Friday PM May 8th, 2009
by: Ed Mayberry, May 8, 2009 8:05:27 pm
The pace of layoffs slowed in April, with employers cutting 539,000 jobs, the fewest in six months. But the unemployment rate climbed to 8.9 per cent as many businesses remained wary of hiring given all the economic and financial uncertainties. The Labor Department tally wasn't nearly as deep as the 620,000 job losses that economists were expecting. The rise in the unemployment rate from 8.5 per cent in March matched economists' forecasts. If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 15.8 per cent in April, the highest on records dating back to 1994. The latest figures are an excuse for Republican Representative Kevin Brady to level criticism at the president.
“Unfortunately the administration’s failed to update its unrealistic economic assumptions in its budget submissions. For example, again this week the administration projects an 8.1 per cent unemployment rate for this year, even though it’s clear the rate will be much, much higher. Under administration policies, the excessive levels of deficits, debt, taxes and inflation will undermine long-term economic growth. Unfortunately, increasing the burden of government on an already weak economy is only going to further undermine economic and job growth in the years ahead.”
The 8.9 per cent unemployment rate reported for April doesn't tell the whole story of the nation's job market woes. Many people are taking home paychecks worth hundreds less as employers cut back on their hours. The average work week in April hovered at 33.2 hours, matching the record low set in March. All told, there are about 8.9 million Americans who would prefer full-time jobs but must make do with part-time work, up from 5.2 million a year ago. Machine operator Jody Taylor of New York is one of them, but says she considers herself lucky. She says she did lose some money but still has “a job and health benefits.
" The good news for the underemployed — they're likely to feel the economic recovery before their unemployed counterparts. One economist says in a bounce-back, “the first thing that will happen is the part-timers will be used more intensively."
The White House has a new message for the unemployed: more help is on the way. President Barack Obama is announcing steps to help them pursue education and training, and keep their jobless benefits at the same time. Currently, people who are out of work and want to go back to school have to give up their unemployment checks. And if they decide to return to school, they may not qualify for federal grants. That's because eligibility can be tied to the previous year's income. Obama's announcement comes as the government releases its April jobless figures. The national unemployment rate stands at a 25-year high of 8.5 per cent. Many analysts expect the latest numbers will show it climbing even higher.
The CEO of Challenger, Gray & Christmas predicts the unemployment rate will climb to ten per cent or higher before it begins to fall. John Challenger says the rate at which the job market continues to worsen appears to have slowed. Challenger says if anything positive can be taken from today’s report, it’s that “consumers and businesses may feel slightly more confident, which could lead to more spending.”
Toyota is reporting a larger-than-expected loss. In fact, it adds up to the company's worst annual loss ever. The latest numbers show the world's biggest automaker lost $7.74 billion in the last quarter. That brings its annual loss for the full fiscal year to its worst ever. The company says next year looks worse. Toyota projects that net losses will deepen for the fiscal year through March 2010. The company president is blaming the devastating results on “significant deterioration in vehicle sales, particularly in the U.S. and Europe.” He also points to the strong yen and the rising cost of raw materials.
Oil prices appeared headed for the strongest week so far this year. This, after better-than-expected payrolls numbers and what some experts believe may be overly optimistic expectations about the country's appetite for energy. Retail gasoline prices, which had lingered around $2 per for weeks, are up for the eighth straight day. Pump prices increased 2.8 cents overnight to a new national average of $2.17 a gallon, according to AAA, Wright Express and Oil Price Information Service. Gas costs 12 cents more per a gallon than last month, but it's nearly $1.48 a gallon cheaper than a year ago.
One economist says the release of the stress test results on the nation's big banks cleared the air and aren't scary. Allen Sinai, chief global economist at Decision Economics, says he's not altering his prediction of a recovery beginning later this year, though it will be awhile before normal lending resumes. The so-called stress tests — a key Obama administration effort to boost confidence in the financial system — showed nine of the 19 biggest banks have enough capital to withstand a deeper recession. But the Federal Reserve says ten need to raise a total of $75 billion more in order to be able to withstand an even worse-than-expected recession. A steeper downturn would make it harder for consumers and businesses to repay loans, which would cause banks' assets to lose value. The government is forcing the banks to keep their capital reserves up so they can keep lending even if the economic picture darkens. Among the banks the Federal Reserve says need to raise more capital are Bank of America, with $33.9 billion; Wells Fargo, needing $13.7 billion; GMAC at $11.5 billion; Citigroup, $5.5 billion, and Morgan Stanley, which the Fed says needs to raise $1.8 billion. They have until June 8th to come up with regulator-approved plans. Some have already announced plans that don't rely on more government loans.
