The Fed’s balance sheet shrunk again in the latest week, falling to $1.974 trillion from $1.985 trillion. Direct-bank lending resumed declined, falling under $270 billion. The makeup of the balance sheet continued to shift out of emergency facilities and into debt holdings. Treasurys and agency debt continued their upward march, though holdings of mortgage-backed securities fell for the second week in a row. The Fed started a program in March to ramp up such acquisitions in order to push down long-term interest rates low. Central-bank liquidity swaps posted a steep drop, as overseas demand for dollars continues to abate. The commercial paper and money market facilities declined again, as companies decide to take their funds out and tap investors directly as sentiment in the market improved.

In an effort to track the Fed’s actions, Real Time Economics has created an interactive graphic that will mark the expansion of the central bank’s balance sheet. Every Thursday afternoon, the chart will be updated with the latest data released by the Fed.

In an effort to simplify the composition of the balance sheet, some elements have been consolidated. Portfolios holding assets from the Bear Stearns and AIG rescues have been put into one category, as have facilities aimed at supporting commercial paper and money markets. The direct bank lending group includes term auction credit, as well as loans extended through the discount window and similar programs.

Central bank liquidity swaps refer to Fed programs with foreign central banks that allow the institutions to lend out foreign currency to their local banks. Repurchase agreements are short-term temporary purchases of securities from banks, which are looking for liquidity and agree to repurchase them on a specified date at a specified price.

Click and drag your mouse to zoom in on the chart. Clicking the check mark on categories can add or remove elements from the balance sheet.

Women have long proven they can do everything that a man can, but it seems there are some things that men can’t – or won’t do – like laundry.

A new Bureau of Labor Statistics report proves what many women have suspected all along: They do far more household work than men. From 2003 to 2007, women spent an average of 10.8 hours more per week doing unpaid “household work” than men.

The difference is most stark among 25- to 34-year olds, with women spending 31.7 hours per week doing the laundry, cooking and cleaning. That’s about twice as much as men, who spent just 15.8 hours on the same chores. Teenage boys and young males performed the fewest hours of household work – 8.9 hours per week, compared with 15.9 for women.

But there is one thing to look forward to: The difference between men and women narrows as they get older. Those between 65 and 74 years old had the smallest gap, with women performing just 8.2 hours more household work per week.

Today’s Journal article on New York’s coffeeshop crackdown on laptops has stirred a common query among readers. Why, ask many, do unemployed job-hunters and improvised freelancers choose coffee shops over cheaper options such as using public libraries or working from home?

Why aren’t these people just at the library?

Many laid off workers have indeed flocked to the library to “fill out resumes and scan ads for job listings,” as the Journal noted back in January. And, though they’re harder to track, many probably also work — or at least, look for it — from home.

But could the crowds also be a sign of things getting better?

That’s the case for Corrie Yadon, 27, an aspiring film production coordinator who lost her job at — ironically — Starbucks in February. Until May, she was collecting unemployment benefits, sending out resumes at Steinway Street Library in Astoria, New York, and making coffee at home. Then she was hired on a three-month assignment as a visual production assistant for a Disney movie. She’s out of a job again right now, but “things are picking up with TV productions,” she says in an interview.

So now she allows herself an iced coffee — the cozy Red Horse Cafe in Brooklyn is a favorite and there are no restrictions — to help her through the search for the next stint in the movie industry.

For others, the atmosphere of a café replaces that other stinging loss of unemployment — interaction. Ryan Kurlbaum, a 27-year-old architect from Leawood, Kansas, needs the buzz of a coffee shop to concentrate. Mr. Kurlbaum has been unemployed for seven weeks and often spends the morning at coffee shops in Park Slope, Brooklyn, personalizing cover letters and slowly working through a long, handwritten list of potential employers. He usually goes home for lunch and to handle job-related phone calls, but, he says, “I’d much rather work around people.”

