Thursday PM July 1st, 2010
by: Ed Mayberry, July 1, 2010 5:07:12 pm
BP's massive oil spill is ready to become the largest ever in the Gulf of Mexico. It's an ominous record that underscores the oil giant's dire need to halt the gusher. Based on the highest of the federal government's estimates, the oil that's gushed for two and a half months from a blown-out well a mile under the sea is expected to surpass the 140 million gallon mark. That eclipses the Ixtoc I spill off Mexico's coast in 1979 to 1980. Even by the lower end of the government's estimates, at least 71.2 million gallons are in the Gulf. That calculation is based on the higher end of the government's range of barrels leaked per day, minus the amount BP says it has collected from the blown-out well using two containment systems.
NASA's space shuttle program will keep going until next year. The space agency made it official after weeks of hints of launch delays. Managers agreed to postpone the next-to-last shuttle launch until November 1st. Discovery had been scheduled to fly to the international space station in September. The very last mission now has a February 26th launch date. Endeavour will close out the shuttle program by delivering a major scientific instrument to the space station. NASA says it needs more time to prepare the cargo for those two flights. As for the possibility of an extra shuttle mission, NASA says no decision is expected before August. NASA would like to fly Atlantis one more time before the fleet is retired.
Just a day ahead of the June employment report, a monthly survey finds layoffs slowing to a crawl and suggests a turnaround may not be far down the road. According to the outplacement firm Challenger, Gray and Christmas, job cuts in June were virtually unchanged from May. CEO John Challenger says the cuts are very low--just 39,000. There were fewer than 300,000 job cuts for the first half of the year--just a third as many as last year and the lowest since the year 2000. Challenger says the June job cuts report shows no sign of a double-dip recession with companies cutting more jobs again. He says, “if anything, it looks like they're poised for more hiring growth as we move into the second half of the year.”
Initial claims for unemployment benefits rose last week for the second time in three weeks, a sign that layoffs are rising. The Labor Department says new claims for jobless benefits jumped by 13,000 to a seasonally adjusted 472,000. Analysts expected a small drop, according to a survey by Thomson Reuters. Greater layoffs by construction firms contributed to the increase, a Labor Department analyst said. Home sales slumped last month after the expiration of a popular homebuyer tax credit. Summer layoffs in many school districts also added to the total. The number of people continuing to claim benefits rose by 43,000 to 4.6 million, the department said. But the number of people collecting extended benefits fell by 376,000, as lawmakers have refused to continue the extra aid.
The House has voted to extend unemployment benefits in a gesture made futile by the Senate's inability to pass the bill. As a result, more than 1.3 million laid-off workers who have already lost benefits won't get them restored before Congress goes on a weeklong break for Independence Day. The last extension expired at the end of May. The House passed a bill to extend unemployment payments for up to a total of 99 weeks, for people whose state-paid benefits have run out. The benefits would be available through the end of November, at a cost of $33.9 billion. Senate Republicans, however, successfully filibustered a similar bill Wednesday night before Senators adjourned for the Congressional recess.
Construction spending declined in May as residential building fell after a popular homebuyers' tax credit expired. The Commerce Department says construction spending dropped by 0.2 percent, after rising by a downwardly revised 2.3 percent in April. Analysts expected a steeper drop. The decline was driven by a 0.4 percent decrease in construction spending on new homes and apartments. That follows a five percent jump in April. A federal government tax credit for homebuyers expired April 30th. The department previously reported that new home construction fell by 17 percent in May. Government spending on highway and other infrastructure projects rose by 0.4 percent, the third straight month of gains.
The number of buyers who signed contracts to purchase homes dropped in May to the lowest level on record, a sign the housing recovery can't survive without government incentives. The National Association of Realtors says its seasonally adjusted index of sales agreements for previously occupied homes tumbled 30 percent in May. The index fell to 77.6 in May from 110.9 in April. May's reading was the lowest dating back to 2001. Economists surveyed by Thomson Reuters had expected the index would fall to 98.4. The index also was down 15.9 percent from the same month a year earlier. The index provides an early measurement of sales activity because there is usually a one- to two-month lag between a sales contract and a completed deal.
Mortgage rates have sunk to the lowest level in more than five decades, but consumers aren't rushing to refinance their loans or buy homes. Mortgage company Freddie Mac says the average rate for 30-year fixed loans sank to 4.58 percent this week. That's down from the previous record of 4.69 percent set last week and the lowest since Freddie Mac began tracking rates in 1971. Rates have fallen over the past two months. Investors wary of the European debt crisis and the stock market have shifted money into the safety of Treasury bonds, driving down yields. Mortgage rates tend to track yields on long-term Treasurys. Tighter lending standards have made it difficult for many borrowers to refinance. Many who do qualify have done so over the past 18 months.
