Wednesday PM August 26th, 2009
by: Ed Mayberry, August 26, 2009 9:08:40 pm
The heaviest job-cutting of the year may have occurred in the opening months of 2009, and may have reached its peak, according to Challenger, Gray & Christmas. The outplacement firm says Labor Day often kicks off the heaviest downsizing periods of the year as companies scramble to meet annual earnings goals, but there are more signs the economy is beginning to turn around. It says it's too soon to expect a massive hiring binge, but the pace of job cuts is likely to continue its downward trend.
New U.S. home sales surged 9.6 per cent in July, rising for the fourth straight month and beating expectations as the housing market marches steadily back from its historic downturn. The Commerce Department says sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. It was the strongest sales pace since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005. The median sales price of $210,100, however, was still down 11.5 per cent from $237,300 a year earlier. Homebuyers are rushing to take advantage of a federal tax credit that covers ten per cent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify. Builders and real estate agents are pressing Congress for that credit to be extended. If it isn't, there are fears that sales could reverse the upward trend.
Orders for durable goods rose last month by the largest amount in two years, fresh evidence that manufacturing is rebounding from the recession. The Commerce Department says orders for goods expected to last at least three years increased 4.9 per cent in July, the third rise in the past four months. Analysts expected a three per cent increase. Orders for June were revised up to a 1.3 per cent drop, from a 2.2 per cent decline. Orders for transportation equipment rose 18.4 per cent. Commercial aircraft orders, a volatile category, more than doubled after falling 30 per cent in June. Motor vehicle orders increased 0.9 per cent. Excluding transportation goods, orders rose 0.8 per cent. That was the third straight increase, but just below analysts' expectations of a 0.9 per cent rise.
The Transportation Department says the popular cash for clunkers program generated nearly 700,000 new car sales and came under the $3 billion budget for the month-long program. The government said dealers submitted 690,114 vouchers totaling $2.88 billion in the program, which ended this week. Japanese automakers Toyota, Honda and Nissan accounted for 41 per cent of the new vehicle sales, outpacing Detroit automakers General Motors, Ford and Chrysler, which had nearly 39 per cent. The Toyota Corolla was the most popular new vehicle purchased under the program, followed by the Honda Civic, Toyota Camry and Ford Focus. The car incentive program offered consumers rebates of $3,500 or $4,500 to trade in a gas-guzzler in exchange for buying a new car.
Airlines cut fares to get more passengers on planes and salvage the summer travel season as the economy struggles to recover. Now the job gets harder for airlines heading into the slower fall and winter months. The Associated Press reports the nine largest U.S. carriers lost nearly $600 million in the second quarter of this year. Bigger losses are predicted in the third and fourth quarters. Some analysts have raised the possibility of another round of bankruptcies. Meanwhile fuel costs, although lower than last year's record levels, have been rising. The spot price of jet fuel has jumped about 70 per cent since March. More mergers are also a possibility. Delta and Northwest combined last year, three years after each went through bankruptcy court. The current US Airways is the product of a combination with America West.
Federal officials are investigating whether Southwest Airlines used unauthorized parts for repairs on some of its older jets. Southwest grounded more than 40 planes last Saturday, causing flight delays. Federal Aviation Administration spokesman Lynn Lunsford says an inspector found problems with documentation of parts that deflect hot engine exhaust away from the wings on Boeing 737 jets. Lunsford says engineers determined that the use of the parts doesn't pose an immediate safety danger, so Southwest is being allowed to use the planes for ten days "while a more permanent solution is decided." Southwest officials didn't immediately return calls for comment. Earlier this year, Dallas-based Southwest agreed to pay $7.5 million for using planes that hadn't been inspected for structural cracks.
US Airways is bumping up its first and second checked bag fees by $5 apiece. The Tempe, Arizona-based airline said it will charge $20 for the first checked bag and $30 for the second, when bags are checked online. Passengers will pay an extra $5 per bag when checking in at the airport. US Airways Group also said it is matching a $50 second checked bag fee on its trans-Atlantic flights, a charge recently introduced by American Airlines and Delta Air Lines. The US Airways fee changes are effective starting today for travel on or after October 7th.
The RecruitMilitary Career Fair is set for Minute Maid Park tomorrow from 11 a.m. to 3 p.m. Over 300 veterans are expected to attend, interviewing with national, regional and local employers.
There's general support and some constructive criticism for Federal Reserve Chairman Ben Bernanke now that he's been renominated. Analysts, lawmakers and the financial industry say they'll be watching to see how Bernanke evolves as the recession eases. Christopher Whalen, managing director of Institutional Risk Analytics, says Bernanke needs to show "he can start to say no and exercise some leadership on fiscal issues." Bradley Sabel, a former bank examiner with the Federal Reserve Bank of New York, says no one agrees with everything, but Bernanke has done "a great job" in taking some needed but "very, very radical steps." Simon Johnson, former chief economist with the International Monetary Fund, says he worries the Fed chairman's weaknesses are the same as predecessor Alan Greenspan--keeping interest rates too low and being super-pro-finance. Johnson favors tougher regulations.
The U.S. government is handing out $720 million for border upgrades as part of federal stimulus money. The Associated Press some low-priority projects skipped ahead of more pressing concerns. In 2004, Congress ordered Homeland Security to create a list, updated annually, of the most important repairs at checkpoints nationwide. But the Obama administration continued a Bush administration practice of considering other, more subjective factors when deciding which projects get money. Customs and Border Protection, the Homeland Security agency overseeing border projects, allowed AP to review the list but will not make it public or explain the deviations. The results: a checkpoint in Laredo, which serves more than 55,000 travelers and 4,200 trucks a day, is rated among the government's highest priorities but was passed over for stimulus money. A border station in Homeland Security Secretary Janet Napolitano's home state of Arizona is getting $199 million--five times more than any other border state. The busy Nogales checkpoint has required repairs for years but was not rated among the neediest projects on the master list reviewed by the AP.
U.S. thrifts eked out a $4 million profit in the second quarter, but the number of troubled institutions continued to rise. The Office of Thrift Supervision says the small profit in the April-June period, marked the industry's first positive earnings since the third quarter of 2007. It compared with a loss of $5.4 billion in the year-ago period, and $1.62 billion in the first quarter of this year. The agency also says the number of "problem thrifts" increased to 40, from 31 in the January-March period. Thrifts differ from banks in that, by law, they must have at least 65 per cent of their lending in mortgages and other consumer loans--making them particularly vulnerable to the housing downturn.
Two alternative energy companies plan to buy a shuttered Ford factory in southeast Michigan and convert it into a renewable energy park. The $725 million project at the sprawling Wixom assembly plant could employ at least 2,800 people within five years. Production would start in late 2011. Xtreme Power of Kyle, Texas, and Clairvoyant Energy of Santa Barbara, California, told state lawmakers they are looking to buy the plant if state tax incentives and federal loans are approved. Ford says it plans to sell the plant to the companies, which plan to lease extra space to suppliers and other energy companies.