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Don’t look now, but your local bank branch might be disappearing.

Faced with a severe economic environment and massive consolidation within the industry, banks are taking a hard look at their retail banking locations.

Severe loan losses in areas like credit cards and commercial real estate, have also put banks’ capital levels under severe pressure, prompting some lenders to look for ways to cut expenses.

"Banks are broadly reassessing their branches," said Bob Meara, senior analyst at the consultancy Celent. "What we don’t know is how they are going to react."

From big banks to regional players, there are already indicators that the nation’s massive banking system is trying to slim down.

Bank of America (BAC, Fortune 500), the nation’s largest bank by deposits, made headlines in July when reports surfaced of its plans to trim as much as 10% of its brick-and-mortar branch locations.

And Birmingham, Ala. -based Superior Bancorp (SUPR), which operates 77 offices in the Southeast, revealed plans late last month to shutter seven branches in an effort to save $3 million annually.

Some experts suggest that examples like BofA and Superior are the exception rather than the rule among the 8,000 or so institutions that populate the U.S. banking industry.

But what is clear is that banks will continue to feel pressure along a number of fronts to cut costs, which could mean shuttering more neighborhood locations.

For starters, some banks aggressively overbuilt in the years leading up to the crisis, experts note, hoping to capitalize on the housing market boom among other things.

"There is no question there were some areas that were overbranched," said Scott MacDonald, a professor of banking at SMU’s Cox School of Business. "If you go to somewhere like California, there was literally a branch on every corner."

As of the end of last June, the U.S. banking industry boasted over 99,000 branches. Five years earlier, that number stood at just under 88,000, according to recent data published by the Federal Deposit Insurance Corp.

Nowadays however, banks are coping with the fact that branches are generally much less profitable nowadays as banks have become reluctant to issue new loans in light of troubling economic signs like rising unemployment.

"What is absolutely clear is that the banking crisis of the last year and overall economic conditions have significantly hampered branch profitability," said Meara personal loans.

And running a bank branch isn’t cheap.

Bancography, a Birmingham-based consulting firm that advises lenders across the country on expansion plans, estimates that opening a new, 3,500-square-foot branch, costs, on average, anywhere between $2 million and $2.5 million to open.

To keep that same branch running, banks pay, on average, about $350,000 to $400,000 a year, to cover everything from employee salaries to taxes.

Consolidation and technology

Intensifying the prospect for branch consolidation is the unprecedented number of mergers within the industry over the last 12 months.

Even as it maintains its plans to continue building branches, JPMorgan Chase (JPM, Fortune 500), for example, has closed nearly 400 locations as a result of last fall’s purchase of thrift giant Washington Mutual.

And while Wells Fargo (WFC, Fortune 500) has yet to determine exactly how many branches it will keep or close as a result of its acquisition of Wachovia, there are already signs it will make cuts to its retail bank locations which totaled more than 6,600 as of the end of the last quarter. The company has already announced it will consolidate 14 stores in Colorado, where it plans to start its branch conversions this fall.

In such instances, notes Jamie Eads, a senior project manager with Bancography, lenders are looking closely at those two branches that are geographically redundant and determining which ones they can get rid of, based on a combination of factors including performance and location.

"It is just a way of continuing to serve the market without having much overlap," she said.

Consumers’ increased reliance on non-traditional channels to do their banking — including paying bills online or using the ATM to make deposits — is also pressuring some banks to rethink their branch strategy.

Insurer USAA, for example, has enjoyed explosive deposit growth in recent years despite having a virtually non-existent retail branch network.

But most experts label USAA’s success an anomaly in a business built on customer relationships. If anything, expect a more moderate decline in the number of bank branches in the years ahead.

"Branches will be central to deposit gathering for some time," said Meara. 

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U.S. non-farm productivity in the second quarter rose at its fastest pace in six years as companies slashed costs to protect profits, government data showed on Tuesday.

The Labor Department said non-farm productivity rose at a 6.4 percent annual rate, the biggest gain since the third quarter of 2003, from a revised 0.3 percent gain in the first quarter. Productivity for the January-March quarter was previously reported as a 1.6 percent gain.

Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 5.3 percent rate in the second quarter.

“It’s good because it helps keep inflation low; labor costs are pretty benign,” said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.

“On the other hand it means you can do more with fewer people,” he said.

U.S. Treasury debt prices held gains on the data, while stock index futures were little moved.

Hours worked plunged at a 7.6 percent rate in the second quarter, the Labor Department said.

Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, fell 5 instant cash advance.8 percent, the biggest decline since the second quarter of 2000. Analysts had expected unit labor costs to fall 2.4 percent in the second quarter. Unit labor costs dropped by a revised 2.7 percent in the January-March quarter.

The government also published revisions to productivity for 2006 through 2008 following adjustments to gross domestic product estimates.

Compensation per hour rose at a 0.2 percent pace and, adjusted for inflation, was down 1.1 percent, while output fell at a 1.7 percent rate in the second quarter.

