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(10/29/09 2:20pm)
____simple_html_dom__voku__html_wrapper____>WASHINGTON — The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.The Commerce Department's report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans."We're beginning to crawl out a very deep hole," said economist Ken Mayland, president of ClearView Economics. "It will take time to get back to normal again and there are questions about how consumers will hold up in the months ahead. But I think the recovery will be sustained."The much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3 percent growth rate economists expected.Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery.A top concern is whether the recovery can continue after government supports are gone.Many economists predict economic activity won't grow as much in the months ahead as the bracing impact of President Barack Obama's $787 billion package of increased government spending and tax cuts fades.The National Association for Business Economics thinks growth will slow to a 2.4 percent pace in the current October-December quarter. It expects a 2.5 percent growth rate in the first three months of next year, although other economists believe the pace will be closer to 1 percent.Christina Romer, Obama's top economist, in remarks last week said the government's stimulus spending already had its biggest impact and probably won't contribute to significant growth next year.Brisk spending by the federal government played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.In other encouraging developments, businesses boosted spending on equipment and software at a 1.1 percent pace in the third quarter, the first increase in nearly two years.Third-quarter activity also was helped by increased sales of U.S.-made goods to customers overseas, as economies in Asia, Europe and elsewhere improved. The cheaper dollar is aiding U.S. exporters, making their goods less expensive to foreign buyers. Exports of U.S. goods soared at an annualized rate of 21.4 percent in the third quarter, the most since the final quarter of 1996.Businesses, meanwhile, reduced their stockpiles of goods less in the third quarter, after slashing them at a record pace in the second quarter. With inventories at rock-bottom levels, even the smallest increase in demand probably will prompt factories to boost production. This restocking of depleted inventories is expected to help sustain the recovery in the coming months, economists said.Even with the third-quarter improvement, the economy isn't out of the woods yet.Federal Reserve Chairman Ben Bernanke and members of Obama's economics team have warned that the nascent recovery won't be robust enough to prevent the unemployment rate — now at a 26-year high of 9.8 percent — from rising into next year.Economists say the jobless rate probably nudged up to 9.9 percent in October and will go as high as 10.5 percent around the middle of next year before declining gradually. The government is scheduled to release the October jobless rate report next week.The Labor Department said Thursday that newly laid-off workers seeking unemployment insurance fell by 1,000 to a seasonally-adjusted 530,000. Analysts expected a drop to 521,000.The number of people continuing to claim benefits, fell by 148,000 to 5.8 million, steeper than analysts expected. Those figures lag initial claims by a week.With joblessness growing and wages dipping slightly in the third quarter, consumers are expected to turn more restrained in the months ahead. That would put a much heavier burden on America's businesses to keep the recovery going.To foster the recovery, the Fed is expected to keep a key bank lending rate at record low near zero when it meets next week and probably will hold it there into next year.With the economy on the mend, the Fed has slowed down some key emergency support programs but doesn't want to pull the plug until the recovery is on firm footing.Even if the economy climbs back into positive territory in the third quarter, it will be up to another group to declare the recession over. The National Bureau of Economic Research, a panel of academics, is in charge of dating the beginning and ends of recessions. It usually makes it determinations well after the fact.
(04/03/09 1:03pm)
____simple_html_dom__voku__html_wrapper____>WASHINGTON — The nation's unemployment rate jumped to 8.5 percent in March, the highest since late 1983, as a wide range of employers eliminated a net total of 663,000 jobs.The Labor Department's report is fresh evidence of the toll the recession has inflicted on America's workers and companies. Most economists expect the job cuts will continue for much of this year.The latest tally of job losses, released Friday, was slightly higher than the 654,000 that economists expected. The rise in the unemployment rate matched expectations.Since the recession began in December 2007, the economy has lost a net total of 5.1 million jobs, with almost two-thirds of the losses occurring in the last five months.The number of unemployed people climbed to 13.2 million in March. In addition, the number of people forced to work part time for "economic reasons" rose by 423,000 to 9 million. That's people who would like to work full time but whose hours were cut back or were unable to find full-time work.If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March, the highest on records dating to 1994.Looking forward, economists expect monthly job losses continuing for most — if not all of — this year.However, they are hoping that payroll reductions in the current quarter won't be as deep as the roughly 685,000 average monthly job losses in the January-March period.In the best-case scenario, employment losses in the present quarter would be about half that pace, some economists said. That scenario partly assumes the economy won't be shrinking nearly as much in the present quarter.The deterioration in the jobs market comes despite a few hopeful signs recently that the recession — now the longest since World War II — could be easing.As the economic downturn eats into their sales and profits, companies are laying off workers and resorting to other cost-saving measures. Those include holding down hours, and freezing or cutting pay, to survive the storm.The average work week in March dropped to 33.2 hours, a new record low, according to the federal data.Job losses were widespread last month. Construction companies cut 126,000 jobs. Factories axed 161,000. Retailers got rid of nearly 50,000. Professional and business services eliminated 133,000. Leisure and hospitality reduced employment by 40,000. Even the government cut jobs — 5,000 of them.Education and health care were the few industries showing any job gains.Federal Reserve Chairman Ben Bernanke said the recession could end later this year, setting the stage for a recovery next year, if the government is successful in bolstering the banking system. Banks have been clobbered by the worst housing, credit and financial crises to hit the country since the 1930s.Even if the recession ends this year, the economy will remain frail, analysts said. Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and any recovery has staying power.Given that, many economists predict the unemployment rate will hit 10 percent at the end of this year. The Fed says unemployment will remain elevated into 2011.Economists say the job market may not get back to normal — meaning a 5 percent unemployment rate — until 2013."There's going to quite a long haul before you see the jobless rate head down," said Bill Cheney, chief economist at John Hancock Financial Services.To brace the economy, the Fed has slashed a key bank lending rate to an all-time low and has embarked on a series of radical programs to inject billions of dollars into the financial system.And the Obama administration had launched a multi-pronged strategy to turn the economy around. Its $787 billion stimulus package includes money that will flow to states for public works projects, help them defray budget cuts, extend unemployment benefits and boost food stamp benefits.The administration also is counting on programs to prop up financial companies and reduce home foreclosures to help turn the economy around.On the economic front, some glimmers of hope have emerged recently.Orders placed with U.S. factories actually rose in February, ending a six straight months of declines, the government reported Thursday. Earlier in the week, there was better-than-expected reports on construction spending and pending home sales. And last week a report showed that consumer spending — an engine of the economy — rose in February for the second month in a row — after a half-year of declines.Still, skittish employers announced more job layoffs this week.3M Co., the maker of Scotch tape, Post-It Notes and other products, said it's cutting another 1,200 jobs, or 1.5 percent of its work force, because of the global economic slump. Fewer than half the jobs will be in the U.S., but include hundreds in its home state of Minnesota. The 1,200 figure includes cuts made earlier in the first quarter.Elsewhere, healthcare products distributor Cardinal Health Inc. said it would eliminate 1,300 positions, or about 3 percent of its work force, and semiconductor equipment maker KLA-Tencor Corp. said it will cut about 600 jobs, or 10 percent of its employees.
