Friday PM January 23rd, 2009
by: Ed Mayberry, January 23, 2009 4:01:27 pm
Houston’s job growth increased in December, with 57,300 new jobs. That’s a 2.2 per cent increase. Houston’s unemployment rate is holding steady at 5.5 per cent. The Texas Workforce Commission says the state unemployment rate is up to six per cent and 25,700 jobs were lost in December. The unemployment rate was a sharp increase from 5.7 per cent in November and 4.2 per cent a year ago. The monthly job loss was the third since September, after the state went more than a year without a net job loss in a month. Texas has still gained more than 150,000 jobs over the past year compared with job losses of 2.6 million nationally. But Commission Chairman Tom Pauken says the national economic storm has reached Texas. The Texas unemployment rate remains below the national rate of 7.2 per cent.
Dreyer’s is closing its packaged ice cream plant in Houston, according to the Houston Chronicle, laying off 168 workers. The plant closing is set to be complete by April, but the warehouse and distribution center will remain open. Distribution and sales will keep 115 workers in Houston.
Lexicon Pharmaceuticals is laying off 122 more employees—about 22 per cent of its work force. Cuts are in basic research and early-stage discovery and support. Last January, Lexicon cut 133 employees, and then a further hundred in May.
The Houston Auto Show gets underway this weekend at Reliant Center. Manufacturers are offering sneak peeks at their new models. Ford’s Dennis Slevin saysFord was already into its revitalization plan before fuel prices skyrocketed and before the economy soured.
"We are committed to have the best or among the best fuel economy in every vehicle that we sell and we’re already delivering on that with the 2009 F-150, the Fusion hybrid and Fusion four-cylinder gas—better performance and the best fuel economy."
Ed: “At some point, people do buy cars, even if they’ve been holding off.”
"Exactly. We think there’s some pent-up demand out there. You know, we expect things to be slow the first half of the year and then to improve in the second half of the year. Another thing that we are really focusing on is having styling that generates an emotional response from our customers. Because, let’s face it, there’s a lot of good product out there, and you need people to be excited about your product in order to spend their hard-earned cash for it."
The other major manufacturers are also at the Houston Auto Show, which runs at Reliant Center through February 1st.
The president and vice chairman of Chrysler says his company is “alive and well,” and that 2009 will be about facing economic realities. Jim Press told analysts at a J.D. Power and Associates roundtable in New Orleans that Chrysler is investing in new products and planning for lower sales volume. Press says Chrysler shouldn't need more bailout money from the government than the $7 billion in loans it already requested. Chrysler received $4 billion this month and hopes to get the other $3 billion after it submits a viability plan. Chrysler's financial arm also received a $1.5 billion loan from the Treasury Department last week that let Chrysler start offering zero-percent financing. The company added other incentives including rebates and employee pricing. Press says the company hopes the incentives will help Chrysler sell its way out of its situation.
President Barack Obama, joined by Congressional Democrats, sought to ease Republican complaints about a massive economic stimulus plan. They met with GOP leaders at the White House, promising to consider some of their recommendations. Many Republican lawmakers say the $825 billion package is too costly, and that too much of the spending is for long-range projects that will not stimulate the economy quickly. House Speaker Nancy Pelosi told reporters that GOP leaders “had some constructive suggestions” which she said will be reviewed. Speaking briefly before the meeting started, Obama urged bipartisan support for the package, adding that he wanted to hear the Republicans' concerns. Obama thanked Congressional leaders for working quickly to move the rescue package that he says will create three million to four million new jobs.
The chairman of the Senate Finance Committee has released details of the economic stimulus plan. Under the Senate proposal, senior citizens receiving social security would get a bonus payment of $300. There's also a temporary two-year $500 tax cut for most workers and $1,000 for couples. The plan also includes a $2,500 tax credit to help pay for college. There are tax cuts for businesses and to promote renewable energy. And there's $87 billion worth of help to states struggling with their budgets for the Medicaid health care program for the poor and disabled. The tax cuts and spending proposals total $355 billion under the plan released by Finance Committee Chairman Max Baucus. It comes in anticipation of a panel vote on Tuesday. The proposals will be paired with $400 billion in further spending proposed by the appropriations committee on the Senate floor.
