Wednesday PM December 3rd, 2008
by: Ed Mayberry, December 3, 2008 6:12:35 pm
Worker productivity slowed in the summer to the smallest advance since late last year while wage pressures increased. Neither development is expected to raise inflation alarms at the Federal Reserve. The Labor Department says productivity, the key ingredient for rising living standards, rose at an annual rate of 1.3 per cent in the July-September quarter. That's down from the 3.6 per cent growth rate in the second quarter. Wage pressures, as measured by unit labor costs, rose at an annual rate of 2.8 per cent, after having declined at a 2.6 per cent rate in the second quarter. The Fed closely monitors developments in productivity and wages to see if inflation is getting out of hand. But the central bank is likely to view the recent developments as temporary and not long-run trends.
The Fed's survey of business conditions around the country shows Americans hunkered down heading into the holidays, forcing retailers to ring up fewer sales and factories to cut back on production. The report suggests the economy was sinking deeper into recession, and concludes: “economic activity weakened across all Federal Reserve districts.”
The U.S. service sector contracted dramatically in November as slower spending hurt insurers, retailers and hotels. The Institute for Supply Management, a trade group of purchasing executives, says its services sector index fell to 37.3 in November from 44.4 in October. Last month's figure was far below the reading of 42 that was expected by Wall Street economists surveyed by Thomson Reuters. A reading below 50 signals contraction, while a reading above 50 indicates growth.
Like their counterparts at the malls, online merchants finally got some relief with the unofficial start of the holiday shopping season. It was spurred by plenty of deals and free shipping offers. But the stronger-than-expected bump in online sales Monday couldn't cancel out a lackluster November. Internet research company Comscore says that online sales spiked 15 per cent to $846 million on “Cyber Monday.” It was given that name by the National Retail Federation in 2005 to describe the surge in online spending when customers returned to work after Thanksgiving and shopped from their desks. The four-day period from Friday through Monday saw e-commerce spending jump 13 per cent as both weekend days and Monday all posted double-digit gains. From November 1st through December 1st, however, online spending fell two per cent.
A top executive at General Motors says bankruptcy isn't a viable option for struggling U.S. automakers. He maintains that a retooling plan being presented to Congress this week will save the industry. President and CEO Fritz Henderson acknowledges the automakers bungled their initial efforts to get federal relief in their appearances on Capitol Hill last month. Henderson, interviewed on NBC's “Today” show, concedes “it was not our finest hour.” And he also says it was a mistake for the heads of the companies to fly to Washington on private luxury jets. But Henderson says the companies have a better, more detailed plan this time around and that company officials already are on Capitol Hill briefing lawmakers on it in advance of hearings tomorrow and Friday.
Congressional leaders are reviewing three separate survival plans as they consider whether to call lawmakers to a special session on an auto bailout. GM says it needs a $4 billion loan this month--$12 billion in loans overall plus a $6 billion line of credit. Chrysler says it needs $7 billion in loans by year's end. Ford is seeking access to a $9 billion line of credit just in case one of the other companies fails.
Governor Rick Perry and the state comptroller say the national economic crisis is starting to affect Texas. But they say Texas is in better position than most states to weather the storm. Perry says Texas is a leader in job creation and is one of the few states with a budget surplus. But he's already asked state agencies to limit their spending. And, before meeting with business leaders today, Perry said the economic slowdown could make it difficult to return surplus money to taxpayers. He says that could mean state general revenue is needed to shore up pension funds. Comptroller Susan Combs noted that state sales tax revenue is not growing as fast as it was two years ago. The legislature meets in January.
Members of the Texas Congressional delegation say they plan to build alliances with other lawmakers as part of a campaign to head off possible deep budget cuts for NASA. Lawmakers said they expect President-elect Barack Obama to rescue the ailing economy by shifting billions of dollars from various federal agencies into new programs to stimulate the economy and stabilize the financial system. The Houston Chronicle reports from its Washington bureau that Republican Pete Olson of Sugar Land said he's reaching out to fellow House freshmen from Florida and two Republicans, Bill Posey of Florida and Parker Griffith of Alabama, whose districts include major NASA installations. Meanwhile, Texas Republican Senator John Cornyn, a member of the Senate Budget Committee, already is citing the space agency's economic contributions to Texas and the nation.
