the same as the Fed chairman’s job.) San Franciso’s Yellen made $392,600 in 2008. Top Fed staff economists routinely earn more than their bosses on the Board of Governors; salaries at regional Fed banks are sometimes higher than in Washington.

The same applies to finance professors — such as Austan Goolsbee, on leave from the University of Chicago’s Booth School of Business to serve as a member of Romer’s Council of Economic Advisers and another possible Fed nominee. A rookie at a top-ranked business school, one finishing a Ph.D. and who hasn’t taught before, makes about $185,000 for nine months’ work, and then often gets another two months pay on top of that, bringing the typical total annual pay close to $250,000. Senior professors with active research programs often make more than $300,000 — and that’s before outside consulting jobs. (Professors in economics departments outside of business schools usually make less than their business-school counterparts, and don’t get that two-month bump.)

Of course, a stint on the Fed board tends to elevate the price the market pays for speeches and consulting afterward. Mr. Meyer’s asking price: $30,000 a speech.

Many large retailers reported their February sales numbers this week, with most of them coming out the morning of Thursday, March 4. Following an announcement last May, Wal-Mart and its units no longer publish monthly sales figures. Updates to come as more retailers report sales. (Last updated March 4, 2010)

Sort the chart below by company name, category, change in total or same-store sales, and total sales. Also, see January’s chart.

The program to resuscitate the consumer loan-backed market has been a success and could generate profits for the Federal Reserve, according to one of the chief architects of the facility.

William Dudley, president of the Federal Reserve Bank of New York and its chief executive, said in an interview with Dow Jones Newswires Wednesday, that the Term Asset-Backed Securities Loan Facility, or TALF, has restarted the market for securities backed by loans on vehicles and credit-card debt.

The Fed launched TALF last March at a time when investors, hurt by the financial meltdown were wary of securities backed by collateral whose performance they doubted. The central bank stepped in, offering buyers low cost loans to buy new bonds backed by auto and student loans. If the loans went awry, investors could walk away from the loan and lose only a part of their initial investment.
Even with this generous nonrecourse lending, the program is “highly likely” to make a profit, Dudley said. He declined to quantify the profit but he did underline that by limiting the program to triple-A rated securities and requiring borrowers to put up some capital of their own, the bank is “very comfortable” with its credit risk on TALF.

A recent U.S. Government Accountability Office report assessed the risks that TALF poses to the Troubled Asset Relief Program, or TARP, which backstops it. The GAO said Treasury should strengthen its TALF decision-making process and determine which data are needed to track the management and sale of assets TALF borrowers might surrender.

“While Treasury bears the first-loss risk from any assets that TALF borrowers might surrender in conjunction with unpaid loans, it has not developed measures to analyze and publicly report on the potential purchase, management, and sale of such assets,” it said in the report. “Without such a plan, Treasury cannot measure TALF’s success in meeting its goals under TARP with respect to any collateral that is placed in TALF LLC.”

Dudley said “there was a lot of attention paid to the fact that we had to be comfortable with the risk we were taking–the combination of triple-A ratings, haircuts so the investor is putting some equity into the game, there was the protection of TARP, there was Treasury capital and we had stress tests.”
For one thing, prices are unlikely to fall as low they were in the middle of the crisis, and even if they did, the Fed doesn’t necessarily have to sell the assets at fire-sale prices but could, instead, hold them for as long as necessary.

While TALF got a slow start due to lengthy documentation and other requirements, investors returned to the asset-backed market and the market is now stable enough that the Fed isn’t considering extending the consumer loan-backed and legacy commercial mortgage-backed securities portion of TALF past the current end date of March 31.

Risk premiums on asset-backed deals have tightened considerably, Dudley said, adding that issuers have sold several non-TALF deals as investors were willing to use their own resources to buy them.
“Everything suggests the timing to end the program seems about right,” Dudley said. “We have strongly suggested the program is ending and it doesn’t seem to have disrupted the market. It doesn’t seem to have led to any spread widening. That suggests to me the timing is right. The ending is unlikely to disrupt markets.”

While the mainstream auto and credit card sectors have improved, both in terms of issuance and spread tightening, market participants point out the esoteric or so-called off-the-run sectors are still not out of the woods.

More than $100 billion in TALF-eligible securities have been sold since the program launched, comprising the bulk of issuance in the past year. TALF was initially billed to be a $200 billion program but residential mortgage-backed securities were not included, even though the central bank had mentioned they might add that to the list of bonds they would provide cheap loans for.