The chair of the Congressional Subcommittee on Transportation Security and Infrastructure Protection is announcing the receipt of two full-funding grant agreements for the North and Southeast Corridor METRO lines. Congresswoman Sheila Jackson Lee says the U.S. Department of Transportation will provide $150 million in funding to make the rail lines a reality. The president’s Fiscal Year 2010 Budget includes $73.3 billion for the Department of Transportation. A ful-funding grant agreement is the final step of the New Starts planning and project development process.
About 52 million social security recipients have begun to get $250 economic recovery checks. That includes many people who will have to repay the money at tax time next year, either through a smaller refund or a larger tax bill. The payments are meant to provide a boost to people who don't qualify for President Barack Obama's “making work pay” tax credit, which pays individuals up to $400 and couples up to $800. Taxpayers are not eligible for both a stimulus payment and the tax credit. However, the stimulus payments will go to many people who also are earning the credit through jobs that provide taxable income. Those people will have the $250 payment deducted from their tax credit next spring, when they file their returns for the 2009 tax year. Stimulus payments are slated to go to people who receive social security, supplemental security income, railroad retirement benefits or veteran's benefits. In all, a little more than $13 billion will be distributed.
Wholesalers slashed inventories for a seventh straight month in March as businesses struggled to get stockpiles in line with plunging sales. The Commerce Department says wholesale inventories dropped 1.6 per cent in March, much larger than the one per cent fall that analysts had expected. That followed a 1.7 per cent drop in February, the largest monthly decline on records that go back 17 years. Wholesalers saw sales plunge 2.4 per cent in March, the fifth decline in six months.
Fannie Mae says it needs $19 billion in additional government aid after posting a loss of $23.2 billion in the first quarter as the taxpayer bill from the housing market bust mounts. That compares with a loss of $2.5 billion in the year-ago period. The results were driven by $20.9 billion in credit losses due to declining housing market conditions and $5.7 billion in write downs of the value of its mortgage-backed securities. The request for federal aid is its second since the takeover. The company received about $15 billion earlier this year.
The Federal Reserve says banks and investment firms borrowed far less over the past week from its emergency lending program, a hopeful sign some credit stresses are easing. The Fed says commercial banks averaged $40.9 billion in daily borrowing over the past week that ended Wednesday. That was down from $44.8 billion in the week that ended April 29th. Investment firms drew just $643 million over the past week from the Fed program, down from an average of $5.5 billion the previous week. The identities of financial institutions are not released. They pay just 0.50 per cent in interest for the emergency loans.
Venezuela's finance ministry has auctioned off a local bank previously controlled by Texas financier R. Allen Stanford for about $112 million. Ministry lawyer Rodolfo Porro said that Stanford Bank was sold to Venezuela's Banco Nacional de Credito for 240 million Bolivars.
President Hugo Chavez is overseeing the seizure of boats, docks and other facilities belonging to oil contractors on Lake Maracaibo in western Venezuela. Chavez says the takeover of 300 boats and dozens of transportation installations is a “historic act.” The socialist leader previously announced his government would seize control of the assets. State oil company Petroleos de Venezuela has recently clashed with domestic and foreign oil contractors as it aims to reduce costs due to falling oil prices. Red-clad workers cheered and waved flags bearing the national oil company logo in a Lake Maracaibo harbor.
Texas Comptroller Susan Combs says the state collected $1.65 billion in sales tax revenue in April—down 3.1 per cent compared to April 2008. Combs says local governments will receive $541.8 million in May sales tax allocations—down 2.3 per cent compared to May 2008. May sales tax allocations of $367.1 million were sent to Texas cities—down 2.8 per cent compared to May 2008.
Passenger traffic is still falling on nearly all U.S. airlines, but the steep march nosedive has yielded to a more gentle April decline. That's fueling hope that the worst of the travel slump may be over, but analysts say it's too early to declare a turning point for the airlines. The industry suffered huge losses and falling revenue in the first quarter. Now, it says the increase in traffic is coming from budget-conscious consumers who are reacting to cheap sales. Airlines measure traffic in miles flown by paying customers—it doesn't matter how much they paid. United Airlines reported that last month's traffic declined 10.5 per cent compared with April 2008, but the declines were much smaller at Delta, Fort Worth-based American Airlines and others. Dallas-based Southwest Airlines beat everybody with a 4.1 per cent increase in traffic, which it credited to Easter falling in April this year instead of March like last year. Even if travel demand is no longer in a free-fall, the best customers could be slower to return. Those are high-paying business travelers. The airlines say travel is one of the first items businesses cut in a recession, and they've seen more corporate travelers switch from first-class to cheaper coach seats.
