IRS apologizes for targeting tea party: this week in the economy
The IRS is under fire for the extra scrutiny its workers gave to 'Tea Party' and 'Patriot' groups' applications for tax-exempt status. Plus, the Dow hit a milestone, jobless claims continued to drop, and other news from around the US economy this week.
IRS apologizes to tea party groups: The Internal Revenue Service apologized Friday for singling out groups with "Tea Party" or "Patriot" in their tax-exempt status applications for additional scrutiny during the 2012 election. White House spokesman Jay Carney said that the IRS's actions, which were taken by low-level workers in Cincinnati, were "inappropriate" and that the Obama administration supports a full investigation.
From 2010 to 2012, the workers chose some 75 groups for extra inquiry because of the words in their names. The extra inquiries, sent to some 300 groups in all, included burdensome questionnaires and, in some cases, improper requests for donors' names, Lois Lerner, the head of the IRS unit that oversees tax-exempt groups, said in a conference call with reporters. "It was an error in judgment, and it was not appropriate, but that's what they did,"
Bernanke warns of banking risks: Federal Reserve chief Ben Bernanke spoke in Chicago Friday, defending the central bank's ability to protect the United States from another financial crisis and warning of the risks of a "shadow banking" system made up of various financial services. According to Mr. Bernanke, the Federal Reserve is taking steps to identify and monitor these services, including regular stress tests for banks. “Shocks of one kind or another are inevitable, so identifying and addressing vulnerabilities is key to ensuring that the financial system overall is robust,” Bernanke said in his speech at the Chicago Fed's annual conference.
Dow passes a milestone: The Dow Jones Industrial Average closed above the 15000 mark for the first time ever Tuesday, gaining 87 points to end at 15056.20. It was the first time the Dow had hit a milestone since 2007, when it first broke 14,000. The S&P 500 also hit a new record this week, as optimistic economic indicators and a good round of first-quarter corporate earnings reports buoyed the market. Whether the Dow’s hot streak will continue is anybody’s guess. Analysts warn that corporate earnings are likely to cool over the rest of the year, and the full brunt of the federal budget cuts under the sequester are expected to take hold this summer. For more on the market, read business editor Laurent Belsie’s May 13 Monitor cover story.
Consumer credit rises: Consumer credit increased $8 billion to $2.8 trillion in March, marking the measure’s 19th consecutive monthly increase. Nonrevolving credit, such as auto and student loans rose $9.7 billion, while revolving credit, mostly credit card debt, fell by $1.7 billion. “This decline was not unexpected, as higher payroll taxes coupled with looming fiscal uncertainty have put a damper on income growth and consumer spending,” Erik Johnson, senior US economist with IHS Global Insight, wrote in an e-mailed analysis. “The stop and go pattern in credit card usage seen over the past couple of years is likely to continue. Elevated unemployment and the increase in payroll taxes will leave households reluctant to run up big credit card balances.”
Job Openings and Labor Turnover Survey (JOLTS) remains flat: There were 3.8 million job openings in the US in March, changing little from February, according to data from the Bureau of Labor Statistics. Year over year, job openings decreased for nondurable goods manufacturing and the federal government, while job openings increased in accommodation and food services.
Jobless claims keep falling: The number of people applying for unemployment benefits fell by 4,000 to 323,000 last week, lower than analysts expected and the reading’s lowest level since November 2007. Continuing claims also fell, by 27,000, and the uninsured unemployment rate held steady for the third week in a row at 2.3 percent. “The claims data indicate that the pace of layoffs is easing despite an apparent slowdown in real GDP growth,” Barclays Research analyst Dean Maki wrote in an e-mailed analysis “This suggests that companies see the slowing in growth as somewhat temporary, and are responding to it by reducing hours worked and hiring at a less rapid pace – both of which were evident in the April employment report – rather than increasing the pace of layoffs.”
Budget surplus: The federal government posted a $122.9 billion budget surplus in April, nearly doubling the size of the surplus posted a year ago.