October seems to have been a good month for consumer spending. Unemployment is holding consumers back, but it isn't keeping wallets clamped shut.

A Bloomberg survey reveals that purchases grew 0.5% last month, based on the thoughts of 61 economists. The U.S. Department of Commerce is releasing its report on Wednesday. In advance of this news, Bloomberg's survey suggests that there are signs of slight improvement.

This morning, the Labor Department announced that its consumer price index rose less than expected during May. This data is considered the latest evidence that the recession is continuing, keeping inflation in check. According to the Labor Department, the index increased a seasonally adjusted 0.1% in May, falling short of expectations for a 0.3% rise. Taking food and energy costs out of the equation, core prices increased 0.1%, matching expectations.

The recession is forcing prices lower, with the unemployment rate advancing to a 25-year high, and factories are operating at record-low levels. Some analysts suggest that we could see a period of deflation -- which is a destabilizing period of extended declines. Although lower prices may seem good, deflation could lead to consumers delaying purchases, which could then lead to drops in production and in wage cuts.

A Wall Street Journal poll of 49 economists found that most are deeply critical of the early work of President Obama and Treasury Secretary Tim Geithner.

According (subscription required) to the Journal, "On average, they gave the president a grade of 59 out of 100, and although there was a broad range of marks, 42% of respondents rated Mr. Obama below 60. Mr. Geithner received an average grade of 51. Federal Reserve Chairman Ben Bernanke scored better, with an average 71."

Nouriel Roubini, a professor at New York University, has recently been profiled in both Barron's and The New York Times. There may be nothing special about his training or methods, but what is fairly unique is his opinion that we are on the brink of a modern version of the Great Depression.

It is hard to say why the media wants to give his analysis voice, but he has become the object of almost endless fascination.

The foundation of his view of the economy is that the current housing disaster will get much, much worse and that banks will end up writing off almost $1.5 trillion in mortgage-related paper. That is about three times what they have taken as charges so far. The New York Times quotes Roubini as saying, "A good third of the regional banks won't make it."

While a number of experts believe that the recession could last a year, Roubini would he called an extremist by most measures. He foresees a downturn lasting 18 months.

The media does not like Roubini because he may be right. They like him because predictions of great economic collapse and mayhem sell papers. That is too bad. The public deserves a more balanced view.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Of all the market changes and losses that Wall Street has witnessed during the United States' decade of errors and descent, perhaps no loss has been as costly for investors, or as lamented, than the passing of Louis Rukeyser.

For those younger investors/readers who may not have heard of him, Rukeyser, who passed away two years ago, was the host of the Public Broadcasting System's "Wall Street Week with Louis Rukeyser."

At its core, the show, which ran with Rukeyser as host from 1970 to 2005 and was broadcast on Friday nights after the market closed, was the first weekly television series to summarize the week's often-dizzying financial and economic news in plain-spoken terms that the typical investor could understand. Simply, Louis Rukeyser defined broadcast financial news coverage and analysis, and was the face of Wall Street for a generation.

And the key to the show's success and usefulness, along with a no-nonsense format, was Rukeyser. A journalist by training, Rukeyser combined expert-level knowledge of the stock market and economics with the temperament and values of a family doctor, to create a calming, trustworthy source that viewers tuned in to religiously. The show became one of the most popular programs on PBS, at one point airing on more than 300 stations and attracting over 4.1 million viewing households.

The U.S. economic slowdown will be more extensive and the recovery milder than previously forecast, a new survey released Tuesday by Bloomberg News indicated.

The 62-economist who responded to the March 2008 survey expect the U.S. economy to grow at an annualized rate of 0.3% in the first half of 2008, a half-percentage less than economists had projected in February 2008.

The U.S. economy grew just 2.2% in 2007, after registering 2.9% growth in 2006. In 2007, the nation's GDP totaled $13.84 trillion in 2007, not adjusted for inflation. Further, in a data point many economists consider to be indicative of additional economic slowing, last week the U.S. Labor Department announced that the U.S. economy lost 63,000 jobs in February 2008.

A quarterly survey of economists by the University of California at Los Angeles says that, while the housing and financial sectors may slump, the economy will probably stay out of a recession. The Anderson Forecast painted a modestly rosy picture of the current situation for consumers and businesses.

"We don't see that happening," said Edward Leamer, director and co-author of the forecast released Tuesday. "This is a tough call, but I will be very surprised if this thing actually precipitates into recession," according to the AP.

The group who participated in the forecast must have been overseas for the last six months. With rising oil prices cutting into consumer spending and housing in sections of the country losing 20% of its value, it is hard to see how spending can do anything but drop this year.