Compass Bank says it is cutting 1,200 workers, or about 10 percent of its staff, as part of an overall reorganization. The company said the job cuts will spread across all of its business units in six states. Compass said the workers who will lose their jobs will be notified within the next few days and will receive severance. The cuts include management and non-management positions. The bank is the U.S. unit of Spain-based Banco Bilbao Vizcaya Argentaria, which bought compass for $9.6 billion in 2007.
The government says it has distributed an additional $1.5 billion to 39 banks nationwide as part of the $700 billion financial rescue program. The latest infusions of money bring the total amount disbursed through the bailout program to $193.8 billion. The government plans to devote $250 billion of the program's first $350 billion to making direct purchases of bank stock as a way of bolstering banks' resources and lending. The Treasury Department says it made the latest capital injections on January 16th.
The Minerals Management Service accepted high bids totaling $483.9 million for 313 offshore petroleum leases in the western Gulf of Mexico. During the agency's August 20th sale in New Orleans, 53 companies submitted 423 bids on 319 tracts off the coast of Texas. Officials rejected high bids totaling $3.3 million on six tracts as not meeting fair market value. The highest bid accepted on a tract was $61.1 million by Statoil Gulf of Mexico. ExxonMobil was the top overall winner, taking 128 tracts with high bids totaling $125.3 million.
The uncertain economy is hurting the nation's major freight railroads because shipping demand has fallen. But Omaha-based Union Pacific Chief Executive Jim Young said the railroads should be helped by a stimulus package if Congress approves one. And the railroads will benefit regardless of whether most of the stimulus money goes to consumers or whether it goes to major infrastructure projects because either will contribute to higher shipping demand. But it's difficult to make plans based on a stimulus package because it's hard to predict when one might get approved and how quickly it might affect the economy. On Thursday, UP reported a 35 per cent surge in fourth-quarter profit due to lower fuel costs.
The Government Accountability Office says the Department of Veterans Affairs is still low-balling budget estimates to Congress to keep spending down. A report finds the VA's strategic plan covering 2007 to 2013 uses cost assumptions and projections that are simply unrealistic. The report comes amid an expected surge in demand for care from veterans, and highlights the Bush administration's problems in planning for the treatment of veterans that President Barack Obama has pledged to fix. The GAO report says the VA undercut and underestimated costs by hundreds of millions of dollars in some cases, while vastly overstating other types of care it planned to provide. The VA's new secretary, retired General Eric Shinseki, has promised to submit “credible and adequate” budget requests to Congress in the future.
The British Statistics Office says the country's economy shrank 1.5 per cent in the fourth quarter, which puts it officially in a recession. It was the biggest fall since the second quarter of 1980 when Margaret Thatcher was prime minister. The drop follows a 0.6 per cent decline in the third quarter of last year. Two straight quarters of falling output is a common definition of a recession. Britain's economy has been hard hit by the world financial crisis, with rising unemployment, falling house prices and slumping pound.
It's a sign the Obama administration may take a harder economic line with China than the Bush administration has. Treasury Secretary-designate Timothy Geithner says President Barack Obama believes China is “manipulating” its currency. But at the same time, Geithner is suggesting that now might not be the right time to brand China a currency manipulator under U.S. trade law. Such a designation would trigger negotiations between the two countries and could result in U.S. economic sanctions against China. American manufacturers have long sought to have China declared a currency manipulator, something the Bush administration declined to do. U.S. manufacturers say the Chinese currency is significantly undervalued, making Chinese goods cheaper for U.S. consumers and American products more expensive in China. That, in turn, has led to a soaring U.S. trade deficit with China.
Hurricane Ike-damaged Shriners Hospital for Children in Galveston is ceasing operations. Employees were told during a staff meeting the hospital will close. The Houston Chronicle reports hospital administrator John Swartwout, Jr., said the Shriners board decided January 16th to suspend hospital operations as an emergency measure to shore up its finances. The September 13th storm caused significant damage to the hospital known for its burn unit. The hospital has 320 employees who will be paid until March 29th and they'll also receive career transition assistance. Employees were instructed to go home and not return until a 1 p.m. meeting on Monday with Shriners International President and CEO Ralph Semb. Reconstruction at the Galveston hospital was halted this week due to the cost. Semb told the Associated Press this week that the hospital had significant damage. He says the group can't afford to repair it. Semb also says the organization has lost more than $3 billion from its endowment fund as a result of the economic downturn.