Governor Rick Perry has more criticism for the Federal Emergency Management Agency when it comes to Hurricane Ike help. Perry questioned FEMA's denial of an appeal for reimbursing the state for some costs associated with protective measures and recovery over Ike. Texas had asked FEMA for 100 per cent reimbursement of costs related to such things as evacuations before Ike hit Galveston on September 13th. The state also seeks funding over removal of hazardous materials after the storm. Perry said FEMA continues to shortchange the state. Perry also says Texas plans to appeal FEMA's denial for an extension of the 100 per cent federal reimbursement of debris removal. FEMA spokeswoman Ericka Lopez says the federal agency so far has awarded more than $2 billion in disaster assistance to Texas.
The head of the Securities and Exchange Commission favors a new proposal for federal regulators sharing oversight of companies that pose financial risks to the economy. SEC Chairman Mary Schapiro said she's “inclined toward” the idea floated this week by the head of the Federal Deposit Insurance Corporation for a new “systemic risk council” to monitor large institutions against financial threats. The council would include the Treasury Department, Federal Reserve, FDIC and SEC. Congress is working to craft an overhaul of U.S. financial rules to prevent a repeat of the crisis that plunged markets worldwide into distress. Speaking to the Investment Company Institute, the mutual fund industry's biggest trade group, Schapiro says she is concerned about an “excessive concentration of power” over financial risk in a single agency.
The European Union has signed an agreement with four gas-producing nations in a bid to reduce its energy dependence on Russia. The declaration is meant to speed up pipeline links to the EU from gas-rich nations on the Caspian Sea and beyond. It asks signatories to commit to long-term construction deals and to resolve disputes delaying projects. Signing were the leaders of Azerbaijan, Georgia, Turkey and Egypt, with the United States, Russia and Ukraine as observers.
A high school has turned to movies to occupy students because substitute teachers are in short supply. Galveston Independent School District Superintendent Lynne Cleveland said more teachers than normal at Ball High School are absent. Some are taking time off to repair storm-damaged homes from Hurricane Ike or using sick days before the end of the school year. The Galveston County Daily News reports that anywhere from ten to 20 or more teachers are absent on a daily basis. Officials at the school have been forced to combine classes in an auditorium, where films are shown. Cleveland said the district can't do a lot to address the issue this semester but solutions were being sought for next school year.
A federal court jury returned a $72.6 million damage award against a Dallas-based law firm over a botched patent application involving a safety device designed to help save downed firefighters. The jury returned its verdict against Akin Gump Strauss Hauer & Feld after deliberating more than four days. Louis Herbert Stumberg and his late partner James Fulton invented the device and assigned ownership rights to North-South Corporation. They granted exclusive distribution rights to Air Measurement Technologies which hired an attorney with Akin Gump in 1989 to file a series of patents. A call to Akin Gump from the Associated Press seeking comment last night wasn't immediately returned. The plaintiffs alleged Akin Gump failed to disclose to the United States Patent and Trademark Office information that was material to the patent, and did so with an intent to deceive the office. The jury in the four-week trial found Akin Gump fully responsible for errors in obtaining a patent for the device.
Cash-strapped Americans looking for a cheap getaway at a state park or campground might be thwarted this summer. The head of a national group of state parks directors says parks and historic sites have had to cut back because of budgets stressed by the recession. Philip McKnelly of the National Association of State Parks Directors says Americans may find reduced hours, higher fees, and closed beaches and pools. McKnelly is former director of the North Carolina State Parks System. In New York, nearly half of the more than 200 state-run parks and historic sites will see some reduction in services. Other states facing cuts include California, Georgia and Illinois.
Past research indicated that white business executives are hampered if they have what's known as a “babyface” appearance. But it looks like the opposite may be true for blacks. According to an upcoming study, black Fortune 500 CEOs who have a babyface appearance are more likely to lead companies with higher revenues and prestige than are black CEOs who look more mature. The study from Northwestern University's Kellogg School of Management finds that a disarming appearance can help black CEOs by countering a stigma that black men are threatening. The study is scheduled to be published in the journal Psychological Science later this year.
The number of rigs actively exploring for oil and natural gas in the United States fell by 17 this week to 928, down nearly half from a year ago. Of the rigs running nationwide, 730 were exploring for natural gas and 190 for oil, Houston-based Baker Hughes reported. Eight were listed as miscellaneous. A year ago, the rig count stood at 1,846. The U.S. count is down 54 per cent since the end of August as weak energy demand has hampered oilfield activity. Of the major oil- and gas-producing states, Texas lost 20 rigs. 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.