(03/06/09 4:39pm)
____simple_html_dom__voku__html_wrapper____>WASHINGTON – The nation’s unemployment rate bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs amid a deepening recession.Both figures were worse than analysts expected and the Labor Department’s report shows America’s workers being clobbered by a wave of layoffs unlikely to ease in the coming months.“There is no light at the end of the tunnel with these numbers,” said Nigel Gault, economist at IHS Global Insight. “Job losses were everywhere and there’s no hope for a turnaround any time soon.”February’s net job loss came after even deeper payroll reductions in the prior two months, according to revised figures released Friday. The economy lost 681,000 jobs in December and another 655,000 in January.Employers are shrinking their work forces and turning to other ways to slash costs — including trimming workers’ hours, freezing wages or cutting pay — because the recession has eaten into their sales and profits. Customers at home and abroad are cutting back as other countries cope with their own economic problems.Since the recession began in December 2007, the economy has lost 4.4 million jobs, more than half of which occurred in the past four months.With employers showing no appetite to hire, the unemployment jumped half a percentage point from 7.6 percent in January. That was the highest since December 1983, when the jobless rate was 8.3 percent.All told, the number of unemployed people climbed to 12.5 million. In addition, the number of people forced to work part time for “economic reasons” rose by a sharp 787,000 to 8.6 million. That’s people who would like to work full time but whose hours were cut back or were unable to find full-time work.
(02/27/09 4:52pm)
____simple_html_dom__voku__html_wrapper____>WASHINGTON — The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession.The Commerce Department report released Friday showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected.A much sharper cutback in consumer spending — which accounts for about two-thirds of economic activity — along with a bigger drop in U.S. exports sales, and reductions in business spending and inventories all contributed to the large downgrade.Looking ahead, economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky."Right now we're in the period of maximum recession stress, where the big cuts are being made," said economist Ken Mayland, president of ClearView Economics.On Wall Street, stocks slid as investors second-guessed Citigroup Inc.'s plans to turn over a bigger piece of itself to the government in a move designed to keep the banking giant alive and bolster its capital in the face of growing losses amid the global recession. The Dow Jones industrials lost about 50 points in morning trading.The new report offered grim proof that the economy's economic tailspin accelerated in the fourth quarter under a slew of negative forces feeding on each other. The economy started off 2008 on feeble footing, picked up a bit of speed in the spring and then contracted at an annualized rate of 0.5 percent in the third quarter.The faster downhill slide in the final quarter of last year came as the financial crisis — the worst since the 1930s — intensified.Consumers at the end of the year slashed spending by the most in 28 years. They chopped spending on cars, furniture, appliances, clothes and other things. Businesses retrenched sharply, too, dropping the ax on equipment and software, home building and commercial construction.Before Friday's report was released, many economists were projecting an annualized drop of 5 percent in the current January-March quarter. However, given the fourth quarter's showing and the dismal state of the jobs market, Mayland believes a decline of closer to 6 percent in the current quarter is possible.The nation's unemployment rate is now at 7.6 percent, the highest in more than 16 years. The Federal Reserve expects the jobless rate to rise to close to 9 percent this year, and probably remain above normal levels of around 5 percent into 2011.A smaller decline in the economy is expected for the second quarter of this year. But the new GDP figure — like the old one — marked the weakest quarterly showing since an annualized drop of 6.4 percent in the first quarter of 1982, when the country was suffering through an intense recession."It's going to be a challenging 2009," Scott Davis, chief executive officer of global shipping giant UPS, said Thursday while speaking at the U.S. Chamber of Commerce in Washington.American consumers — spooked by vanishing jobs, sinking home values and shrinking investment portfolios have cut back. In turn, companies are slashing production and payrolls. Rising foreclosures are aggravating the already stricken housing market, hard-to-get credit has stymied business investment and is crimping the ability of some consumers to make big-ticket purchases.It's creating a self-perpetuating vicious cycle that Washington policymakers are finding hard to break.To jolt life back into the economy, President Barack Obama recently signed a $787 billion recovery package of increased government spending and tax cuts. The president also unveiled a $75 billion plan to stem home foreclosures and Treasury Secretary Timothy Geithner said as much as $2 trillion could be plowed into the financial system to jump-start lending.For all of 2008, the economy grew by just 1.1 percent, weaker than the government initially estimated. That was down from a 2 percent gain in 2007 and marked the slowest growth since the last recession in 2001.
(02/27/09 4:49pm)
____simple_html_dom__voku__html_wrapper____>WASHINGTON — The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession.The Commerce Department report released Friday showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected.A much sharper cutback in consumer spending — which accounts for about two-thirds of economic activity — along with a bigger drop in U.S. exports sales, and reductions in business spending and inventories all contributed to the large downgrade.Looking ahead, economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky."Right now we're in the period of maximum recession stress, where the big cuts are being made," said economist Ken Mayland, president of ClearView Economics.On Wall Street, stocks slid as investors second-guessed Citigroup Inc.'s plans to turn over a bigger piece of itself to the government in a move designed to keep the banking giant alive and bolster its capital in the face of growing losses amid the global recession. The Dow Jones industrials lost about 50 points in morning trading.The new report offered grim proof that the economy's economic tailspin accelerated in the fourth quarter under a slew of negative forces feeding on each other. The economy started off 2008 on feeble footing, picked up a bit of speed in the spring and then contracted at an annualized rate of 0.5 percent in the third quarter.The faster downhill slide in the final quarter of last year came as the financial crisis — the worst since the 1930s — intensified.Consumers at the end of the year slashed spending by the most in 28 years. They chopped spending on cars, furniture, appliances, clothes and other things. Businesses retrenched sharply, too, dropping the ax on equipment and software, home building and commercial construction.Before Friday's report was released, many economists were projecting an annualized drop of 5 percent in the current January-March quarter. However, given the fourth quarter's showing and the dismal state of the jobs market, Mayland believes a decline of closer to 6 percent in the current quarter is possible.The nation's unemployment rate is now at 7.6 percent, the highest in more than 16 years. The Federal Reserve expects the jobless rate to rise to close to 9 percent this year, and probably remain above normal levels of around 5 percent into 2011.
