EoW March 2010

devised by the US Department of Commerce. Within an hour, the Standard & Poor’s 500 Index increased 1% to 1,094.86 in New York. The Reuters/Michigan news moreover coincided with the separate release of gures showing faster economic growth in fourth-quarter 2009 and in January, including stronger-than- anticipated results from a survey of Chicago-area purchasing managers. According to the Commerce Department, the world’s largest economy grew at a 5.7% annual rate in the nal three months of 2009, the fastest pace in six years. The economy has been able to grow without taking on workers because of the extraordinary productivity of the workers already in place. With orders on the increase, companies in January expanded at the quickest pace in more than four years. The Institute for Supply Management-Chicago Inc said its business barometer for the month climbed to 61.5, the highest level since November 2005, from 58.7 in December. Readings above 50 signal expansion. “Signs of a recovery are becoming increasingly visible to ❈ consumers,” Ryan Sweet, a senior economist at Moody’s Economy.com (West Chester, Pennsylvania) told Bloomberg News . “We’re seeing some of the improvements in consumer con dence paying dividends to spending.” (“Con dence among US Consumers Gains a Second Month amid Fewer Job Cuts,” 29 th January) But he also observed that consumers remain nervous about their jobs. In the same week, Federal Reserve policy said that, even as consumer spending picks up it is being constrained by a weak labour market. And Bloomberg ’s Vincent Del Giudice wrote that further improvement in consumer sentiment su cient to release purchasing power and sustain the recovery depends on job creation. President Barack Obama took the opportunity presented ❈ by the economic upturn to promote his proposal for a temporary tax credit to jump-start hiring. A rm that takes on a new employee in 2010 would receive a credit up to $5,000 against its income tax. Alternatively, a company that awards a raise in salary above the in ation rate could claim an income tax credit equal to the additional Social Security taxes it would pay on the increase. As an encouragement to early hiring the tax credit, which requires Congressional approval, would be available to employers on a quarterly basis. It would also be retroactive to the start of the year. The credits would be capped at $500,000 for each business. According to a source within the administration, one million businesses could be expected to take advantage of the credit, the great majority of them small companies. “Now’s the perfect time for this kind of incentive because the economy is growing but businesses are still hesitant to start hiring again,” Mr Obama said on a 29 th January visit to Chesapeake Machine Co (Baltimore, Maryland), which makes heavy steel parts and industrial equipment and relies increasingly on defence contracting projects. The company laid o four workers last year but currently is looking to hire a machinist.