“It’s a smaller program than was anticipated,” Dudley said. “The reason the program is smaller than we initially thought is because the market normalized faster than we thought.” Borrowers have been actually repaying the TALF loans and “they can actually go out in the marketplace and get financing elsewhere instead of using TALF,” he added.

The case for extending TALF has “diminished,” Dudley said, noting TALF was “the most innovative liquidity program.”

It was “difficult because we had to develop it from scratch,” he said, adding, “It is definitely one of my favorites.”

The Monster Employment Index surged in February, with increases across a range of geographies and job categories, suggesting that employers are starting to emerge from a long hibernation. The Index, compiled by online job service Monster.com, grew to 124 from 114, the highest reading since December 2008 and the largest month-over-month increase since the company began compiling the index in 2003.

The Monster Index is compiled from jobs posted on a number of employment sites including Monster.com. In February, job advertisements rose in 15 of the 20 sectors tracked by the index, including telecommunications, finance and scientific and technical services. Those numbers are not seasonally adjusted, meaning that declines in categories including entertainment and retail trade were, at least in part, due to seasonality.

“We’re definitely seeing a difference to what we’ve seen in months prior,” said Jeff Quinn, director of research at Monster.com. “Companies are out there posting, and I assume they’re not posting for jobs where they don’t want to hire.”

Job listings increased in all Census regions and every state, the survey said. By adjusting the number of online help-wanted ads for total working population, the Monster Employment Index had the following state ranking for per-capita online job availability in February:

1: Alaska
2: Delaware
3: Montana
4: Virginia
5: Rhode Island
6: Maryland
7: Connecticut
8: Vermont
9: Wyoming
10: Massachusetts

Treasury Secretary Timothy Geithner and other senior administration officials met with multiple consumer and public interest activists on Wednesday and the administration later detailed the standards it believes would make any new consumer protection regime “accountable and effective.”

According to a Treasury spokesman, a new consumer protection regime must have:

• 1) Real independence to make and carry out decisions.
• 2) Independent leadership appointed by the President, confirmed by the Senate.
• 3) Independent budget and administration.
• 4) Independent ability to set clear rules for the consumer financial services marketplace and enforce them.

The Federal Reserve’s beige book, released today, showed the economy kept improving at the beginning of the year, though the pesky winter storms didn’t help. Here are some of the highlights and oddities from the 12 districts it covers:

• Weather was an important factor, namely the severe winter snowstorms that hurt retailers and construction. But on the upside “business is booming” at ski resorts in the Richmond District. At any rate, weather was so important that the 50-page report mentioned it 41 times. It referenced storms 25 times.
• A sign of local budget strain? “Emergency vehicle manufacturers noted a cut back in production, and added that the outlook had weakened.” (Dallas District)
• It pays to challenge the landlord. The commercial real estate sector was weak and in some cases getting worse. “Several Districts also noted that many tenants were pushing for, and in some cases receiving, concessions on rents.”
• Housing market insecurity: “Purchases of entry-level homes continue to do well, and several builders reported that the move-up category is gaining momentum. However, builders expressed concern about the potential effect on home sales once the first-time home buyers’ tax credit expires on April 30. They also reported that banks remain unwilling to lend money for constructing spec houses, and tight credit standards are keeping many potential buyers out of the market.” (Cleveland District)
• Good news for manufacturing workers: “Almost all respondents that had suspended 401(k) plan matches have resumed making matches or expect to do so shortly,” manufacturing employers reported. (Boston District)
• This isn’t a surprise to those who waited in two-hour lines to buy groceries before the storms. “Many consumers avoided driving during dangerous road conditions, causing weakness in retail sales (except for items such as food).” (Richmond District)
• Americans upgraded their TVs for the Super Bowl. “…the store manager at a chain discount retailer in North Carolina reported that sales of larger screen televisions were especially strong just prior to the Super Bowl football game and following the snow storms.” (Richmond District)
• Tourism is improving. “Atlanta also reported rising tourism activity related to several successful major sporting events and a well-attended Mardi Gras in New Orleans. San Francisco noted increases in visitors to Hawaii and Las Vegas and said hotel occupancies stabilized in some other areas.”
• Two jobs for the price of one: “…job creation remained tepid. Businesses continued to describe attempts to do more with less, such as combining the duties of several jobs into one.” (Atlanta District)
• Canada to the rescue! “One major mall in western New York State reports some softening in business in February, but another reports that business remained strong through mid-month, helped by particularly strong business from Canadian shoppers—particularly on Presidents’ Day (Family Day, in Ontario) weekend.” (New York District)
• Minnesotans are imbibing. “A Minnesota-based restaurant and bar chain reported that recent same-store sales were above year-earlier levels. A movie theater in Minnesota reported that ticket sales were up during January.” (Minneapolis District)
• Give them free gifts and they will come: An Outer Banks of North Carolina analyst said future bookings are up “and credited the increase to creative packaging such as throwing in free linens, gas cards and gift certificates to local restaurants.” (Richmond District)
• Corn is having a lot of issues. “News that last fall’s corn harvest was a record triggered declines in the price of corn, even though a higher than typical percentage of corn acres remained unharvested. There continued to be problems with the quality of corn in storage, leading to price discounts at delivery.”