(02/06/09 11:23pm)
____simple_html_dom__voku__html_wrapper____>WASHINGTON – The nation lost nearly 600,000 jobs last month, the worst showing in a third of a century, as a vicious cycle of cutbacks by consumers forced ever more layoffs by beleaguered employers. The unemployment rate catapulted to 7.6 percent, the highest in 16 years, and seems headed for double digits.Some 3.6 million jobs have disappeared so far in a deepening recession, which is shaping up as the biggest job killer in the post-World War II period and is raising pressure on President Barack Obama and Congress to agree quickly on a huge economic stimulus plan to stop the hemorrhaging.On Wall Street, investors optimistically assumed action was on the way and pushed stock prices higher. The Dow Jones industrials gained more than 217 points, and all broad stock indexes surged nearly 3 percent.Battered by the recession, employers slashed a net 598,000 jobs in January, the most since 1974, the Labor Department reported Friday. The jobless rate surged from 7.2 percent in December to 7.6 percent, and economists and government officials all agreed the toll was certain to go higher.“These numbers demand action,” Obama declared, urging Congress to waste no time in completing work on the economic recovery package.“If we drag our feet and fail to act, this crisis will turn into a catastrophe. We’ll continue to get devastating job reports like today’s month after month, year after year.”The jobs lost so far since the recession began in December 2007 are the most of any downturn in the post-war period. About half the losses occurred just in the past three months.Layoffs this month are likely to be just as bad. And job seekers’ prospects aren’t likely to become noticeably better until 2011 – at the earliest – when job growth should return to a more healthy pace, analysts said.Louis DiFilippo, 30, who was laid off in October from a food store in Washington, recalls seeing sales slowing. “I saw that something had to give,” he remembers, “but I was hoping that it wouldn’t be my position.”Unable to find a new job, he’s going back to school.Even if the recession were to end by fall – a best-case scenario – the economy and the job market would remain feeble for some time. Economists predict anywhere from 2 million to 3 million or more jobs will disappear this year and the unemployment rate probably will climb to 10 percent or higher by the spring of 2010.“We’re talking years – not months – before we see a decent recovery in the jobs market,” said Sung Won Sohn, economist at the Martin Smith School of Business at California State University. “It is going to get worse before it gets better.”The pink slips are hitting all categories of workers — blue collar, while collar, those without high school diplomas and those with college degrees. And they’re sparing few occupations or corners of the country.Vanishing jobs and evaporating wealth from sinking home values, 401(k) retirement plans and other investments have forced consumers to retrench. Those spending cutbacks have, in turn, led companies to pull back and slash jobs. As the cycle persists, the economy’s problems are feeding on each other.With no replacement work to be found, the ranks of unemployed workers climbed to 11.6 million. In addition, 7.8 million people were working part time. That category includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work.The average work week in January stayed at 33.3 hours, matching the record low set in December.More than 200,000 state government employees were expected to stay home without pay Friday in California, which began its first-ever furloughs to save money. And Cessna Aircraft Co. has told remaining workers that it plans to cut the work week of some production lines to just three or four days.If part-time employees, discouraged workers and others are factored in, the unemployment rate would have been 13.9 percent in January, the highest in records going back to 1994.
(04/04/08 3:49am)
WASHINGTON – The number of new people signing up for unemployment benefits last week shot up to the highest level in more than two years, fresh evidence of the damage to a national economy clobbered by housing, credit and financial crises.\nThe Labor Department reported Thursday that new applications filed for unemployment insurance jumped by a seasonally adjusted 38,000 to 407,000 for the week ending March 29. The increase left claims at their highest point since Sept. 17, 2005, following the blows of the devastating Gulf Coast hurricanes.\n“This report supports the view that the jobs market is deteriorating toward recessionary conditions,” said T.J. Marta, a fixed-income strategist at RBC Capital Markets.\nThe latest snapshot of labor activity was worse than economists had anticipated. They had predicted claims would be much lower, around 365,000.\nA government analyst said some of the big increase in claims might have been related to an early Easter holiday this year, where claims that weren’t filed or processed during the holiday week were pushed forward into the following week.\nStill, looking at the longer-term trend, there was little doubt of the pickup in unemployment filings. A year ago, new claims stood at 319,000.\nMeanwhile, the number of people continuing to collect unemployment benefits rose by a sharp 97,000 to 2.94 million for the week ending March 22, the most recent period for which that information is available. That was the highest since July 17, 2004.\nThe economy is suffering from a trio of mighty blows – a housing collapse, a credit crunch and a financial system in turmoil. That’s causing people and businesses to hunker down, crimping spending, capital investment and hiring. Those things in turn further weaken the economy, in a vicious cycle.\nFor the first time, Federal Reserve Chairman Ben Bernanke said on Wednesday the country could be heading toward a recession. Many other economists and the public believe it’s already there.\nEmployers cuts jobs in January and February, and economists are predicting more losses when the government releases the March employment report on Friday.\nThe nation’s unemployment rate, now at 4.8 percent, is expected to rise to 5 percent in March. The jobless rate could climb to 5.5 percent or higher by the end of this year, according to some analysts’ projections.\nTo bolster the economy, the Fed has been cutting a key interest rate to induce people and companies to boost their spending. Many analysts still predict another reduction to that rate when the central bank meets later this month, although Bernanke didn’t tip his hand about the Fed’s next rate move.
(02/21/08 5:20am)
WASHINGTON – The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.\nThe updated forecasts come amid worry by Federal Reserve Chairman Ben Bernanke and his colleagues that the economy could continue to weaken, even after their aggressive interest rate cuts in January, according to minutes of those private deliberations released Wednesday.\n“With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action,” minutes of the Fed’s Jan. 29-30 closed door meeting showed.\nThe Fed at that session voted to cut a key interest rate by one-half percentage point to 3 percent. Just eight days earlier, the Fed, in an emergency session, slashed its rate by a rare three-quarters percentage point. The two rate cuts together marked the most dramatic rate reductions in a single month by the Fed in a quarter century.\nUnder its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That’s lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.\nGDP is the value of all goods and services produced within the U.S. and is the best barometer of the country’s economic fitness.\nWith economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent to 5.3 percent this year. That is higher than the central bank’s old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.\nAnd, with energy prices marching upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That’s higher than its old forecast, which was estimated to come in at around 1.8 percent to 2.1 percent.\nThe Fed said its revised forecasts reflect a number of factors including “a further intensification of the housing market correction, tighter credit conditions .... ongoing turmoil in financial markets and higher oil prices.”\nThe combination of slower economic growth and increasing inflation could complicate the Fed’s work. The central bank is trying to keep the economy growing, while ensuring that inflation stays under control. The Fed’s remedy for a weakening economy is interest rate cuts. To combat inflation, the Fed usually boosts rates.\nOil prices on Tuesday jumped to a new record – topping $100 a barrel. Consumer prices, meanwhile, rose by a bigger-than-expected 0.4 percent in January, according to new government figures released Wednesday.\nFed policymakers were mindful that they needed to keep a close eye on inflation, minutes of the Jan. 29-30 meeting said.\nSome policymakers noted that when prospects for economic growth improved, “a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate,” according to the documents.\nStill, all but one of the Fed’s members agreed to lower rates by a half-point at that time.\nRichard Fisher, president of the Federal Reserve Bank of Dallas was the sole dissenter. He preferred no change. The minutes showed Fisher thought the level of interest rates were already “quite stimulative, while headline inflation was too high.”
