Monday PM February 2nd, 2009
by: Ed Mayberry, February 2, 2009 4:02:23 pm
Macy's says it will cut 7,000 jobs, or four per cent of its work force, and slash its dividend as it looks to lower expenses. Cincinnati-based Macy's says the work force reduction includes positions in offices, stores and other locations. Store staff reductions will average about five or six positions per store. Eleven stores are slated to close, but none in Texas. The cuts will include some unfilled jobs. The company has a total current work force of approximately 180,000. Macy's anticipates the reductions and other actions will lower its selling, general and administrative expenses by about $400 million annually starting in 2010.
Shriners Hospitals for Children in Galveston tells the Texas Workforce Commission that it will lay off 354 employees. An announcement on January 23rd indicated that it would suspend operations at the Galveston facility, hit by Hurricane Ike. The hospital says the 30-bed Galveston facility would not close permanently, but until financial conditions improve.
The economic downturn has forced private industry and state and local government to shed jobs, but one major employer in the country is hiring: the federal government. Economists say a strong federal work force is key to economic recovery. Were President Barack Obama to put any of the nearly two million federal civil servants out in the street in the middle of the worst economic downturn since the Great Depression, the consequences could be dire. Obama's proposed $800-plus billion economic aid plan, which includes heavy spending on public works, is expected to increase the ranks of government workers. That measure is working its way through Congress just as Microsoft, Pfizer, Caterpillar, Home Depot and scores of other companies are shedding workers. The nation's governors are asking or ordering state workers to accept furloughs, salary reductions, truncated workweeks or reduced benefits.
The U.S. Senate has opened debate on President Barack Obama's massive economic stimulus package. Before the debate got under way, Senate Republican Leader Mitch McConnell called for more mortgage relief and additional tax cuts, while Democrats conceded privately they will drop items that have drawn bipartisan criticism. The bill is a major test for Obama and Democrats controlling the Senate. There's unrest among Democrats such as Budget Committee Chairman Kent Conrad, who have expressed concern that many of the items in the sprawling measure won't do much to stimulate the economy. The Senate measure is broadly similar to an $819 billion plan that passed the House last week.
The Senate's current version of an economic stimulus bill offers billions more in business tax credits than the House plan does. Both versions would allow money-losing companies to get refunds on taxes they paid on profits in previous years. But the Senate bill offers more ways to do it and that could add up to more than $15 billion in payments to those companies. The total cost of the Senate package stands at about $890 billion, compared with $819 billion for the plan the House passed last week. The tax packages in both are aimed at getting individuals and companies to spend money at a time when most are inclined to cut back and save. The business tax credits seek to help struggling companies stay afloat and reward companies that invest and expand.
Some new plans for rescuing the financial sector are set to be unveiled next week. A Treasury official says Treasury Secretary Timothy Geithner will announce the plans next week in a speech. They'll include new programs aimed at helping homeowners avoid foreclosure, along with efforts to stabilize the banking sector. Over the weekend, top Treasury officials met with people from the financial industry and with other policymakers to talk about possible rescue plans. One is a so-called “bad bank” run by the government. It would buy problem assets that are clogging bank balance sheets. Another plan would provide insurance against losses on assets that banks will continue to hold on their books. The plans haven't been finalized. Officials said as recently as Saturday that they planned to release the plans this week, but they have since pulled back.
President Obama says his administration will establish an independent board to review the government's massive financial bailout program. Obama also said in an interview that some banks are going to have to write down bad debts, while other banks may fail. Administration officials, the Federal Reserve and top banking officials are working on proposals for how the government will use the last $350 billion from the $700 billion rescue program with some lawmakers clamoring for greater oversight. In an NBC interview taped Sunday and aired on NBC's Today Show, Obama said he is ultimately accountable and “if I don't have this done in three years then there's gonna be a one-term proposition.”
Legislative leaders have asked state agencies to cut their current spending in an effort to avoid mandatory funding slashes in an increasingly tight state budget. In a letter dated Friday, Republican House Speaker Joe Straus and Lieutenant Governor David Dewhurst asked heads of state agencies for their recommendations to cut costs by 2.5 per cent. While the national recession has impacted the Texas economy, the 2010-2011 state budget is not facing the dire circumstances other states are grappling with. But Friday's letter indicates the level of their concern. Many lawmakers have quietly speculated that the state budget squeeze will be significantly relieved by the economic stimulus package pending in Washington.
The nation's top military officer says the global financial crisis is threatening U.S. security options abroad. Navy Admiral Mike Mullen told reservists that the financial meltdown will force a delicate balance between national security and federal budget cuts. Mullen is chairman of the Pentagon's Joint Chiefs of Staff. The Pentagon will soon send Congress a new budget request, and top officials are signaling that it will reflect belt-tightening because of the poor economy. The money crunch comes amid what Mullen described as sweeping political changes in Iraq and Pakistan. Stabilizing both nations is crucial to the U.S. war on terror.