An industry trade group says its manufacturing index slowed in June, but was still at a level that suggests growth in the industrial sector. The Institute for Supply Management says its index fell to 56.2 last month from 59.7 in May. Economists polled by Thomson Reuters expected a reading of 59 for last month. A reading above 50 indicates expansion. The manufacturing sector has been one of the economy's bright spots for nearly a year as companies restock inventories and replace old equipment. The report says new orders and production are not growing as fast as they have been. But the report still suggests that manufacturers plan to hire more.
Consumer advocates are urging uninsured people with health problems to sign up for President Barack Obama's new health coverage plan soon, despite the costs. That's because they can't be turned away for medical reasons. Richard Popper of the Health and Human Services Department says monthly premiums will vary by state--from $140 a month to as much as $900. The price is based on individual health insurance rates in each state, which can differ dramatically because of medical costs and the scope of coverage. The pre-existing condition insurance plan has started taking applications in many states, and coverage will be available as early as August 1st. The new plan is intended to remain available until 2014, when core health care overhaul provisions take effect.
Linn Energy announced a $90 million deal has been signed to acquire oil and natural gas properties in the Permian Basin. Houston-based Linn said the acquisitions should close by August 16th. CEO Mark Ellis says the acquisition in the Wolfberry Formation is an attractive addition to the company's other recently secured assets in the area. Linn is an independent oil and natural gas development company.
Texas could appeal the Environmental Protection Agency's rejection of a 16-year-old state air permitting program--which the Feds say violates the Clean Air Act. Governor Rick Perry says Texas will continue to fight what he calls “this federal takeover of a successful state program.” EPA's decision will force some 125 refineries and petrochemical plants to invest millions of dollars to get new permits. The EPA has been working with industry leaders to find a way to effectively and efficiently issue new air permits, including at the nation's largest refinery--ExxonMobil in Baytown. Texas Commission on Environmental Quality Chairman Bryan Shaw insists that the state's permitting program complies with the Clean Air Act and has improved air quality. TCEQ, in an effort to satisfy the EPA, recently changed the rules--but Shaw says apparently the EPA did not take that into consideration.
A government program that's supposed to help impoverished families heat and cool their homes wasted more than $100 million of taxpayer dollars paying the electric bills of thousands of applicants who were dead, in prison or living in million-dollar mansions. The Department of Health and Human Services spent $5 billion through the low-income home energy assistance program in 2009, doling out money to states with little oversight. An investigation by the Government Accountability Office found about $116 million in improper payments to seven states in 2009. The program helped pay the electric bill of a Chicago woman who lives in a $2 million home and drives a Mercedes. The study found HHS paid $3.9 million to 11,000 applicants who used the identities of dead people.
Retail gasoline prices across Texas held steady this week at an average $2.61 a gallon going into the July 4th holiday weekend. AAA Texas reports the state remains below the national average price at the pump, at $2.75, also was unchanged since last week. The association's survey found Houston with the cheapest gasoline statewide, at $2.57 a gallon. El Paso had the highest-priced gasoline, at $2.72, up three cents from last week. AAA Texas says Hurricane Alex, which was downgraded to a tropical storm after making landfall in Mexico, did not impact refining facilities in Texas and Louisiana. The association projects about 2.43 million Texans will be traveling away from home over the Independence Day weekend, up more than 14 percent from last year.
Charitable foundations and nonprofit organizations are seeing signs of an economic recovery. They saw double-digit returns on their investments last year, but an organization that studies charities says other financial news remains bleak. Demand for services is still rising, government contracts are decreasing, donations were down at many nonprofits during the past two years, and some organizations took out loans to meet their commitments in 2009. A pair of reports being released by an organization that gives financial advice to nonprofits says private and community foundations as well as charities saw their investments improve an average of 21 percent for the year ending December 31st, 2009. Investments declined 26 percent in fiscal 2008.
General Motors, Ford and Chrysler are reporting sales of cars and trucks fell nearly 12-13 percent from May to June. Consumers are delaying big-ticket purchases because they're worried about their jobs in an environment of high unemployment. Analysts predict overall sales for the industry will drop ten percent or more from May. There were glimmers of strength in today's results. Sales for the GM's four core brands--Chevrolet, Buick, GMC and Cadillac--rose 36 percent over June of last year, helped by strong demand for crossovers and some recovery in pickups. The company's overall sales, which include brands being sold or phased out, increased 11 percent from a year earlier. Ford, too, says its numbers are better than a year ago, when the industry was in the midst of a deep recession. Its sales were up 15 percent over last June. Chrysler says its sales were 35 percent stronger than June 2009, but the company had just emerged from Chapter 11 bankruptcy protection at the time.