(02/12/08 5:00am)
By Jeannine Aversa\nThe Associated Press\nWASHINGTON – President Bush, acknowledging that the country is suffering through a period of economic uncertainty, called on Congress Monday to do more to help people and businesses hurt by the housing slump and credit crunch.\nIn a brief introduction to his annual economic report, Bush said the $168 billion economic rescue package passed by Congress last week will keep “our economy growing and our people working.”\nStill, other steps need to be taken to strengthen the economy, he said. The president exhorted lawmakers to make his tax cuts permanent and do more to help struggling homeowners at risk of losing their houses.\nBush is expected later this week to sign an economic stimulus package that includes rebates of $600 to $1,200 to most taxpayers and $300 checks to disabled veterans, the elderly and other low-income people. \n“Money will be going directly to American workers and families and individuals,” he said.\nIn addition, the package includes tax breaks for businesses and would take some steps to boost the ailing housing market.\nTo that end, the legislation would temporarily raise to $729,750 the limit on Federal Housing Administration loans and the cap on loans that mortgage giants Fannie Mae and Freddie Mac can buy. Raising that cap on Fannie Mae and Freddie Mac should provide relief in the market for “jumbo” mortgages – those exceeding $417,000. The credit crunch hit that market hard, making it very difficult, if not impossible, for people to get those loans. And, that has plunged the housing market even deeper into turmoil.\nBush urged Congress to pass additional legislation that would revamp Fannie Mae and Freddie Mac and modernize the Depression-era Federal Housing Administration, which insures mortgages for low- and middle-income borrowers. The president also said Congress should approve legislation allowing state housing agencies to issue tax-free bonds to help squeezed homeowners refinance their mortgages.\nThese and other steps could help struggling homeowners “weather turbulent times in the market,” Bush said.\nDescribing the report to reporters, Bush said the stimulus plan is “going to help deal with the uncertainties.” As for the broader economic assessment, he said it indicates “our economy is structurally sound in the long term and that we’re dealing with uncertainties in the short term.” The question, Bush added, is what can be done about it.\nFallout from the housing bust and harder-to-get credit has catapulted home foreclosures to record highs, has forced financial companies to rack up multibillion-dollar losses in bad mortgage investment, has rocked Wall Street and has dealt a powerful blow to the national economy.\nThe economy nearly stalled in the final three months of 2007, growing at a pace of just 0.6 percent. The odds of a recession have grown considerably during the last year, and an increasing number of analysts believe the economy may actually be shrinking now.\n“Our economy is undergoing a period of uncertainty, and there are heightened risks to our near-term economic growth,” Bush said in his economic report to Congress. \nHe said the stimulus package should “insure against those risks.”\nThe administration is hopeful the country will skirt a recession. The last one was in 2001, shortly after Bush first took office.
(01/18/08 3:39am)
WASHINGTON – President Bush and Federal Reserve Chairman Ben Bernanke on Thursday embraced calls for an economic stimulus package to avert recession. Bernanke said such a plan should be aimed at quickly getting cash into the hands of people, especially those with low and moderate incomes.\nThe Fed chief, in testimony to the House Budget Committee, said efforts that involve “putting money into the hands of households and firms that would spend it in the near term” would be more effective than other provisions, such as making Bush’s tax cut permanent. “Again, I’m not taking a view one way or the other on the desirability of those long-term tax cuts being made permanent,” he said.\nWhile shying away from endorsing a specific plan, Bernanke made clear his support for the general concept of an economic rescue package and that it be temporary that it won’t complicate longer-term fiscal challenges. It is likely that any such package would include tax rebates.\n“Fiscal action could be helpful in principle” and may provide “broader support for the economy” than the Fed can furnish alone through reductions in interest rates, Bernanke said. However, “the design and implementation of the fiscal program are critically important,” he said.\nBernanke forecast slower growth in 2008 but not a recession.\nWhen asked by lawmakers about the potential effect of a fiscal stimulus package totaling around $100 billion, Bernanke said the economic impact could be “significant” and not “window dressing.” Some have floated packages that would range in size from $50 billion to $150 billion – all of which are in the range of “reasonable,” Bernanke said.\nRebates can be useful, he added.\n“Getting money to low- and moderate-income people is good in the sense of getting a bang for the buck” because they tend to spend it quickly, Bernanke said. Research shows that the affluent spend some of their rebates, he said.\nTemporary expensing and depreciation provisions for businesses also could spur spending, which would help the economy, he said. As it puts together a package, Bernanke added, “Congress might want to consider a diversified mix of elements.”\nBut he warned: “I hope Congress can resist having a huge list of things” that would lard up legislation and might not do much to help bolser the economy in the short run.\nAt the White House, spokesman Tony Fratto said, “The president does believe that over the short term, that to deal with this softening in the economy, that some boost is necessary.” That marked the first White House confirmation that Bush, confronting a deepening economic crisis that has shaken much of the nation, supports government intervention. Until now, the White House said the president was just considering some type of short-term boost.\n“We do want to try to pass something quickly,” Fratto said later in the day. “I see no obstacle to that. It seems to me that both sides of the aisle in both houses of Congress want to try to get to an agreement,” he said.\nFratto would not divulge the details or what the stimulus would look like, other than to say all options are being considered.\nThe shaping of a stimulus package was expected to accelerate Thursday during a conference call between Bush and congressional leaders. “I would characterize it as a consultation,” Fratto said.\nFratto declined to say when the president could announce a package, or whether it would be before or after the State of the Union address later this month.\nThe fragile state of the economy has gripped Wall Street and Main Street and is a rising concern among voters. The situation has galvanized politicians – \nincluding those vying to be the next president – and poses the biggest test to Bernanke, who took over the Fed nearly two years ago.
(01/14/08 5:25am)
WASHINGTON – The unemployment rate leaps to a two-year high, record numbers of people are forced from their homes and Wall Street nose-dives again. Such is the fallout from a housing meltdown that threatens to slingshot the country into a recession.\nThe big economic question these days is whether the weakening economy will survive the strains or collapse under them.\nThe odds have grown that the economy will slip into a recession. At the beginning of last year, many economists put that chance at less than 1-in-3; now an increasing number says it has climbed to around 50-50. Goldman Sachs, the biggest investment bank on Wall Street, even thinks a recession is inevitable this year.\nHopeful it can be avoided, President Bush and the Democrat-controlled Congress are exploring economic rescue measures, including possible tax rebates. Federal Reserve Chairman Ben Bernanke pledged to lower interest rates as needed.\nThe idea is to induce people to boost spending, especially on big-ticket items such as homes and cars, and revitalize economic activity.\n“The recession gorilla is there,” said Brian Bethune, economist at Global Insight. “The question is can the Federal Reserve do enough to avert a recession? We think the odds are close to 50 percent that there will be a recession. It is high – no question about it.”\nMuch hope rides on the Fed. By dropping rates, it can act quickly – faster than Congress or the White House could agree on and deliver an economic boost.\n“The Federal Reserve is not currently forecasting a recession,” Bernanke said last week. “We are forecasting slow growth.”\nBernanke signaled that a rate cut would come this month. Many economists believe a key rate, now at 4.25 percent, could fall by as much as one-half of a percentage point. Such a cut would lower the rates that are charged to millions of consumers and businesses for many different types of loans.\nAnalysts predict the Fed will keep doing that in the months ahead as part of a campaign that started in September, when the central bank cut rates for the first time in four years.\nTrying to put the fragile economy back on firm footing is the biggest challenge for Bernanke since taking over the Fed nearly two years ago. His job requires a deft reading of the economy’s vital signs and keen insights into what makes people and businesses tick. It is their behavior that shapes the economy. And it is in turbulent times that the Fed chief needs to bolster public and investor confidence.\nStill, Wall Street is on edge. The Dow Jones industrials plunged nearly 250 points on Friday. Also, consumer confidence tumbled in early January.\nBill Cheney, chief economist at John Hancock Financial Services, puts the odds of a recession as high as 40 percent. “There are a lot of headwinds and the economy probably has enough momentum to get through, but when things get rough, there are a lot of ways things could go wrong,” Cheney said.\nThe fear is that people will clamp down on the spending and businesses will put a lid on hiring and capital investment, sending the economy into a tailspin.\nBy one rough rule of thumb, a recession occurs when there are two consecutive quarters – \nsix straight months – \nwhen the economy shrinks.\nThe National Bureau of Economic Research, the recognized arbiters for dating recessions, uses a more complicated formula. It takes into account such things as employment and income growth. By that measure, the last recession was in 2001, starting in March and ending in November.\nTax rebates aimed at stimulating the economy were part of Bush’s $1.35 trillion in tax cuts in 2001. They were credited with helping to make the recession short and mild.