Federal auditors say the government must toughen its monitoring of the $700 billion financial bailout. The first comprehensive review of the rescue package says the oversight is needed to ensure that banking institutions limit their top executives' pay and comply with other restrictions. The Government Accountability Office report concludes the Treasury Department has no mechanism in place to track how institutions are using $150 billion that the government injected into the banking system as of last month. The auditors acknowledged that the program, created October 3rd to help stabilize a rapidly faltering banking system, was less than 60 days old and has been adjusting to an evolving mission. But the 72-page report is bound to feed Congressional concern that banks and other institutions are not being properly monitored and are not using the money to increase lending.
Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates in an effort to stabilize the housing market. Scott Talbott of the Financial Services Roundtable says that under the proposal, Treasury would seek to lower the rate on a 30-year fixed rate mortgage to 4.5 per cent. That's about one percentage point below the current rate. Talbott says Treasury would do so by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac. Treasury spokeswoman Brookly McLaughlin would not comment on speculation about actions Treasury may take in the future.
Washington Mutual says despite nationwide layoffs it's keeping open a regional operations center in San Antonio that employs 1,800 people and is at the core of its job creation agreement with the state. WAMU became the largest bank to fail in the ongoing credit crisis and was taken over by JPMorgan Chase in September. JPMorgan Chase is cutting a total of 9,200 Washington Mutual jobs. However, company officials said the San Antonio operations center will remain open. It's not yet known how many other Texans will be affected by layoffs. WAMU spokeswoman Missy Latham says there will be small pockets of layoffs in Texas.
Jet engine maker Pratt & Whitney today laid off about 350 employees nationwide due to the slowdown in the global economy. Pratt & Whitney spokeswoman Jennifer Whitlow says the cuts affect less than one per cent of the work force of more than 38,000 employees--and take effect immediately. Pratt & Whitney, a subsidiary of United Technologies, supplies military and commercial jet engines for products such as Boeing's 747 and 777, as well as the Airbus A300. It also builds engines for Lockheed Martin's F-22 fighter jet and the F-35 joint strike fighter. About 280 of the layoffs will occur at the company's Connecticut operations. The remaining 70 will affect employees in 12 other states--including Maine and Texas. Whitlow says those cuts will affect salaried positions including administrative assistants, engineers and accountants.
Sixteen Indiana National Guard soldiers are suing a contractor they say knowingly let them be exposed to a toxic chemical in Iraq. The federal lawsuit was filed in Indianapolis against Houston-based KBR. The suit claims the guardsmen from a Tell City-based unit were exposed to a carcinogen while protecting an Iraqi water pumping plant shortly after the U.S. invasion in 2003. The lawsuit says some of the guardsmen now have respiratory system tumors. The lawsuit says that officials with KBR knew at least as early as May 2003 that the plant was contaminated--but concealed the danger from civilian workers and the soldiers. KBR didn't immediately comment on the lawsuit.
Hundreds of workers hired to clean up debris, repair damaged roofs and restore flood-soaked buildings now say they were robbed of wages, stranded with nowhere to stay and injured on the job. The pattern was first seen after Hurricane Katrina devastated New Orleans. Now, worker advocates say it's being repeated in Houston and other Texas Gulf Coast cities ravaged by Ike. The Houston Interfaith Worker Justice Center says that, in some cases, the same employers cited for worker abuse in Katrina have also turned up in worker complaints in Texas. It says one Florida-based company, Timberwood Carpentry, recruited 1,000 workers from Florida, Mississippi, Louisiana, Georgia and Texas for clean-up work. They offered lodging, food, transportation and months of work. However, once workers got to Port Arthur there were no hotel rooms. Instead, they had to sleep outside or in cars. The center says about 160 workers reported wage theft with a total of $121,681 in pay withheld from workers. Of that, only $35,770 has been recovered. No comment from Timberwood.
For the second time in a week, the U.S. Bureau of Land Management is pulling parcels from an expanded oil-and-gas leasing program in Utah. The tracts include land inside Nine Mile Canyon and Desolation Canyon on the Green River. The BLM has now pulled almost 100,000 acres from an auction set for December 19th. More than 276,000 acres will still be up for bid. There's no word why the parcels are being pulled, but conservationists have been condemning drilling near what are considered some of Utah's scenic treasures. The other tracts withdrawn from the auction are located on and near the borders of Arches National Park, Dinosaur National Monument, and Canyonlands National Park.