The European Central Bank hasn’t been very effusive in its praise of Greece lately — which makes Wednesday’s statement that the ECB “welcomes the convincing additional and permanent fiscal consolidation measures” taken by Athens practically a high-five.

Greek Prime Minister George Papandreou (AFP/Getty Images)

The extra 4.8 billion euros in tax increases and spending cuts unveiled Wednesday “demonstrates the strong commitment of the Greek government to achieve the fiscal objectives enshrined in its stability program,” the ECB said.

That’s much different from the guarded tone take in past weeks. One month ago, Jean-Claude Trichet only called action Athens had taken up to that point “steps in the right direction.”

Wednesday’s statement “is not even the style of the ECB,” says BNP Paribas economist Luigi Speranza. “It sounds peculiarly positive, but to be honest, it’s fair.”

What’s different about Wednesday’s package out of Greece is that items like a higher value-added tax and cuts in public-sector wages deliver revenues to the government, unlike previously announced goals like better tax collection where the money may not materialize.

The ECB’s statement, coming just hours after Moody’s said Athens’ steps are consistent with its A2 rating, also eases market fears about whether Greek government bonds will be welcome as ECB collateral next year.

Right now, Greece is safe thanks to relaxed collateral rules in place since the height of the crisis. But the ECB is due to revert back to its old system in 2011. Moody’s is the only agency that still has Greece above the minimum A-requirement under the old rules. Wednesday’s statement by Moody’s suggests Greece is safe as long as it does what it promises.

And even if Moody’s were to downgrade Greece further, it’s unlikely the ECB would cut Greece loose. As Speranza notes, “after a statement like [the ECB’s on Wednesday], assuming Greece implements the plan, do you see the ECB not accepting Greek debt as collateral?”

Last year, the Institute of International Finance, a trade association of global banks, put together an all-star group of bankers, hedge fund operators and former government officials to alert us all to “systemic risk” — the kinds of risk that can sink an economy.

The banker-appointed group just released its latest warning — and found that new proposals to regulate banks should be one of the global economy’s biggest worries. “Uncertainties about the prospects for reform — which have been highlighted by the recent proliferation of national proposals — are thought by [the group’s] members to pose additional risks to economic recovery,” said the group headed by Jacques de Larosiere, a former managing director of the International Monetary Fund.

So which proposals are the IIF and its all-star group, formally called the Market Monitoring Group, really fretting about? The ever-cautious group didn’t name names, though in response to questions, IIF Managing Director Charles Dallara, said that the group had in mind the Obama administration’s proposal to tax banks to pay for the government rescue of the economy and the so-called Volcker rule, which would bar banks from proprietary trading. He also cited proposals by some European officials to regulate rating agencies and CDS markets.

For some time, bankers have been arguing that uncertainty about regulation is messing up the economy because beleaguered bankers don’t know what to expect out of government. That comment has generally produced derisive howls from U.S. officials, who blame banks and other financial institutions for igniting the crisis that tanked the global economy.

Mr. Dallara says the IIF and its market monitors aren’t trying to slow or kill regulation. Rather, they think the global regulatory agenda is already overstuffed with efforts to raise capital, reduce leverage and figure out how to handle troubled financial firms. All these efforts are being discussed by the Group of 20 wealthy and developing nations with a deadline of finishing by the end of the year.

“Any extra layer of uncertainty raises a question of whether we’re serious about international coordination,” Mr. Dallara said.

Average unemployment rates soared to 10% or higher in 14 states and Washington, D.C. last year – above the 9.3% average for the nation – as the recession spurred layoffs and froze hiring, the Labor Department said Wednesday. Nine states tracked their highest annual unemployment rates ever and Michigan and Nevada experienced both the biggest year over year increases and the highest rates. No regions went unscathed: The unemployment rate rose in all 50 states.

Unemployment Rates, by State

Source: Labor Department