(01/11/07 5:34am)
WASHINGTON -- The Democratic-controlled House voted Wednesday to increase the federal minimum wage to $7.25 an hour, bringing America's lowest-paid workers a crucial step closer to their first raise in a decade.\nThe vote was 315-116, with more than 80 Republicans joining Democrats to pass the bill.\n"You should not be relegated to poverty if you work hard and play by the rules," said House Majority Leader Steny Hoyer, D-Md.\nThe bill was the second measure passed since Democrats took control of the House, ending more than a decade of Republican rule.\nThe measure, which now goes to the Senate, would raise the federal wage floor by $2.10 from its current $5.15 an hour in three steps over 26 months.\nThe Senate is expected to move quickly -- perhaps in the next few weeks -- on a similar bill. Business groups and some Republican lawmakers, however, hope they will be able to get some business-friendly provisions into the Senate package.\nThe last increase was in 1997, when President Clinton successfully prodded the GOP-controlled Congress to enact the increase. Republicans declined to approve another raise for the six years in which they held majorities in the House and Senate and President Bush was in the White House.\nOrganized labor and other supporters pitched the bill as badly needed assistance for the working poor.\nBusiness groups and other critics said it could lead to higher prices for goods and services, force small companies to pink-slip existing workers or hire fewer new ones, and crimp profits.\nThe White House issued a statement saying it opposed the bill because it "fails to provide relief to small businesses."\nSenate Democratic leaders have already signaled they will accept changes designed to shield small businesses from adverse consequences of higher labor costs.\n"This bill increases costs for mom-and-pop businesses," said Steve Chabot, R-Ohio, contending the legislation doesn't do anything to help offset that burden.\nMany businesses want the pot sweetened, perhaps by faster depreciation or other tax breaks or by letting small businesses band together to buy health insurance for their workers.\n"In America we can either have maximum opportunity or we can have minimum wages. We cannot have both," said Rep. Jeb Hensarling, R-Texas.\nThe bill would raise the wage floor in three steps. It would go to $5.85 an hour 60 days after being signed into law by the president, to $6.55 a year later and to $7.25 a year after that.\n"For 10 years the lowest-paid Americans have been frozen out. They have been working at a federal poverty wage, not a federal minimum wage," said Rep. George Miller, D-Calif., author of the legislation.\nBush has said he supports a wage boost paired with "targeted tax and regulatory relief" to help businesses -- which would have to pay for the higher labor costs -- stay competitive.\nThe Labor Department says 479,000 workers paid by the hour earned exactly $5.15 in 2005, the most recent estimate available.\nThe federal minimum wage is like a national wage floor, though some people can be paid less under certain circumstances. States can set minimum wages above the federal level; more than two dozen states plus the District of Columbia do.\nPeople who are paid the minimum wage tend to be young -- under age 25 -- and never married, and they are more likely to be women, minorities and part-timers, according to a recent analysis of 2005 data by the U.S. Department of Labor.\nIf the federal wage does rise in 26 months to $7.25 an hour, about 5.6 million people -- 4 percent of the work force -- who make less than that would be directly affected, according to the Economic Policy Institute, a liberal leaning group. The group estimates that an additional 7.4 million workers would benefit indirectly as raising the floor would ripple through the work force.\nRecent attempts to boost the federal minimum wage had failed when Republicans had control of Congress. But prospects changed after the Nov. 7 midterm elections put Democrats in charge in both the House and Senate.
(01/09/07 4:18am)
WASHINGTON -- The economy has cranked out fewer jobs under President Bush -- by millions -- than it had by the same point in the presidencies of Ronald Reagan and Bill Clinton.\nDemocrats say it's evidence that Bush's economic policies aren't working.\nCommerce Secretary Carlos Gutierrez counters, in an interview, "It's just a matter of timing and when we started getting out of the recession that the president inherited."\nEconomists suggest something fundamentally different also may be going on in the economy: The labor force of available workers is growing more slowly as the baby-boom generation ages.\nUnder Bush, the economy produced 3.7 million new jobs from January 2001 through December of last year based on nonfarm payroll figures collected by the Labor Department's Bureau of Labor Statistics.\nThat figure is likely to be higher -- perhaps by an additional 810,000 -- when the government releases annual revisions based on more complete information next month. However, that doesn't change the basic historical picture.\nWhen Clinton was in the White House, the economy generated 17.6 million jobs during the corresponding period, from January 1993 to December 1998. Under Reagan, 9.5 million jobs were created from January 1981 to December 1986.\nThose are the two most-recent two-term presidents before Bush. Some 2.6 million jobs were created during the four-year term of Bush's father, who took office in January 1989.\nReagan had two recessions, one of which began in July 1981 and ended in November 1982. It was the most severe recession since the Great Depression, pushing the monthly unemployment rate as high as 10.8 percent.
(09/28/05 4:56am)
WASHINGTON -- Federal Reserve Chairman Alan Greenspan issued a fresh warning Tuesday that investors shouldn't be lulled into a false sense of security by the economy's long stretch of low interest rates.\n"History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets," Greenspan said in a speech delivered via satellite to a meeting of the National Association for Business Economics in Chicago.\nGreenspan, in Tuesday's speech, didn't specify what risky assets he was referring to. The Fed chief has been sounding an alarm for months about the perils to homeowners and lenders using risky and exotic types of mortgages.\nIn his remarks Tuesday, Greenspan repeated worries he has expressed in the past -- that a rise in interest rates may spell trouble for some investors who are counting on rates to stay low for an extended period of time.\n"Such developments apparently reflect not only market dynamics but also the all--too-evident alternating and infectious bouts of human euphoria and distress and the instability they engender," he said.\nThe country enjoyed some of the lowest mortgage rates in more than four decades, when the Federal Reserve ratcheted down a key interest it controlled to the lowest level in 46 years. Since June 2004, the Fed has been raising rates gradually to keep inflation in check.\nThis Fed campaign is beginning to have an impact on long-term interest rates set by financial markets. While long-term rates are still considered low, analysts do believe they will move higher in coming months.