The Bank of England signaled doubts Thursday about the sustainability of a recent improvement in the U.K. economy, surprising markets with a larger-than-expected increase in its so-called quantitative easing program — by £50 billion to a total of £175 billion. Meanwhile, the European Central Bank, as expected, left its benchmark rate unchanged at 1.0%. Below, economists react, first to the BOE and then to the ECB.

Bloomberg News/Landov

Businessmen sit in front of the Bank of England on Thursday.

A big surprise relative to market expectations: The consensus expectation was for unchanged purchases. … A key uncertainty ahead of this decision was whether the Monetary Policy Committee would place greater emphasis on the (upbeat) UK survey data or the (much more pessimistic) official GDP data. In the past the MPC has argued that surveys are more reliable, in that they predict future revisions to the official data. But it now seems that the MPC is relying much more on the official data. – Goldman Sachs

[D]uring the crisis, the criticism [of policy] was too little too late. Now, with the extension of the quantitative easing program to the point at which it effectively monetizes this year’s record budget deficit, it’s back to too much too late. … So, what is the committee up to? The statement emphasizes the latest – disappointing – growth number and continued concerns about the current and prospective strength of money and credit. There’s nothing wrong with that, though, at other times, it has seemed as if the committee put more weight on other indicators. … The latest decision adds to the committee’s record of surprising markets. — Robert Barrie, Credit Suisse

The Monetary Policy Committee’s decision to extend its Quantitative Easing program by £50 billion to £175 billion indicates that the committee continues to have serious concerns about long-term growth prospects and persistent muted bank lending to businesses. This is reinforced by the fact that the Bank of England had to seek permission from the Chancellor to extend the Quantitative Easing program beyond £150 billion. Despite the recent improved data, the economy continues to face serious headwinds and sustainable recovery is still very far from certain. – Howard Archer, IHS Global Insight

[The BOE statement] acknowledged that surveys are picking up and the world economy is stabilizing. However, this is in the context of a lower starting point – i.e. the recession is deeper than previously thought. It explicitly highlighted that the future policy outlook will be a trade-off between two opposing forces. Firstly, there is a lot of stimulus already in the system and that will continue to work through. But the economy is still facing the overhang of balance sheets that are in need of repair. — Alan Clarke, BNP Paribas

Until recently, we had thought that the decision to expand asset purchases could be a close one, but firmer newsflow over the past week in the shape of surveys, house prices and overseas data had dented expectations for further quantitative easing. Moreover most comment had surrounded the possibilities of no change or a rise of £25 billion. £50 billion was almost off the scale. … The MPC seems more driven than normal by its inflation forecasts and less influenced by the recent dataflow than we had believed. … [W]we would be wary of assuming that £175 billion will be the limit for QE. We suspect that it will be, but a materialization of downside risks would prompt a further expansion of the scheme and we will scrutinize the forthcoming Inflation Report to gauge the MPC’s current thoughts. — Philip Shaw, Investec

European Central Bank

The ECB August statement was very similar to that of July with a mildly more positive tone on the growth front, reflecting the recent improvement in sentiment indicators. However, the ECB was not prepared to claim that these signs should be interpreted as sustainable. Indeed, Trichet emphasised that the Bank remains “very prudent and cautious.” … We remain of the view that ECB rates will remain on hold for longer than markets anticipate. — Jacques Cailloux, RBS

The ECB statement and Mr.Trichet’s accompanying comments reinforce our belief that the bank is likely to keep interest rates at 1.00% deep into 2010, despite the recent improvement in Eurozone economic data and survey evidence. Certainly any policy tightening currently looks a considerable way off, although we would not totally rule out the possibility that the ECB could trim interest rates further if there is any faltering in the current signs that the rate of Eurozone economic contraction is slowing substantially and the risk of extended deflation increases. … The ECB also acknowledged that the supply of credit remains a problem, although it considered that low demand is the main factor behind the subdued flow of bank loans to the non-financial private sector. — Howard Archer, IHS Global Insight

