The Economy: Housing supplies are creeping lower in this hobbled recovery.
In Congress: A possible extension of COBRA benefits for long-term unemployed.
Climate Change: India and China won’t budge on CO2 emissions before the U.S.

The Economy
Is recent manufacturing strength starting to fizzle out? Squishy car sales in Sept., following the end of the government’s cash for clunkers program, and purchasing managers’ tepid expectations are giving rise to such speculation.
We don’t think so. Zigzagging performance is normal coming out of recession, but the underlying trend is up. Manufacturing job losses have slowed dramatically ... at 51,000 in Sept., compared with an average monthly loss of 171,000, Jan.–June. Profits have climbed back from a bottom ... up $10 billion (on an annualized basis) in the second quarter ... and showing every sign of increasing in the quarters ahead.
Still, some industries are very wobbly and likely to lose ground this quarter: Autos, especially, pulling fabricated metals, plastics, and electronics down with it. They’ll do somewhat better in 2010. The strong horses in the pack, this year and next: High-tech medical equipment, general medical supplies, and defense electronics.
A flood of foreclosures early next year will dampen the housing recovery. The tidal wave is still being held back this year, as mortgage companies struggle to figure out which homes qualify for federal programs. But that finger will come out of the dike by year-end. Making matters worse ... unemployment above 10% and a new surge of adjustable rate loans due to reset.
Sales of foreclosed homes will hit 1.9 million in 2010, up from 1.7 million this year and a half-million or so a year till 2007, when the housing market collapsed.
Expect more for-sale signs on other homes as well. Convinced that a somewhat improved economy will make sales more likely than over the past year, homeowners who aren’t distressed will list their homes.
Nevertheless, housing supplies will creep lower. Inventory of unsold new homes is down 54% ... unsold existing homes ... about 20%.
And price declines will flatten out ... at least on a national average basis. Look for the median price on existing homes to drop 4% in the first half of 2010, then level off. The new home median: Down 2%, first half ... up 2% in the second. For both new and existing homes, the median price will drop 12% this year.
Meanwhile, more foreclosures spell woe for the Federal Housing Admin. Despite agency officials’ insistence that a taxpayer funded bailout isn’t in the cards ...
Uncle Sam’s housing insurance fund will likely need a $50-billion infusion next year to cover losses when borrowers it has insured default on their mortgages.
And it’ll be forced to tighten loan requirements and charge borrowers more.

In Congress
The stubborn jobless rate is getting White House attention in a big way.
Nervous Democrats in Congress worry about big election losses if the rate climbs past 10% and stays there for months as members get ready to face voters. Look for a grab bag of legislative moves meant to help the unemployed and add jobs.
One sure step: An extension of jobless benefits for the long-term unemployed.
Plus an extension of the $8,000 tax credit for first time home buyers. Maybe a $3,000 credit for employers who create new jobs. Obama favors it, but many Democrats say it’s too easy to cheat ... impossible to tell what’s a new job.
Also an extension of the COBRA health care subsidy for the newly jobless.
Businesses want another idea in the mix: Extended loss carryback rules. They were included in the first stimulus but only for small firms. Bigs want in.
States are also lobbying for help. Many are struggling with huge deficits. They particularly want help with Medicaid costs, which could grow substantially if Congress passes a health reform bill that leads to a major increase in eligibility.

Climate Change
The Copenhagen climate summit in December won’t make much of a mark.
The U.S. won’t agree to any binding commitments until Congress acts on legislation tackling the problem of CO2 emissions back home. And the chances of that happening this year are now nil. Lawmakers’ plates are plenty full already.
That means China and India won’t budge, either. They’re not about to agree to fixed targets for their greenhouse gas emissions until the U.S. is also on the line for them. Indeed, they’ll insist the U.S. commit not only to big emissions cutbacks, but also to subsidies for them and other developing countries that won’t get to benefit from decades of unfettered use of fossil fuels. The parties are just too far apart for the meeting to gin up a replacement for the Kyoto Protocol, which ends with 2012.