(02/18/05 4:08am)
WASHINGTON -- President Bush appealed to members of Congress to make suggestions of their own for changing Social Security on Thursday, and said they need not fear political retribution.\n"It used to be in the past people would step up and say, 'Well, here's an interesting idea,'" Bush said at a news conference at the White House. "Then they would take that idea and clobber the person politically." \nThe president, who has repeatedly called for bipartisanship on the volatile issue, said he won't do that.\n"What I'm saying to members of Congress is that, 'We have a problem, come together and let's fix it, and bring your ideas forward, and I'm willing to discuss them with you,'" Bush said in remarks that were quickly rejected by Democratic lawmakers, who say the president's plan would cut benefits. \nDemocrats want him to produce a complete proposal before they do.\n"He's not going to get us negotiating against ourselves," said Senate Democratic Leader Harry Reid.\nThe president made his comments as Federal Reserve Chairman Alan Greenspan gave Bush's proposal for private accounts a modest endorsement Thursday.\n"These accounts properly constructed and managed will create a sense of increased wealth" on the part of middle and lower income workers, Greenspan said in an appearance before the House Banking Committee.\nGreenspan expressed fresh concerns about the costs of a transition and the impact on financial markets.\nHis worry: whether increased government borrowing would boost a variety of interest rates -- from mortgage rates for consumers to borrowing costs for everybody.\nThe Fed chief acknowledged that the private accounts by themselves don't solve Social Security's long-term financial problems.\nReid delivered his rejection at a news conference where Senate Democrats unveiled a Web site calculator designed to let workers compare their benefits under current law with what they calculated would be available under the president's plan.\n"The president's been making it seem to people that privatization makes you money. It loses you money," said Sen. Chuck Schumer, D-N.Y.\n"No one will gain," added Reid.\nThe president's proposal would allow workers under age 55 to divert a chunk of their Social Security taxes into voluntary, private stock and bond investment accounts. The administration has estimated that transition costs for the next 10 years would be $754 billion.\nCritics contend the true costs would be in the trillions of dollars.\nCongressional Republicans have floated a variety of ideas since Bush called for personal accounts as part of a broader bill to increase the program's solvency and made Social Security legislation the top item on his legislative agenda, including some that have been at odds with his own suggestions.\nHouse Financial Services Committee Chairman Michael Oxley, R-Ohio, said he hopes Congress will step up to the plate to fix Social Security. "There will be some heavy lifting to get the system right, of course," Oxley said.\nDemocrats, by contrast, have consistently expressed opposition to the president's plans, labeling them an attempt to cut benefits to pay for privatization of the government benefit program.\nSome Democrats on the House panel, who believe Bush is trying to scare the public on the Social Security issue, wondered aloud why Greenspan didn't use the word "crisis" to describe the situation.\n"I have chosen not to use that word," Greenspan said. "I consider the problem a very serious one."\nBush conceded that nothing will happen "unless that Congress thinks there's a problem. ... Once the people say to Congress, 'There's a problem, fix it,' then I have a duty to say to members of Congress, `Bring forth your ideas.'"\nBush added: "And I clarified a variety of ideas that people should be encouraged to bring forward, without political retribution."\nBush is leaving open the possibility of raising taxes on those who earn more than $90,000 a year to help bolster Social Security's finances. Under the current system, payroll taxes are paid only on the first $90,000 in wages.
(07/15/04 2:08am)
WASHINGTON -- The government's deficit ballooned to $326.6 billion in the first nine months of the 2004 budget year, according to a snapshot of U.S. balance sheets released Tuesday.\nThat's more than 20 percent larger than the $269.7 billion shortfall for the corresponding period last year. For the current budget year which began Oct. 1, this spending has totaled $1.73 trillion, 6.4 percent more than the same period a year ago. Revenues came to $1.40 trillion, 3.5 percent more than the previous year.\nSo far this year, the biggest spending categories are programs from the Health and Human Services Department, including Medicare and Medicaid, $407.1 billion; Social Security, $397 billion; military, $322.3 billion; and interest on the public debt, $274.9 billion.\nOn the revenue side, individual income tax payments came to $596.4 billion for the first nine months of the 2004 budget year, 1.4 percent less than the corresponding period a year ago.\nCorporate income tax payments, however, totaled $140.3 billion so far this year, nearly a 44 percent increase. The Congressional Budget Office says a little over half of that increase stemmed from rising tax collections as the economic recovery has grown deeper roots.\nWith a stronger economy expected to help boost overall revenues, some private economists believe the budget shortfall for this year may be about $450 billion. That would be better than earlier projections but would still set a new record in dollar terms.\nThe government produced a record $374 billion deficit last year.\nThe Congressional Budget Office has said this year's budget deficit is expected to be less than the $477 billion shortfall the office projected in March. The White House is expected to lower its forecast from the current $521 billion deficit projected for this year whenever it releases updated figures.\nIn June, the government recorded a surplus of $19.1 billion, smaller than the $21.2 billion surplus for the same month last year. The surplus in June was based on revenues of $214.4 billion and spending of $195.2 billion.