Staying very close to the message of the last press conference, the ECB seems to have become a bit less bearish on the economic outlook. Dropping the explicit reference to the recovery only starting in mid 2010 suggests that the September staff projections could reveal a less gloomy GDP estimate than the current -0.3%. We are at +0.5%. In the Q&A, Trichet tried to play down the potential change to the staff projections though. Instead, he emphasized the high degree of uncertainty, the potential setbacks along a bumpy road to recovery and the lagged effects of the past contraction in activity on the labour market. – Elga Bartsch, Morgan Stanley

As discussed in the Journal article today, the Federal Reserve could decide next week to allow its $300 billion Treasury purchase program run its course in September. It’s not clear which way they’ll go. Officials have been lukewarm on Treasury purchases for months and many seem inclined to let it run out. But with the unemployment rate projected to linger above 8% into 2011 and the outlook uncertain, officials are still looking for ways to promote growth. Bank of England officials surprised some investors on Thursday by boosting its bond-buying plans.

The Fed’s rate decision is a done deal, but it must decide what to do about asset purchases. (Associated Press)

If officials do decide to let the Treasury purchase program run its course, one issue they’ll need to contend with is how to communicate that to the markets. They could say explicitly in the Federal Open Market Committee statement that comes out after the Aug.11 and 12 meetings that they intend to let the purchase program run out. On the other hand, they could just repeat what they’ve been saying after recent meetings, “In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.”

The Fed has already purchased $237 billion and is on a pace to finish its purchases by mid- to late-September. If officials repeat what they’ve been saying without explicitly saying the program will end, it sends an implicit message to the market that the program is about to run out because it’s so close to that $300 billion limit.

But it also gives the Fed a little bit of wiggle room to come up with new plans later. Why explicitly close the door on something if conditions might change? They changed a lot in August and September of 2007 and 2008, and this is one of the few levers the Fed has to work with — albeit imperfect — if the economy takes a turn for the worse. Laurence Meyer, vice chairman of Macroeconomic Advisers LLC, notes Fed officials have an incentive to state their plans explicitly on Treasurys in the name of transparency and clarity for investors. Staying silent also has a benefit: flexibility in an uncertain world. It also has a precedent. The Fed has altered its statement on purchase plans very little after recent meetings, despite considerable market uncertainty about its course on Treasury buying.

The Fed also has decisions to make about its purchases of mortgage backed securities in addition to debt issued by Fannie Mae and Freddie Mac. It has set out to purchase $1.25 trillion mortgage backed securities by year end and $200 billion of mortgage agency debt. At $702 billion and $107 billion, it is behind pace to achieve those goals. But because the Fed still has time before those programs run out, it seems likely to use the months ahead to evaluate how they’re working and how the economy performs. New York Fed President Bill Dudley has advocated tapering off the mortgage purchase programs, which could involve stretching them into 2010. Fed officials also have discussed altering the mix of their purchases. One idea on the table at the last meeting — which will be on the table again — is for the Fed to start buying adjustable rate mortgage backed securities.

Many large retailers reported their July sales numbers this week, with most of them coming out the morning of Thursday, Aug. 6. Following an announcement in May, Wal-Mart and its units no longer publish monthly sales figures. Updates to come as more retailers report sales. (Last updated Aug. 6, 2009)

Sort the chart below by company name, category, change in total or same-store sales, and total sales. Also, see June’s chart.

A recent survey of employers in metro areas across the country shows the pain of the employed: Virtually everywhere, employers’ salary budgets have increased less than it was projected in 2008, according to WorldatWork, a non-profit human resources association.

Washington is seeing more wage growth than other cities in the U.S. (Getty Images)

The average metro-area employer raised the salary budget by only 2.2% this year, 1.7 percentage points less than the expected 3.9% increase, which was also the average actual salary budget raise in 2008 and 2007. Widening salary budgets may reflect pay increases as well as new hires.