Houston’s retail occupancy rate dropped at the end of 2008, but the year-end numbers show only a slight dip, according to Dallas-based retail brokerage firm Weitzman Group. Nearly five million square feet of retail space was added last year in Houston, with most projects planned and funded before the downturn. The retail occupancy rate was at 87.8 per cent at the end of the year—down from 88.5 per cent a year earlier. Store closures impacted the occupancy rate, as national retailers shrank operations.
Consumer spending fell for a record sixth straight month in December as recession-battered households, worried about surging layoffs, boosted their savings rates to the highest level since May. The Commerce Department says personal consumption spending, which accounts for the largest portion of total economic activity, dropped by one per cent in December. That was slightly worse than the 0.9 per cent decline economists expected. Incomes, reflecting a wave of layoffs, fell for a third straight month, dropping by 0.2 per cent. Worried about the possibility of more job cuts, Americans boosted their savings rate to 3.6 per cent of their after-tax incomes in December. That was the highest level since tax rebate checks temporarily pushed the rate up to 4.8 per cent in May.
A private measure of the manufacturing sector's health for January rose from a record low, but still posted the 12th straight month of contraction amid a global recession. The Institute for Supply Management, a trade group of purchasing executives, says its manufacturing index rose to 35.6 per cent in January from 32.4 in December. That was above the reading of 32.6 economists surveyed by Thomson Reuters expected. Any reading above 50 signals growth, while a reading below 50 indicates contraction. The index has fallen steadily since august as the economy deteriorated, hitting a 28-year low in December.
Construction spending fell for a third straight month in December, closing out a year in which building activity fell by a record amount as housing continued to plunge. The Commerce Department says total construction spending dropped by 1.4 per cent in December, slightly worse than the 1.2 per cent decline economists expected. For the year, total construction spending fell by a record 5.1 per cent, surpassing the 2.1 per cent decline in 2007. The weakness in both years reflected huge declines in home construction, which fell 27.2 per cent last year, the largest drop on records going back to 1993.
A United Auto Workers official says General Motors will try to reduce its factory work force by offering early retirement and buyout packages all U.S. hourly workers represented by the union. The official says the offers of $20,000 in cash and a $25,000 voucher to buy a vehicle were made in an e-mail message to local union officials. The official did not want to be identified because not all workers have been notified. The offer comes just a few days after Chrysler made similar but more lucrative offers to most of its U.S. hourly workers. Chrysler is offering up to $75,000 in cash and $25,000 to buy a vehicle to workers if they leave the company without retiring. The incentive for early retirement is $50,000 cash and a $25,000 voucher.
The Treasury Department says it will need to borrow $493 billion in the first three months of this year, a record amount for the January-March period. The Treasury Department says that figure comes on top of $569 billion the government borrowed from October through December, the all-time high for any quarter. The huge amounts of borrowing in the first six months of the budget year reflect the impact of soaring costs to cover the $700 billion financial rescue program and a deepening recession that has cut into tax revenues.
The Federal Reserve says banks have made it harder for borrowers to obtain all kinds of loans over the last three months. The difficulty receiving home mortgages, credit cards and business loans is happening despite a $700 billion bailout program and a flurry of other bold moves by the government to stem the worst financial crisis to hit the country since the 1930s. All told, though, the Fed concludes the proportion of banks that “reported having tightened their lending policies on all major loan categories over the previous three months stayed very elevated.”
Two Pentagon auditors say wartime contracts, including reconstruction funding and planning in Iraq and Afghanistan, suffer from poor planning, greed and weak oversight. That's from prepared testimony from government watchdogs for the first hearing of the Commission on Wartime Contracting. The testimony was obtained by the Associated Press. Congress created the bipartisan panel over the objections of the Bush White House. More than $100 billion has been spent so far to support war operations and rebuilding. The testimony says there are 154 open criminal investigations into allegations of bribery, conflicts of interest, bid rigging, and theft. One auditor says the U.S. government “was neither prepared for nor able to respond quickly to the ever-changing demands.”
Ukraine's president says his country must honor contracts that ended a nearly two-week halt in Russian natural gas shipments to Europe earlier this month. Viktor Yushchenko's remark Friday was the clearest statement yet that his camp in Ukraine's bitterly divided leadership will go along with the contracts with Russia. Yushchenko's rival, Prime Minister Yulia Tymoshenko, reached deals with Russia's Vladimir Putin last week on transit of Russian gas across Ukraine to Europe and supplies for Ukraine itself. Shipments to Europe were restored after the deals were signed. But Yushchenko has sharply criticized the agreements, and aides have suggested his administration might seek to renegotiate them. Yushchenko said the deals have been signed and must be honored.
An IRS survey finds that nearly nine in ten Americans think it is “not at all” acceptable to cheat on your taxes. The annual survey released by the Internal Revenue Service Oversight Board found that only nine per cent of respondents thought it was ever okay to cheat on their taxes. Eighty-nine per cent said it was never okay. Although the survey was conducted in late August, its release comes as Tom Daschle, President Barack Obama's nominee to be Health and Human Services secretary, has acknowledged failing to pay more than $120,000 in taxes. Treasury Secretary Timothy Geithner had similar problems on a smaller scale. The national telephone survey of 1,005 adults has a margin of sampling error of plus or minus three percentage points.