(01/29/04 4:47am)
WASHINGTON D.C.-- The Federal Reserve, not wanting to upset the economic recovery, held a main short-term interest rate at a 45-year low Wednesday. But the central bank hinted rates could move higher in the future.\nWrapping up a two-day meeting -- the first regularly scheduled session of the year -- Federal Reserve Chairman Alan Greenspan and his colleagues left the federal funds rate unchanged at 1 percent. The funds rate, the interest banks charge each other on overnight loans, is the Fed's primary tool for influencing the economy. The Reserve lowered the funds rate to its current 1 percent level in June and the rate hasn't budged since then.\nHowever, the fed used some new language in its statement Wednesday, saying "with inflation quite low ... the committee believes that it can be patient in removing its policy accommodation."\nThat's different wording from previous statements when the Reserve said it had leeway to keep short-term rates low for a "considerable period" -- a phrase it had been using since August.\nEconomists viewed the new language as a small first step by Federal Reserve policy-makers to prepare Wall Street and Main Street for higher interest rates down the road -- but said a rate increase is not imminent.\n"What Fed policy-makers are saying is that they are getting the market ready for tighter monetary policy eventually. But they are not going to raise interest rates any time soon," said Wells Fargo's chief economist Sung Won Sohn.\nOn Wall Street, stocks fell after the Fed's announcement. The Dow Jones industrials were off 80 points and the Nasdaq was down 18 points in afternoon trading.\nThe Reserve said since its last meeting in December, economic reports suggest the economy is "expanding briskly." It added "although new hiring remains subdued, other indicators suggest an improvement in the labor market."\nThe Fed's decision to leave the funds rate alone means commercial banks' prime lending rate for many short-term consumer and business loans remains at 4 percent, the lowest level in more than four decades.\nAn environment of low short-term borrowing costs may give consumers and businesses an incentive to spend and invest more, boosting economic growth.\nDespite improvements in the national economy, job seekers still find it difficult to get work and businesses aren't yet firing on all cylinders, economists said.\nThe nation's payrolls grew by a minuscule 1,000 in December, raising new concerns about the fragile state of the labor market. The unemployment rate dipped to 5.7 percent, but that was mainly because thousands of prospective workers gave up looking for jobs.\nThe economy has lost 2.3 million jobs since President Bush took office in January 2001. The president believes a stronger economy will lead to more jobs. Democrats point to the job losses as evidence of what they say are the president's failed economic policies.\nAnalysts are hopeful that stronger job growth will take place later this year as businesses feel more confident in the economy and see their bottom lines improve.\nEven with the Fed dropping its pledge Wednesday to hold short-term rates low for a "considerable period," some economists continue to believe the Reserve will leave rates at current levels throughout this year. That would be good news for America's borrowers and consumer-sensitive industries such as housing. New-home sales set a record high for all of 2003, the government reported Wednesday.\nOthers, however, believe the Fed will begin to nudge up rates later this year. Some predict the first rate increase could come as early as June. The last time the Federal Reserve raised rates was May 2000, when the economy was enjoying a record expansion.\nThe economy fell into recession in 2001, struggled to get out and finally perked up in the second half of last year.\nIn the third quarter of 2003, the economy grew at blistering 8.2 percent rate -- the strongest performance in nearly two decades. Economists believe economic growth slowed to a rate of around 4 to 5 percent in the final quarter of last year, which would still be brisk. The government on Friday will release its first estimate of economic growth for the fourth quarter.\nEconomic growth in the current quarter is projected to be solid -- at a rate of just over 4 percent, economists said.
(09/30/03 5:25am)
WASHINGTON -- Flush with extra cash from tax cuts, America's consumers treated themselves in August and spent with gusto, good news for the economy's revival.\nThe Commerce Department reported Monday that consumer spending increased by a strong 0.8 percent last month on top of an even bigger 0.9 percent advance in July as larger paychecks and other incentives from President Bush's third tax cut began to take hold.\n"Consumer spending turned in another stellar performance," said Wachovia economist Mark Vitner. "Spending continues to be bolstered by the recently enacted tax cuts."\nAmericans' disposable incomes, or what's left after taxes, advanced by 0.9 percent in August, following a 1.5 percent jump in July.\nThe government attributed much of the increase in disposable incomes in both July and August to the president's tax cut, which lowered federal tax withholdings, boosting people's take-home pay and provided other incentives.\nCommerce Secretary Don Evans said the tax cuts are "helping American consumers keep more of the money they earn" and that "their increased purchasing power is strengthening our economy."\nExcluding the tax impact, disposable incomes increased by a more modest 0.3 percent in July and 0.2 percent in August.\nThe spending and income figures are not adjusted for price changes.\nOn Wall Street, the report helped to push stocks higher. The Dow Jones industrials gained 67.16 points to close at 9,380.24.\nConsumer spending accounts for roughly two-thirds of all economic activity in the United States. Because of that, the behavior of shoppers is a major factor in shaping the economy's recovery.\nThus far, consumers are spending enough to keep the nation's cash registers humming and the economy's rebound chugging forward.\nThe economy grew at a 3.3 percent rate in the second quarter of this year, and economists are predicting that it is now gaining even more momentum.\nMany analysts believe the economy is growing at a rate in excess of 5 percent in the current quarter and should be able to maintain growth above 4 percent in the final three months of the year.\nThat forecast, if it proves to be correct, would represent the strongest back-to-back growth rates since the last two quarters of 1999.\nStill, analysts caution that they have predicted second-half economic rebounds for three years that have failed to happen as consumers and companies grew cautious -- concerned about their own financial situations as well as the economy's future.\nNear rock-bottom short-term rates, the latest round of tax cuts and a refinancing frenzy earlier this summer are helping to support consumer spending.\n"Those ingredients translated into a big helping of spending by consumers," said Stuart Hoffman, chief economist at PNC Financial Services Group.\nThus far, those positive factors are helping to offset the negative impact of a sluggish job market. In August, businesses slashed jobs for the seventh month in a row. And, more recently, claims for unemployment benefits have remained stubbornly high.\nMonday's report, however, also showed that wages and salaries increased by just 0.1 percent in August, after being flat in July -- a reflection of the lackluster labor market. Some economists worry about the vigor of consumer spending in the coming months if the job market doesn't improve.\nConsumer spending on "durable" goods -- costly manufactured products such as cars and appliances -- went up by 2.8 percent in August, following a 3.3 percent increase in July.\nSpending on "nondurables" such as food and clothes, rose by 0.9 percent for the second straight month. For services, spending increased by 0.3 percent in August, after a 0.5 percent gain.\nBecause disposable income growth outpaced spending, the nation's personal savings rate, or savings as a percentage of after-tax incomes, rose to 3.8 percent in August from 3.6 percent in July. The savings rate in August marked the best showing since February.\nAmid signs that the economy is picking up speed, the Federal Reserve earlier this month decided to hold a key short-term interest rate at a 45-year low of 1 percent and hinted that the rate could stay there for some time.