Compared with the April-June quarter of 2008, non-farm productivity was up 1.8 percent. Unit labor costs fell 0.6 percent year-on-year. Compensation from a year earlier rose 1.3 percent and was up 2.2 percent once adjusted for inflation.

Output, measured on a year-on-year basis, was down 5.6 percent.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

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U.S. stocks have entered a new bull market, and the S&P 500 index could rise as much as 10% from current levels by the end of this year, Abby Joseph Cohen, the head of Goldman Sachs’ investment policy committee, said on CNBC Thursday.

Goldman Sachs sees the benchmark Standard & Poor’s 500 index in a range of 1,050-1,100 points toward year-end, said Cohen, the firm’s senior investment strategist and president of its global markets institute. That range, she said, "is where we should be toward the end of this year."

Stocks have recovered sharply since hitting 12-year lows in early March, with the S&P 500 index now up 47% since trading as low as 666.79 points in March. In early afternoon trade on Thursday, the S&P was off 0.63% at 996.44 points.

"We do think the new bull market has begun," Cohen said free online credit report. "It may prove it began in March of this year."

Cohen also said she expects the labor market to improve, but in "an erratic way."

"It appears job losses are slowing, and there is some job creation going on," she said. But "we have many more months of difficult labor situation ahead, even if the recession, using GDP or industrial production, is almost over."

Employment data has been keenly watched for signs of improvement. On Friday, investors will get another look at the job situation with the Labor Department’s July employment report. 

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The pace of economic decline slowed substantially in the second quarter, as the U.S. economy shrank at an annual rate of 1% — far less than it did in the first quarter, according to a government report released Friday.

Economists surveyed on Briefing.com expected the GDP to contract by 1.5%.

GDP is the broadest measure of the economy, which has been mired in recession since December 2007, worsening in recent quarters. The fourth quarter of 2008 and first quarter of 2009 measured the worst two quarterly declines in 26 years — the nation’s gross domestic product fell a revised 5.4% and 6.4% respectively.

The slower second-quarter contraction was largely due to a smaller decline in exports and business inventories as consumer prices and government spending rocketed higher.

Businesses spending fell by 8.9% last quarter, compared with a 39.2% drop in the first quarter. The decline in business inventories also took a significantly smaller bite out of GDP in the most recent quarter than in the previous two.

Federal government spending grew by 10.9% in the quarter, after falling by 4.3% in the first quarter. That was only partially aided by the stimulus program, as very little of Recovery Act funds were spent between April and June.

That partially offset a 1.2% decline in consumer spending, which makes up about 70% of GDP. In the first quarter, consumer spending was actually up 0.6%.

GDP has contracted for four straight quarters — the first time that has happened since the Commerce Department began tracking that measure in 1947. But the most recent quarterly decline is the smallest since the second quarter of 2008, giving hope to some economists that the recession is at or nearing an end.

President Obama sounded a note of caution, saying at a news conference Friday afternoon that the economy has not yet begun to recover, but the GDP numbers were "encouraging."

"We won’t have a recovery as long as we’re losing jobs, [but] you need to have economic growth before you have job growth," said Obama. "Today’s GDP is an encouraging sign that the economy is heading in the right direction. That means, eventually, businesses will start growing and will start hiring again free business card. But this won’t happen overnight."

Farewell recession? Lakshman Achuthan, managing director of the Economic Cycle Research Institute, said the GDP number was encouraging, and he expects the recession to come to an end this summer. While GDP is a trailing indicator, he said the change in direction suggests the worst is behind us.

"As we suspected, things got a lot less bad in terms of economic activity. It means we turned a corner earlier this year in terms of the severity of the recession," he said. "The free market correction is abating quickly."

Achuthan said the recession turned into "an abyss" last fall as the credit market froze. But trillions of dollars in government programs to ease credit have largely succeeded, which helped normal business cycle dynamics take over.

"The vicious cycle is become virtuous," he said. "Confidence is returning, pent-up demand is creating higher prices, and the economy is getting stronger."

ECRI’s leading indicators, which predict future economic conditions, have rocketed to a five-year high. Achuthan said that suggests we have reached the bottom, bringing about an end to the latest round of economic contractions. He also said data suggest there will be no double-dip recession, or an ‘L-shaped’ recovery, in which the economy revives but stagnates.

Still, the labor market remains distraught, and the economy will need to stop shedding jobs to begin a real rebound. Since the economy still faces real challenges, Achuthan thinks it will be a "small ‘v’ shaped recovery instead of a big ‘V.’"

The National Bureau of Economic Analysis, which declares the beginning and end of recessions, takes into consideration more factors than just GDP, including job growth. It also doesn’t typically doesn’t officially call the start or end until several months later. 

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U.S. Treasury Secretary Timothy Geithner said on Sunday more actions may be necessary to firm up economic recovery, including extended unemployment aid, and declined to rule out future tax hikes to reduce massive budget deficits.

Geithner also said the government needed to show the will to reverse massive deficits after the recovery, including raising tax revenues if necessary.

“We have to bring them down to a level where the amount we’re borrowing from the world is stable at a reasonable level,” Geithner said on ABC’s “This Week with George Stephanopoulos.”

