Employment Cooling, Housing Slipping as Fed Continues to Combat Inflation

The nation’s red hot labor market cooled a bit in August, indicating that the Federal Reserve’s inflation-fighting efforts may be having the desired effect. But Fed officials aren’t declaring victory yet. Far from it.

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Delayed but not derailed, the homebuyer tax credit won a Congressional last week, as the House and Senate agreed to expand and extend the popular program into next year. Absent Congressional action, the credit would have expired November 30.

Economists have been warning for months that the recovery, when it began, would not be smooth. Last month’s statistics confirm that prediction providing enough ups and downs to support a bipolar diagnosis.

Delivering an expected but nonetheless unwelcome defeat to the financial services sector, the House Financial Services Committee has approved legislation establishing a new Consumer Financial Protection Agency (CFPA), with broad authority to enforce compliance with consumer protection laws.

Three months ago, Treasury Secretary Timothy Geithner summoned lenders and loan servicers to Washington to express his and the Obama Administrations intense displeasure at the slow pace at which the industry was modifying the mortgages of struggling homebuyers. Apparently, that slap heard round the world – or at least, round the financial community – had an effect.