(03/04/03 5:12am)
WASHINGTON -- Consumers worried about a possible war with Iraq and their own financial prospects trimmed spending in January -- the first such rollback in four months -- and manufacturing slowed in February, sending a pair of trouble signs for an already struggling economy.\nThe 0.1 percent cutback reported by the Commerce Department Monday came after consumers splurged in December, boosting their spending by a sizable 1 percent. End of year financing deals on cars and other big-ticket goods proved too good to pass up.\nBut in January consumers sharply cut spending on such big-ticket "durable" goods -- items expected to last at least three years. This was the major factor behind the overall drop in spending for the month.\nThe cutback in spending came as Americans' incomes, including wages, interest and government benefits, went up by a modest 0.3 percent for the sixth straight month in January.\nIn a more forward-looking report, the Institute for Supply Management's index of manufacturing activity fell to 50.5 in February, slipping markedly from a January reading of 53.9. A level above 50 indicates the manufacturing sector is expanding; below 50 means it's contracting.\nMonday's report showed that manufacturing barely grew last month, turning in a performance that was significantly weaker than the 52.0 reading analysts were predicting.\nManufacturing -- hardest hit by the 2001 recession -- is the weakest link in the economy's ability to get back to full health.\nBut the housing sector continues to be one of the economy's strongest pillars, as evidenced in another report from the Commerce Department.\nConstruction spending jumped by 1.7 percent in January to a seasonally adjusted annual rate of $877.9 billion, an all-time monthly high, as builders bet that low mortgage rates would continue to support the housing market.\nThe increase -- the largest in a year -- followed a strong 1.5 percent advance in December.\nMost of January's strength came from residential projects, where spending rose to a record monthly rate of $452.6 billion.\nGovernment spending on big public works projects rose solidly, but spending by private builders on commercial construction, such as office buildings, continued to be weak, a sore spot for the economy.\nIn the report tracking consumers, both the spending and income figures -- which are not adjusted for inflation -- were weaker than economists were expecting. They were forecasting spending to go up by 0.2 percent and incomes to grow by 0.4 percent in January.\nWorries about a war with Iraq, a rollercoaster stock market, a sluggish job market and sinking confidence in the economy are a few of the forces making consumers more cautious.\nThe 0.1 percent drop in spending in January marked the first and biggest decline since September, when consumers trimmed spending by 0.4 percent.\nUnlike businesses, which have been weary to make big financial commitments, consumers have been the main force keeping the economy going. Their spending accounts for two-thirds of all economic activity in the United States.\nIf a war were to break out, economists believe consumers initially would sharply cut back on their spending, a force that would slow the recovery.\nIf the United States were to put a quick and successful end to the war, then consumers and businesses would probably return to more normal buying and investing behavior, helping economic growth. But if a war turns out to be drawn out and severe supply disruptions cause dramatic spikes in oil prices, the economy could be looking at a backslide into recession.\nThe Federal Reserve is expected to hold short-term interest rates at a 41-year low of 1.25 percent when it meets next on March 18. Fed policy-makers hope that by keeping rates so low consumers and businesses will be more inclined to boost spending and investment, helping the recovery.\nIn January, consumers cut spending on "durable" goods, such as cars, by 5.7 percent, the biggest drop since Feb. 1990, and a reversal from the brisk 6.8 percent rise registered in December.\nSpending on nondurables, such as food and clothes, went up by 1.3 percent in January, following a 0.4 percent increase. Consumers boosted spending on services, including travel and utilities, by 0.4 percent, up from a tiny 0.1 percent advance in December.\nAmericans' disposable -- or after-tax income -- rose by 0.3 percent in January, down from a 0.4 percent rise in December.\nWith income growth outpacing spending, the nation's personal savings rate -- savings as a percentage of after-tax income -- rose from 3.9 percent in December to 4.3 percent in January.
(12/05/02 5:10am)
WASHINGTON -- United Airlines lost its bid for $1.8 billion in federal loan guarantees Wednesday, a major setback to the nation's second-largest air carrier in its efforts to avoid bankruptcy.\nThe Air Transportation Stabilization Board said that despite efforts to pare costs, "the business plan submitted by the company is not financially sound."\nChicago-based United had asked that the government guarantee $1.8 billion of a $2 billion private loan package. Without the guarantee and the loan, the airline has said it would probably have to file for Chapter 11 bankruptcy protection.\nThe $1.8 billion is the largest request received by the board, double the amount that US Airways was conditionally granted earlier this year.\nThe board was established by Congress last year to oversee a $10 billion loan program, part of an airline industry bailout after last year's Sept. 11 terrorist attacks.\nThe board, in its statement, said United's plan "does not support the conclusion that there is a reasonable assurance of repayment and would pose an unacceptably high risk to U.S. taxpayers."\nUnited's chief executive officer, Glenn Tilton, expressed disappointment with the board's decision, but he didn't say whether the company would file for bankruptcy or file a revised proposal for a federal loan guarantee with the board.\n"We appreciate, however, the possibility expressed to consider an improved proposal at a later date," Tilton said. "We will consult with our union leaders and other stakeholders and quickly determine what step to take next."\nHours after the board announced its decision, the union representing 13,000 United mechanics and aircraft cleaners canceled a vote on wage cuts scheduled for Thursday.\nTwo of the three board members -- Treasury's undersecretary for domestic finance, Peter Fisher, and Federal Reserve Board member Edward Gramlich -- rejected United's request. The third member, Kirk Van Tine, the general counsel of the Transportation Department, voted to defer a decision until Dec. 9 to allow United to submit additional financial information.\n"These are hard decisions, and I certainly feel for the affected employees," said Gramlich. "At the same time, the loan board has a responsibility to taxpayers and to fostering the long-term health of the airline industry," he said, explaining his decision to reject United's request.\nFisher said: "This is not just about costs; it's about a business plan that is fundamentally flawed."\nThe board's executive director, Daniel Montgomery, told reporters that United still has an opportunity to file a revised request with the board even if the airline were to file for bankruptcy.\nThe head of United's pilots union held out hope of avoiding a bankruptcy filing, although he did not specify how that might be accomplished.\n"We are extremely disappointed by the decision of the ATSB and do not agree with the board's analysis of United's business plan," said Paul Whiteford, head of the United pilots union. "We believe the purpose of the ATSB is to stabilize, not restructure the airline industry."\n"We will work very hard over the next few days with both the company and union coalition to evaluate the situation and respond as quickly as possible to achieve an out-of-court recovery for the company," he added.\nThe union representing United flight attendants, the Association of Flight Attendants, also was disappointed by the board's decision.\nAfter losing an industry-record $2.1 billion in 2001, United is on course to exceed that loss this year as it struggles amid a weak economy and a decline in business travelers.\nSome passengers flying United on Wednesday said the government should help United stay in business.\n"We need the competition to keep the fares lower," said Courtney Burkholder, 31, of Lincoln, Neb., as she walked through Chicago's O'Hare International Airport. "Generally, it seems unfair that the airlines suffered for the terrorist attacks."\nA bankruptcy would be unlikely to have any immediate effect on passengers. United has said it would continue flying its normal schedule, as US Airways has been doing since its Chapter 11 filing in August.\nBut United is trying to avoid a filing because its stock shares would probably become virtually worthless and it would lose control of its restructuring to a judge. The airline is 55 percent owned by its employees.\nUnited shares had risen 7 cents in regular trading Wednesday to close at $3.12 on the New York Stock Exchange. But the shares plummeted in after-hours trading, losing 56 percent of their value, or $1.75, to $1.37 each.\nThe board' decision makes it "highly likely" that United will be forced to file for bankruptcy, said Aaron Gellman, an airline industry expert and professor at Northwestern University's Transportation Center.\nBut the decision doesn't mean United's schedule will be decimated, he said.\n"They will not stop flying. When they come out of bankruptcy, they'll come out leaner and meaner," Gellman said.\nThe board in early November sent a letter to United, seeking additional information including details on cost savings that could be achieved from labor unions and from management, capital spending commitments and pension obligations.\nOnly two major airlines have gotten help from the board.\nThe board in July gave conditional approval to US Airways' application for a $900 million federal loan guarantee, but the carrier still ended up filing for bankruptcy protection. And, in December of last year, America West received conditional approval for a federal loan guarantee of $380 million.\nThe board has approved loan guarantees for some smaller airlines, as well.\nA person familiar with United's situation said the airline was close to securing $1.5 billion debtor-in-possession financing that would be needed in order to keep it operating while in bankruptcy. The airline has been in negotiations with several banks organizing the loan, including J.P. Morgan, Bank One and GE Capital, a unit of General Electric, said the person, speaking on condition of anonymity.