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Associated Press photo by Amy Sancetta

Signs of life

Money | Despite problems in Europe, the U.S. economy may be starting to heal

Issue: "Border bandits," Dec. 3, 2011

Europe has dominated the financial news for weeks, and with good reason: The future of the euro as a currency and the European Union as a viable economic entity hangs on the resolution of EuroZone debt problems. And a shakeup there will affect economies worldwide.

Lost in the euro talk, however, has been evidence that the U.S. economy is starting to show signs of life.

The United States added 80,000 jobs in October and the unemployment rate dropped to 9 percent. Also, fewer people made first-time claims for unemployment benefits during October. The Labor Department, which releases the numbers weekly, said on Nov. 10 that weekly applications dropped 10,000 to a seasonally adjusted 390,000. It was the sixth drop in seven weeks, and the lowest level in five weeks.

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This number is significantly higher than the 375,000 needed to signal real job growth, but most analysts say it's an important step in the right direction.

In a separate report, the Commerce Department said the seasonally adjusted U.S. trade deficit shrank to $43.1 billion in September. That was the narrowest trade gap since December 2010 and was the result of record-high exports and suggests the U.S. economy closed the third quarter a little stronger than many expected.

Finally, Americans are more hopeful about the economic outlook. A November rise in the Thomson Reuters/University of Michigan consumer confidence index was the third consecutive monthly gain, and it pushed consumer sentiment to a five-month high.

Gaining currency

By Warren Cole Smith

Talaj/iStock

The Heritage Foundation held what it called a Conference on the Stable Dollar in October, giving mainstream-or at least conservative mainstream-credibility to discussions of a return to the gold standard.

President Richard Nixon officially ended the gold standard more than 30 years ago, but some conservatives and libertarians have been calling for a return ever since. This year, gold has traded as high as $1,900 an ounce and the U.S. banking system is in turmoil. So gold standard advocates, who usually also support the abolition of the Federal Reserve Bank, are out in greater force. Even Occupy Wall Street has gotten into the act, with a smattering of "End the Fed" signs showing up at protests.

But the idea of a gold standard hasn't caught on with most GOP presidential candidates. Ron Paul and Herman Cain have endorsed the gold standard, according to the American Principles Project. At a debate in October, Newt Gingrich called for "hard money with a very limited Federal Reserve." The others have been silent or skeptical, calling instead for reforms at the Fed.

Cash advance?

By Warren Cole Smith

The U.S. economy saw another sign of life when online coupon pioneer Groupon raised about $700 million with an initial public offering on Nov. 4.

The price for the stock was set at $20 per share, above the anticipated range of $16 to $18. The higher price indicated investors were eager to snap up the Chicago-based company's shares. The IPO's price gives Groupon a market value of $12.7 billion. That makes Groupon's IPO the second-largest by an internet company, behind only that of Google Inc. in 2004.

IPOs are an important gauge of economic activity, since they signal the willingness of the capital markets to make investments in the economy. Analysts hope the success of the Groupon IPO will motivate others. More than 200 companies have filed with the SEC for an IPO but have been holding fire for the right time to offer their stock. Groupon may encourage investment bankers and money managers-many of whom are sitting on large pots of cash-to jump back into the capital markets.

Warren Cole Smith
Warren Cole Smith

Warren, who lives in Charlotte, N.C., is vice president of WORLD News Group and the host of the radio program Listening In. Follow Warren on Twitter @WarrenColeSmith.

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