Indications are that lay-offs have already begun in a number of industries. Retail sales are falling as are purchases of consumer goods and autos.

Otherwise, everything is fine.

Douglas A. McIntyre is an editor at 247wallst.com.

I don't know why it took so long for economists to admit the current housing and credit mess will impact the economy, but the latest report from the National Association for Business Economists (NABE) expects GDP to expand just 1.5% from October through December. That's less than half the 3.9% we saw in the period of July through September.

Historically, a housing slowdown always becomes a drag on the economy, as people spend less on things related to buying or fixing up a new house. On top of a real estate slowdown we also have a credit mess that's essentially frozen much of the type of lending that fueled the housing bubble that just burst. People can no longer use their homes as piggy banks that can be tapped for whatever they want to buy.

For all of this year economists expected the economy to grow by 2.1%. That would be the weakest economic growth since 2002 when the economy grew by just 1.6% as we headed out of our last recession. NABE also lowered its growth prediction for next year to 2.5% from 2.8%, and that may even be too optimistic unless something is done to get the housing market back on track. As long as foreclosures keep rising and people are unable to sell their homes or refinance unaffordable mortgages, you won't see a turnaround in this economy.

MAJOR PAPERS:

• A WSJ.com survey found that economists are more optimistic about the economy and see a lessening chance of a recession, the Wall Street Journal reported.
• Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) sold its shares in the China-controlled PetroChina Company Limited (NYSE: PTR), according to the Wall Street Journal's "Heard on the Street" column, leading many investors uncertain about China's stock valuations.
• The WSJ also reported that a jury in Nevada awarded $134.5M to three women who said hormone therapy drugs manufactured by Wyeth (NYSE: WYE), including Prempro and Premarin, caused their breast cancer.

OTHER PAPERS:

• The SEC began an inquiry into oversight of the New York State pension fund. The SEC is trying to find out if civil violations of federal securities laws were committed, the New York Times reported.
• Over 90,000 children's products imported by J.C. Penny Company (NYSE: JCP) from China, Taiwan and Vietnam, were recalled because of dangerous levels of lead, the Associated Press reported.

WEB SITES:

• Google Inc (NASDAQ: GOOG) said on its blog that it has improved its service for the Shanghai and Shenzhen stock exchanges by providing pricing data in real time and hopes the SEC will approve their "Last Sale" proposal, which would allow users free and unlimited access to real-time last sale prices for the NYSE and Nasdaq stocks.

Economists and CEOs have vastly different views on the economy.

A Wall Street Journal (registration required) poll of economists surveyed between Oct. 5 and Oct. 9 showed that on average they put the chance of a recession at 34%, down from 37% in September.

Is it a big deal that economists are 3% more optimistic than they used to be? Well, that depends. Though the dismal scientists expect the federal funds rate to be reduced one more time this year by one-quarter percentage point, they are pretty downbeat on the housing market.

Many, though, apparently see the glass as half full.

"Some of the uncertainties have faded, partly due to the fact that the Fed moved more aggressively," Lou Crandall, chief economist at Wrightson ICAP, told the Journal. "The Fed's willingness to pull out all the stops played a role in bolstering the economy."


In fact, 44.3% of the 61 top CEOs expect economic conditions in their industries to get worse, up from 24.4% in February. Almost 60% of those surveyed expect the U.S. economy to get worse, up from 24.4% a year earlier.

So who are you going to believe?

The unemployment report came in as a shock to the market today as employers cut payrolls by 4,000 in August, the first drop in U.S. jobs in 4 years. The forecast was a payroll gain of 110,000.

This is a dramatic unexpected shift with large implications. The Fed's Beige Book Report had indicated that the housing slowdown had been relatively contained. Today's employment report is the first real indication that the credit crisis and housing slowdown is spreading to the broader economy.

Although the Fed relies on multiple data points, this report is the equivalent of an economic earthquake. Although the job losses were limited to government employers and private employers actually added jobs, this should cause some concern for the Fed.

Employment is a key number for the health of the economy. This is especially true in the case of a weak housing market. People will do anything to keep their homes as long as they have jobs. If unemployment increases, then, the housing crisis can worsen substantially and quite quickly. This can have a much broader effect on the economy.

The Fed realizes this and has watched the employment situation closely. I believe that this changes the Fed outlook. It will probably cut the Fed Funds rate by at least 0.25% and possibly by 0.50% depending upon what additional data indicates. This is beginning to look more like 1998. The unemployment report has just changed the entire economic outlook overnight.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices.