Thursday PM December 3rd, 2009
by: Ed Mayberry, December 3, 2009 9:12:26 pm
Comcast is putting up $6.5 billion in cash and $7.25 billion in assets in its deal to buy 51 per cent of NBC Universal from General Electric, creating the nation's largest entertainment company. That means the biggest U.S. cable television provider would control the NBC and Telemundo, about two dozen cable channels and the Universal movie studio and theme parks. Consumer groups question whether one company should have so much power over the production and delivery of entertainment. But Comcast contends consumers should benefit. Among other things, Comcast says, Universal movies could reach cable TV sooner after their theatrical releases.
The tally of newly laid-off workers seeking unemployment benefits fell unexpectedly for the fifth straight week. The Labor Department says first-time claims for unemployment insurance dropped by 5,000 to a seasonally adjusted 457,000, the lowest total since the week of September 6th, 2008. Wall Street economists expected an increase, according to a survey by Thomson Reuters. A Labor Department analyst says the closing of state unemployment offices for last week's Thanksgiving holiday was responsible for some of the decline. The number of people claiming benefits for more than a week rose by 28,000 to 5.5 million. Analysts had expected a decline.
President Barack Obama says chronic unemployment isn't merely academic and is "a struggle that cuts deep and touches people across the nation." At a jobs forum he hosted at the White House, Obama claimed progress toward an economic recovery while saying much more work needs to be done. Obama said the leading question of the day is "how do we get businesses to start hiring again." He spoke to a gathering of academics, business executives and labor leaders on the eve of the government's report, due Friday, on the state of joblessness in November. The jobless rate in October shot up to 10.2 per cent.
The White House says it's considering a host of legislative options to boost job creation. The chairwoman of the White House Council of Economic Advisers says the White House is open to supporting initiatives designed to help small businesses and increase spending on infrastructure. Christina Romer also says the White House supports extending jobless benefits for the long-term unemployed and subsidies for the unemployed to buy health insurance. At the same time, Romer said any new steps would have to have a relatively small deficit impact, saying the Obama administration will emphasize anything it does will "be done in a fiscally responsible way." Her comments come as President Obama prepares for tomorrow's job forum. Obama plans to give a speech next week that will lay out ideas, including those that might arise out of the jobs summit.
Productivity surged in the third quarter by the largest amount in six years while labor costs fell. While that indicates inflation is remaining under control, it also signals that workers' wages are getting squeezed, raising doubts about the durability of the economic recovery. The Commerce Department said productivity was rising at an annual rate of 8.1 per cent in July-September period, the biggest jump since 2003, while unit labor costs were falling at a 2.5 per cent rate. The productivity gain was revised down from an initial estimate of 9.5 per cent made a month ago while the drop in unit labor costs was less than the 5.2 per cent plunge first reported. The revisions were larger than economists had expected.
A private measure of U.S. service sector activity unexpectedly shrank in November after two months of tepid growth, as constrained consumer spending and rising unemployment hinder a broad recovery. The Institute for Supply Management's service index dropped to 48.7 from 50.6 in October. Analysts polled by Thomson Reuters had expected a level of 51.1. Any reading below 50 signals contraction. The service sector grew in September for the first time in 13 months. The ISM measure tracks more than 80 per cent of the country's economic activity, including such diverse industries as health care, retail, financial services and transportation.
Retailers are reporting sluggish sales results for November as a modestly positive start to the holiday shopping season wasn't strong enough to offset weak spending the rest of the month. According to early results, stores including teen merchant Wet Seal, Children's Place Retail Stores and discounter Fred's are reporting sales declines. Warehouse club operator Costco Wholesale is reporting a gain, though it's smaller than expected. A bright spot is Limited Brands, which runs Victoria's Secret and Bath & Body Works. It reported a solid sales gain. The figures are based on sales at stores open at least a year and are considered a key indicator of a retailers' health.
Bank of America plans to repay its government bailout funds and raise capital in the coming days. The bank has issued a statement saying it would pay back the $45 billion in government loans it received during the credit crisis last year and after the purchase of Merrill Lynch earlier this year. The move would allow Bank of America, which is trying to recruit a new CEO to succeed the retiring Ken Lewis, to free itself from government restrictions on executive pay that come along with bailout funds. Bank of America said it would use $26.2 billion in available cash and would also sell $18.8 billion in securities.
Continental Airlines says customers whose flights may be delayed or canceled due to expected wintry weather this week in southeast Texas can change their plans without the usual penalty. The airline said customers on flights scheduled to, from or through area airports Friday through Sunday can change flights on the company Web site, continental.com. To waive the change fee, they must reschedule with travel that begins by December 20th. In cases of canceled flights, customers can request a refund, the airline said. The airports expected to be affected by weather include Continental's Houston hub at Bush Intercontinental Airport.
Texas environmental regulators have issued a record number of fines for polluters in 2009. The Texas Commission on Environmental Quality announced it issued 1,756 administrative orders in the fiscal year, the most since the agency began issuing fines in 1985. Agency Chairman Bryan W. Shaw says the many businesses that were fined are also forced to pay to fix their problems. The TCEQ also takes a lead role in the Texas Environmental Enforcement Task Force to pursue criminal prosecution that led to 17 convictions. The agency conducted about 107,000 investigations and responded to nearly 5,000 complaints.
The AAA Texas price survey shows the average price of regular-grade gasoline remained unchanged from last week at $2.50 per gallon. Meanwhile, the average price nationally fell a penny to $2.63 per gallon. The cheapest gasoline in the Texas survey is found in Galveston, where the average price remained unchanged at $2.45 per gallon. The most expensive gas is, again, in El Paso at $2.57 per gallon, four cents less than last week. The auto club says the ongoing price stability of gasoline has been matched by narrow changes in crude oil prices. Crude prices for 2009 topped out at $82 per barrel in late October and have stayed between $75 and $80.
General Motors says it will reconsider its decision to close some dealerships as part of a compromise to scuttle federal legislation that would require it to keep dealerships open. GM says it will conduct face-to-face reviews with dealerships and agree to binding arbitration. The automaker says in some cases, dealerships would regain lost franchises. GM plans to cut 2,400 dealers from its 6,000-dealer network by next fall. The U.S. House passed legislation in July that would force GM to restore dealers it cut, but the Senate has yet to vote on that legislation. GM had been negotiating with Congressional leaders since September on a deal to avoid the legislation.
Verizon Communications is closing four call service centers, including one in Longview. Other centers are being closed in Shreveport, Toledo and Virginia Beach, Virginia. Company spokeswoman Gretchen Lejeune says the company will be offering the employees other jobs with Verizon, along with relocation and severance packages. Lejeune did not have a count of how many employees work in the four call centers. Lejeune says Verizon's 2008 acquisition of Alltel Corp. left the combined company with excess capacity.
Hundreds of contractors are expected at the University of Texas Medical Branch next month in a major push to repair damage from 2008's Hurricane Ike. UTMB President Dr. David Callender attributed the delays in Ike repairs to the time frame for bidding of public contracts for work on the Galveston campus. Callender, in an update to his staff, estimated about 1,000 contractors will head for the campus in January as part of $667 million in capital improvements. Callender also says the emergency room at John Sealy Hospital has treated more than 6,000 patients since it reopened August 1st. Ike swamped parts of Galveston on September 13th, 2008.
The House has voted to permanently extend a 45 per cent inheritance tax on estates larger than $3.5 million, canceling a one-year repeal of the tax set to begin next month. Under the bill, estates smaller than $3.5 million would continue to be exempt from the tax, and married couples, with a little estate planning, could exempt a total of $7 million. The bill passed the House by a 225-200 vote. Similar legislation is pending in the Senate, but the health care debate there could preclude action on the estate tax before Congress breaks for holidays later this month.
The average interest rate for a 30-year mortgage dropped to a record low of 4.71 per cent this week, pushed down by an aggressive government campaign to reduce borrowing costs. The rate is the lowest since Freddie Mac began tracking the data in 1971. The previous record of 4.78 per cent was set during the week ending April 30th and matched last week. The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.
Making a case for a second term as head of the Federal Reserve, Ben Bernanke says he has the tools and the political backbone necessary to reel in massive economic support once the recovery is firmly rooted. The Fed chief also pledged to work closely with Congress to better protect the country from future financial crises. In prepared testimony to the Senate Banking Committee, Bernanke says: "It would be a tragedy if, after all the hardships that Americans have endured during the past two years, our nation failed to take the steps necessary to prevent a recurrence of a crisis of the magnitude we have recently confronted."
The 53rd annual Money Show of the Southwest is underway at the George R. Brown Convention Center through Saturday. Speakers are giving presentations on how to include rare coins and bullion in your investment portfolio, in a time that consumers are being bombarded with advertising that urges the purchase of gold or bullion coins or to send in gold jewelry for cash.