“And that’s going to require some very hard choices. And we’re going to have to do that in a way that does not add unfairly to the burdens that the average American already faces.”

He said it was too soon “to make a judgment about what it’s going to take” to reduce deficits.

There were signs the economy is starting to improve, Geithner said, but “we have a ways to go” before it starts growing enough to create jobs again.

Although economic forecasters predict that output will turn positive in the second half of this year, Geithner said as that happens, the pace of job losses will slow materially instant cash advance.

But the Obama administration may have to look at extending unemployment benefits toward the end of the year to deal with a stubbornly high jobless rate.

“I think that is something that the administration and Congress are going to look very carefully at as we get closer to the end of this year,” Geithner said.

Former Federal Reserve Chairman Alan Greenspan, speaking later on the same program, said strengthening confidence in the economy could be dashed if home prices were to take another turn downward.

Greenspan told the ABC program he didn’t believe that a steep drop was in store, but home prices had stabilized only temporarily.

“It is possible that could get a second wave down,” Greenspan said. “Under those conditions, we would get a very significant change in the underlying confidence in the consumer area,” as foreclosures rise and more home values fall below their mortgage levels.

(Editing by Doina Chiacu)

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Loan servicers will "significantly" increase the pace of mortgage modifications under the Obama foreclosure prevention program, the Treasury Department said Tuesday.

The Obama administration wants to see 500,000 trial modifications in place by Nov. 1. Currently, 200,000 are underway.

Officials called executives from 25 servicers participating in the program to Washington Tuesday to discuss improving the 5-month-old plan’s implementation.

Both the Obama administration and the industry are feeling mounting pressure from borrowers who say their servicers are not responding to their calls and applications, losing their paperwork or not making decisions.

"[T]oo many homeowners are at risk of foreclosure right now," Treasury Secretary Tim Geithner said in a statement Tuesday. "Today’s meeting was an opportunity to identify ways to accelerate the program and bring relief faster."

Announced in February, the loan modification plan allows eligible borrowers who are in or at risk of default to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. The adjustments are made permanent after the homeowner makes three on-time payments. Homeowners, servicers and mortgage investors receive incentive payments in hopes of increasing participation.

So far, the government has committed $20 billion to the effort and has said it would provide $75 billion overall.

Most servicers started implementing the program in April and May, but soon faced harsh criticism as applications flooded in. CNNMoney.com has heard overwhelming negative reviews from the nearly 500 people who wrote in about their experiences.

"Obama’s plan is a joke," wrote Jean in Michigan. "The banks are a joke. fax, fax, fax, call, call, call and no response for months. Even washington rep can’t get an answer or help, what a sham!!!!"

Also, the number of people falling behind on their payments continues to mount, especially as unemployment rises. Some 1.5 million people fell into foreclosure in the first half of 2009, up 15% from a year ago.

Even President Obama acknowledges that the program is failing to stem the foreclosure tidal wave.

"Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn’t been keeping pace with all the foreclosures that are taking place," Obama said last month.

The administration has said the plan could help up to 4 million people avoid foreclosure. Though officials said they are on track to reach their goal, the Government Accountability Office cast doubts in a report last week on whether this number could be achieved.

To help servicers speed up the modification process, the administration said it will work with the institutions to set more exacting performance measures, such as average borrower wait time, document handling and response time for completed applications cash loans in 1 hour. Officials will release their first progress report on each servicer — detailing the number of trail modification offers were extended and are underway — by Aug. 4.

Servicers, including Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500), Ocwen (OCN) and Wells Fargo (WFC, Fortune 500), were spending all of Tuesday meeting with Treasury and Housing department officials in the morning and early afternoon, and then with housing counselors in the latter part of the day.

In the morning session, servicers said they would like to see a standardization of documents and definitions, which will speed their application review and reporting process. Also, they asked the administration to create a Web site where borrowers could apply for a modification and submit their documentation electronically, rather than fax them in. And financial institutions said they are looking into why only 50% of the troubled borrowers they contact respond.

"Things can be done all through the process to make it work a little better," said Paul Leonard, vice president for government affairs at the Housing Policy Council, which represents financial institutions.

Servicers believe the administration’s goal is attainable, he said.

To reach it, however, servicers will have to hire and train more staff. Like its peers, Citigroup said it is ramping up its efforts.

"We have increased loss mitigation staff, added call center capabilities, expanded training and taken other important steps to fully implement the program in its current stage of development," said Sanjiv Das, chief executive of CitiMortgage. "Today’s meeting was an important step toward the administration’s and our shared objective of improving the effectiveness and efficiency of the Make Home Affordable mortgage modification program."

How has President Obama’s $787 billion stimulus program affected you or your community? Are you seeing a benefit from the Making Work Pay tax cuts or the additional $25 in unemployment benefits? Are you seeing construction jobs or other stimulus-funded work in your neighborhood? Do you still have a job because of stimulus funds? We want to hear your experiences. E-mail your story to realstories@cnnmoney.com or send in an iReport and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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