The Federal Reserve will be flying blind this week when it decides what to do with the economy.
But it doesn’t have to.
Tomorrow afternoon, after a two-day meeting, the Fed’s Open Market Committee will announce whether or not it will print more money to buy government bonds.
Then, on Friday, the Labor Department will announce its widely anticipated report on the job market for July. The experts think that only 80,000 jobs were created this month — the same as in June.
With the jobs report just a few days away, you’d think the Fed would want to know what the numbers are going to be.
Apparently, it doesn’t.
“They never asked” for the employment figures, says a source at the Labor Department, noting that the Fed would have a valid reason to get the numbers ahead of time.
All the Fed would have to do to get a glimpse, according to the folks down at Labor, is sign a “memorandum of understanding” that promises the jobs figures won’t be leaked before the official report comes out at 8:30 a.m. on Friday.
The Fed does have a memorandum with Labor for a couple of small bits of information. The Fed uses that data to put together its own industrial-production figures.
But there’s no memorandum on the granddaddy of all reports: the Current Employment Statistics, which not only tells the world the number of jobs the country is creating but also how many people are unemployed.
Unless there is some delay, those numbers have been accumulated at least four days before the actual release. So the Fed could have had the numbers yesterday and used them in its deliberations on economic policy.
The White House isn’t even accorded this privilege. The president’s Council of Economic Advisers doesn’t see the employment report until late Thursday afternoon.
So why isn’t the Fed taking advantage of Labor’s generosity?
Well, it beats me. You’d think the Fed would love to know if job growth is keeping up with expectations before the meeting of its governors. If the Fed does nothing to spur economic policy and then a bad employment report comes out, the central bankers will be in for a heap of criticism.
The Fed, of course, gathers its own info on the economy. And I’ve always been a critic of the jobs report. So maybe the Fed agrees with me and thinks the Labor Department’s numbers are worthless.
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Facebook co-founder Eduardo Saverin is probably happy that Washington does nothing quickly.
Saverin was born in Brazil and became a US citizen but said before Facebook went public that he planned to renounce his American citizenship and move to Singapore.
It was widely reported as a tax-dodge maneuver. Saverin would pay less in Singapore on his Facebook holdings than in the US.
That may be true, but Saverin’s move could also have turned into a monumental blunder. In fact, it still might.
Saverin’s move isn’t unique.
According to government figures, as many as 8,000 US citizens are expected to give up their citizenship in 2012, compared with just 3,805 last year. That comes out to 154 a week this year, twice the 2011 rate. Saverin was the highest-profile tax dodger.
Greg Bertsch, a tax and immigration expert with Duggan Bertsch LLC in Chicago, says all the renouncers “might actually be good for the US” because they will have to pay tax to Washington immediately on their assets.
Bertsch says that dropping your citizenship creates a “tax event. It’s assumed you sold all your assets the day you renounced.”
In Saverin’s case, for instance, the IRS would immediately level a 15 percent, long-term capital gains tax on the billions or so worth of Facebook stock he owns. The tax is owed to Uncle Sam the minute the papers renouncing a citizenship are completed.
I don’t know the timing of Saverin’s move, but he seems to have started the process before Facebook sold stock in a highly anticipated initial public offering.
Facebook shares have since skidded tremendously in price.
So if Saverin’s anti-citizenship paperwork had been completed at the time of the Facebook IPO, he’d owe tax on a higher amount. And he’d have to sell shares at today’s lower price to pay that tax.
Am I the only one who doesn’t feel sorry for this guy?
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Companies continue to have disappointing revenues even as their earnings remain good.
I reported this trend in a column last week.
Thomson Reuters says that 67 percent of the 294 companies that are represented in the Standard & Poor’s 500 index and have reported second-quarter results have beaten the profits expected by Wall Street. Typically, 62 percent beat earnings expectations.
But only 40 percent of those companies beat revenue expectations. Typically, that figure is closer to 63 percent.
Apple missed revenue expectations by the most, says Thomson Reuters. Slowing iPhone sales caused the company to be $2.15 billion short of expectations.
As I explained last week, companies can fool with their earnings by cutting costs. But there isn’t much they can do to make up for slowing sales.