Major airlines moved to match a fare sale started by Dallas-based Southwest Airlines. The carriers face weak demand for travel during the recession. Southwest — through Monday — will sell seats to almost everywhere it flies starting at $49 to $99 each way. Tickets must be bought at least 14 days before flying, travel must be completed by March 11th and seats are limited. Fort Worth-based American Airlines and Houston-based Continental Airlines have matched the Southwest fares. Delta Air Lines appeared to match the Southwest move. Delta posted a systemwide fare sale on its Web site that runs through Monday — same as the Southwest sale. Southwest launched the sale after this week's announcement that it lost money in the fourth quarter — its second-straight losing quarter after 69 straight profitable ones.
A top presidential aide says Ukraine may later seek changes to a hard-won gas deal with Russia because it hurts the national economy. President Viktor Yushchenko's economic adviser Olexandr Shlapak told reporters that while the deal will be implemented for now, Ukraine may seek to revise it this summer. Shlapak says Ukrainian officials should examine the agreement together with European specialists and come up with proposals to amend the deal. The agreement was signed by the countries' state gas companies and ended a nearly two-week gas cutoff to European countries caused by a politically charged gas dispute between the two ex-Soviet neighbors.
FEMA is changing the way it calculates flood danger. It's been using maps that let people know about flooding risks. They also regulate development in flood plains and set flood insurance rates. And they're in dire need of updating. FEMA has been bringing the flood maps up to date over the past five years. But a new report from the National Research Council says FEMA would be better off using Lidar, an optical sensing technology, to determine areas of greatest risk. Right now, FEMA is using data from the U.S. Geological Survey's national elevation dataset. Asked if better flood maps could save lives and property, a FEMA spokesman says that all depends on how local communities choose to use the improved information.
The Gulf of Mexico is on the path to become the first ocean where large-scale fish farms could sprout. Next week, the Gulf of Mexico Fishery Management Council is expected to vote on whether to allow offshore aquaculture operations in federal waters. The council has shown an eagerness to permit the activity. The vote will be a major step in a six-year-long debate among fishermen, scientists, environmentalists and business groups about the viability and dangers of offshore fish farming. The council is expected to vote either Wednesday or Thursday at a meeting in Bay St. Louis, Mississippi.
The 23rd annual AAA Texas Cruise and Travel Show is set for Sunday afternoon at the Houston Marriott Westchase on Briarpark. The free event features over three dozen travel vendors representing domestic and European destinations, cruises, hotels and travel bureaus.
The number of rigs actively exploring for oil and natural gas in the United States dropped by 53 this week to 1,515. Of the rigs running nationwide, 1,185 were exploring for natural gas and 318 for oil, Houston-based Baker Hughes reported Friday. A total of 12 were listed as miscellaneous. A year ago, the rig count stood at 1,747. Of the major oil- and gas-producing states, Texas lost 16. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.
Oilfield services provider Schlumberger says its fourth-quarter earnings fell nearly 17 per cent. It says a significant fall off in drilling and other activity by oil and gas companies hurt the results, which missed Wall Street forecasts. Schlumberger says its net profit for the October-December period amounted to $1.15 billion. A year before, the quarterly profit was $1.38 billion. Revenue rose to $6.87 billion from $6.25 billion a year earlier. Analysts surveyed by Thomson Reuters on average expected revenue of $6.99 billion. Schlumberger said it expects demand to erode further this year, with significant declines in North American gas drilling, Russian oil operations and some offshore regions. The company's principal offices are in Houston, Paris and The Hague, Netherlands.
Comerica says its fourth-quarter profit plunged nearly 98 per cent as credit costs rose and the regional bank earned less in its fee-related businesses. But shares soared as investors seemed reassured by the bank's ability to turn a profit despite the harsh economic conditions. The Dallas-based bank also reiterated a strong commitment to cutting back expenses--including additional job cuts through the first quarter. For the final three months of 2008, the bank reported net income after paying preferred dividends of $3 million. Results included $17 million of preferred stock dividends issued to the Treasury Department in exchange for $2.25 billion in government aid. The results also included severance-related expenses of $18 million. Net interest income, or the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, fell 12 per cent to $431 million. Noninterest income, or money earned from fees and other charges, dropped 24 per cent to $174 million.