Even the brighter spots in the survey look grim. According to figures contained only in the press release accompanying the report, the salaries of average-performing workers will be rising by only about 2% this year in the top 10 cities with the most generous planned paycheck raises. And in four of the 10 cities as many as 25% of employers surveyed are not going to give raises at all this year.

Topping the press release ranking was Washington, D.C., with a 2.3% average paycheck booster. “With a projected 350,000 federal sector job openings in 2010, it’s easy to see why the Washington, D.C. labor market will continue to offer competitive compensation to keep top talent,” Paul Rowson, managing director of the WorldatWork Washington Office and Conference Center said.

Still, the expansion in the federal government and employers that do business with it may be boosting wages in D.C. but it isn’t healing the city’s unemployment plague. Not seasonally adjusted figures from the Bureau of Labor Statistics show that the unemployment rate for the D.C. area was 11.3% in June 2009, up 4.5% from a year earlier and well above the national average of 9.7%. That compares with below-the-national-average joblessness in neighboring counties in both Maryland and Virginia. Whether it is jobs or pay raises, it seems, big government is benefiting commuters more than D.C. residents.

Economists at Goldman, Sachs & Co., among the most bearish on the outlook for the U.S. economy, are now joining the ranks of those who see a rosier outlook for the U.S. this year than previously thought. 

The bank now sees the U.S. economy expanding by a 3% annual rate in the third quarter, more than double their previous estimate of 1%. In a research note to clients today, they point to last week’s second-quarter GDP report, which showed so much inventory liquidation that factory output is now likely to expand in the July through September months, providing a lift to overall growth.

The economists also see a bigger assist coming from fiscal stimulus efforts than they had previously thought, coupled with surprising strength in residential investment rates, most notably home sales. 

Their forecast tweak has no meaningful implications for existing views on inflation (it will stay low); or hiring, (Goldman expects unemployment levels will increase); or any changes in Federal Reserve policy. 

Goldman’s adjustment comes amid a key week for the economy that is likely to see further revisions to second-half U.S. growth after the government’s July nonfarm payrolls report arrives on Friday. Already, market participants have seen the Institute for Supply Management’s surveys of the factory and nonmanufacturing sectors. While the latter, which was released Wednesday, was unexpectedly weak, it was the former’s surprising strength that offered the most important clue about what lies ahead.

The ISM’s Anthony Nieves, who directs the nonmanufacturing survey, said Wednesday that, “manufacturing led us into this recession and manufacturing will lead – as it does historically – out.”

The bulk of the deals that emerged ahead of a loan application deadline for TALF have sold, according to people familiar with the matter.

Issuers including General Electric Co., SLM Corp., Wheels Inc. and First National Bank of Omaha sold newly created bonds backed by loans for education, credit card debt and fleet leases.

The Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF, launched in March, offers investors with loans at attractive rates to buy newly created asset-backed securities. Over $8 billion in deals surfaced ahead of the sixth loan deadline on Thursday. Last month, that figure was a little over $12 billion and in June, it was $16.4 billion.

Most of the consumer loan-backed deals sold this year were eligible for TALF, which helped revitalize the securitization market and improved the availability of credit for consumers.

Initially, the program was viewed as being user-unfriendly but the Fed’s cheap loans drew investors who overcame lengthy documentation and other implementation issues to participate. Now, many hope it is extended past its scheduled expiration at the end of this year.

The Fed has recently also begun to offer attractive financing for new and existing commercial mortgage-backed loans in an effort to revive that sector. The next loan application deadline for the commercial-property portion is Aug. 20.

On Wednesday, General Electric sold two deals eligible for TALF financing: a $500 million deal, backed by dealer floorplans and dubbed GE Dealer Floorplan Master Note Trust 2009-1, has a duration of 2.94 years. The single-tranche deal sold at 168 basis points over one-month London Interbank Offered Rate, or Libor.

