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High Unemployment Keeps Dragging the Economy Down

A detail from Ben Shahn's mural "Unemployment" at the Voice of America in Washington, DC flickr hide caption

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As high unemployment continues to drag on the economy, consumers saved more and spent less while businesses cut back on orders for manufactured goods in June, the Commerce Department said.

Personal incomes and spending were flat in June, with consumers finding ways to squirrel money away. The savings rate rose to 6.4% from 6.3% in May, for a total of $725.9 billion saved.

Prices barely budged, with the consumer price index unchanged in June compared to May, and up just 1.4% compared with the previous year. That's without volatile food and energy prices. Factor them in, and prices fell 0.1% compared to May and rose 1.4% compared to a year earlier.

The report is fodder for deflation hawks. St. Louis Fed Chief James Bullard warned about that outcome last week; NPR's Michele Norris discussed the risks of deflation with him Monday.

Meanwhile, orders for factory goods fell -1.2% in June to $406.41 billion, led by big drops in orders for construction machinery and defense communications equipment.

Separately, the National Association of Realtors said pending sales of existing homes fell -2.6% in June. The housing market has been weak since a credit for new homebuyers expired at the end of April. Compared to May, pending sales fell the most in the Northeast, -12.2%, and the least in the West, -0.2%.