In addition, consumers also pulled back
on spending. Consumer spending was almost
flat for the second quarter, inching up 0.09
percent. Consumers cut back on purchases of
goods by 1. 3 percent and upped their spending
on services by a mere 0.8 percent. Spending
on durable goods declined 4. 4 percent, with
purchases of vehicles dropping 22. 7 percent.
Consumers also kept a muted pace of spend
ing on nondurable goods — clothing, shoes,
food and beverage, gasoline — which rose a
scant 0.1 percent.
It is no surprise that consumers remain
wary. The employment picture remains blurry
at best. The latest data showed 1. 3 million
net new jobs created in the past 12 months.
But there were some strong individual sec
tor differences, particularly as related to pri
vate versus public jobs. A total of 1. 8 million
private sector jobs were created over the past
12 months. Jobs at the federal government
fell slightly. The state and local jobs shed at
a much faster pace given the strains of having
to balance budgets. The combined state and
local government job cuts totaled 340,000 in
the past 12 months.
Unemployment insurance claims remained
high, staying above 400,000 per week. The
number of people receiving unemployment
benefits has been constant around the 3. 7
million mark during the second quarter. The
unemployment rate rose from 9.0 in April to
9. 2 in June of this year. It notched down to 9. 1
percent in July, but remains elevated.
Meanwhile, businesses propped up the
economic activity during the second quarter.
Businesses have plenty of cash sitting idle,
and the capacity to increase spending and
push the economy out of the doldrums. In the
second quarter, business investments were
up 6. 3 percent, targeted at information pro
cessing and software, transportation and real
estate. Spending on commercial structures
increased 8. 2 percent.
Looking ahead, how businesses spend will
largely determine the trajectory of the broader
economy. What keeps the business sector from
increasing payrolls is an issue of confidence
and access to capital. The legislative activities
of the past year have injected a large degree
of uncertainty in the business arena. Between
the health care reform and the DoddFrank
financial reform bill, businesses are faced
with an unprecedented level of regulations
that have yet to be drafted. In addition, the
vilification of millionaires and billionaires in
the public arena has not done much to boost