It's Over ... or Not
The deepest recession in modern memory is coming to an end, said Department of Treasury Secretary Timothy Geithner during a May 18 briefing. Geithner pointed to improvements in credit and financial markets, among other indicators, as signs that the economy was starting to come back. However, the Federal Reserve Board's Federal Open Market Committee (FOMC)—the body that sets the federal funds rate, or the interest rate banks charge each other for loans— downgraded its economic forecast for 2009 in the recently released minutes of its late April meeting. Almost all FOMC members downgraded their projections from the ones they made in January, and the group as a whole is now projecting the U.S.'s real gross domestic product in 2009 to decrease by 2 percentage points from 2008, to 1.3 percent. The FOMC also predicts U.S> unemployment to continue rising and increased its projection for unemployment in 2009 to be between 9.2 and 9.6 percent, up from 8.4 to 8.8 percent in earlier prognostications. The FOMC projects nationwide unemployment to remain near 8 percent through 2011, before trending back to between 4.8 and 5 percent over the longer run. The FOMC did agree with Geithner in one respect, though, saying it expects a recovery in sales and production to begin in the second half of the year. The AIA is paying close attention to its Architecture Billings Index, which has a nine- to 12 month lag between when billings and construction spending. (Improvements in construction spending are seen as an indicator of a rebounding economy.) The ABI fell in April to 42.8, from a recent high of 43.7 in March. It was the first time the index was above 40 for two consecutive months since August and September 2008. (Any score above 50 indicates an increase in billings.) One good sign is that more firms are reporting the possibility of projects coming out of federal stimulus funds, said AIA chief economist Kermit Baker in a statement accompanying the latest ABI release. "Still, too many architects are continuing to report difficult conditions to feel confident that the economic landscape for the construction industry will improve very quickly," Baker added. "What these figures mean is that we could be seeing things turn around over a period of several months."
Greenhouse Gas Legislation
On May 22, the House Energy and Commerce Committee approved a bill that would create the first national limit on greenhouse-gas emissions. The legislation—an effort to push the U.S. away from a reliance on polluting fossil fuels and toward wind-, solar-, and plant-based energy sources—calls for a 17 percent reduction in greenhouse-gas emissions by 2020, and an 83 percent reduction by 2050. It also requires utilities to generate 15 percent of their electricity from renewable energy sources by 2020. The bill would create a cap-and-trade system, allowing a market for pollution allowances to develop, where some companies could buy permits to emit polluting gases from companies that pollute less. Although President Barack Obama supports the bill, it still has a long way to go before becoming law: several rounds through other House committees, and then a journey through the Senate, which has a record of shooting down cap-and-trade emissions legislation.
Better MPG, Eventually
President Obama announced more-stringent vehicle emissions standards for U.S. automobiles on May 19. The new rules—which match those already in place in California—mandate 5 percent annual increases in fuel efficiency for cars and light trucks, so that by 2016, new cars will have to achieve an efficiency of at least 39 miles per gallon, while new light trucks must get 30 mpg.The new standards will likely increase vehicle cost by about $600, but President Obama said that over a new vehicle's lifetime, consumers would save $2,800 in fuel costs, based on a gasoline price of $3.50 per gallon. The new standards should cut vehicle emissions by one-third, once enacted.
Perhaps the biggest surprise in the wake of Obama's news conference was the reaction of American carmakers, which have spent millions of dollars in lawsuits fighting tougher emission standards. Detroit is happy to have new standards, manufacturers say, because there will now be one standard, and thus one version of a car or truck model to build, instead of various ones for different areas of the country. Now, of course, the onus is on Ford et al. to create cars and trucks that Americans want to buy.