The other deal, a $1.75 billion credit card loan-backed deal dubbed GEMNT 2009-2, was originally $1.25 billion. The single-tranche deal, with a duration of 2.93 years, sold at 155 basis points over a short-term benchmark. Joint leads on the bond are RBS and Credit Suisse.

SLM Corp., better known as Sallie Mae, sold its $1.68 billion deal Wednesday. The student loan-backed deal sold at 25 basis points over prime rate, a benchmark. The single-tranche deal has a duration of 3.86 years. Joint leads are Barclays, Bank of America and JP Morgan.

CNH Capital America LLC sold a dealer floorplan-backed deal on Wednesday, according to a person familiar with the matter.

The $583.25 million deal sold at 170 basis points over one-month Libor. The bond, led by RBS and Banc of America Securities, is eligible for funding under the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF.

World Financial Network sold three deals on Wednesday. The first, a $500 million deal of which the top-rated tranche is worth $395 million, sold at 165 basis points over a short-term benchmark. This portion is eligible for TALF loans.

The second is a $310 million deal in which the top-rated portion is worth $245 million. It sold at 205 basis points over the same benchmark.

The third, a $139 million deal, had the $110 million portion eligible for TALF. It sold at 160 basis points over a short-term futures benchmark.

Wheels Inc. sold a $703.3 million fleet lease-backed deal. The triple-A-rated portion of $673.9 million sold at 155 basis points over one-month Libor.

First National Bank of Omaha’s $500 million credit card loan-backed deal sold at 135 basis points over one-month Libor.

Year-to-date issuance of deals eligible for TALF funds stands at over $60 billion.

A roundup of economic news from around the Web.

• Economic Conditions: James Hamilton of Econbrowser looks at the latest economic data, and isn’t convinced of a turnaround. “I wish we had something else besides the auto numbers that would indicate that things have started to get better rather than simply reassuring us that things are getting worse more slowly than they used to be. I’ll be watching Thursday’s unemployment claims and Friday’s employment report with unusual interest this week. But Phil Rothman, like other forecasters, is predicting we lost another 350,000 jobs in July, or two to three times the number we’d need to add each month just to keep the unemployment rate from rising.”
• China vs. U.S. Stimulus: The Economist’s Democracy in America blog looks at the differences between U.S. and Chinese stimulus. “America’s federal stimulus package serves partly to counteract massive cuts by state governments, many of which are required to run balanced budgets. That’s a problem China doesn’t need to cope with… It’s certainly true that China’s ability to get infrastructure spending into the pipeline rapidly has made its stimulus package more effective. Equally important is the Chinese ability to get commercial banks to lend more money and stimulate credit growth essentially through party officials jawboning bankers — something that works much better in a communist system than in a laissez-faire capitalist one, as Timothy Geithner has repeatedly discovered. Some may now yearn for America to emulate one or even both of these Chinese traits. But it should be recognized that one major reason China’s stimulus package has been more effective than America’s is that relative to the size of the economy, it’s much, much bigger.”
• Setser Moves to NEC: Brad Setser, one of the Journal’s picks among top economics bloggers, is leaving his excellent blog to work for Larry Summers at the National Economic Council. “I always intended to write extensively about the world’s emerging markets. I never anticipated that I would end up writing most frequently about an emerging economy that I hardly knew when I first started writing this blog: China. Back in 2004, I was an expert on sovereign debt, not sovereign wealth. But some stories seize you. And China’s rise as a global creditor was just that story. I never thought China’s government would ever add close to $800 billion to its foreign assets over four quarters — accumulate close to $2,500 billion in foreign assets. China has stretched all definitions of the possible. There is — understandably — an enormous amount of interest in the consequences of a world where China is the world’s key creditor country; that, more than anything, seemed to drive this blog’s traffic.” Good luck to Brad. His contributions to the blogophere will be sorely missed.

Compiled by Phil Izzo