Archive for category Mixed Economy
Republicans Urge Delay in Release of Remaining Bailout Cash
Posted by admin in Mixed Economy, Politics on January 13th, 2009
FOXnews.com
Tuesday, January 13, 2009
Republicans on the House Financial Services Committee urged Democratic Chairman Barney Frank on Monday night “in the strongest possible terms” to postpone a debate and vote to release the second half of the $700 billion financial bailout package.
President Bush on Monday sent a request for the $350 billion to Congress on behalf of the incoming administration. Senate leaders were hoping to vote later this week on the financial bailout package, which President-elect Barack Obama is seeking.
“Karl Marx famously observed that history repeats itself, first as tragedy and then as farce,” GOP lawmakers said in a letter to Frank. “And it appears this Congress is trying to prove Marx correct. The original TARP was considered and enacted in a panicked rush to judgment. We are again moving far too quickly in considering whether to approve the expenditure of hundreds of billions of taxpayer dollars.”
Sources told FOX News that Senate leaders are hoping to call a vote on the measure some time between Thursday and Saturday, though it’s unclear whether Obama’s request would be approved. Only one chamber of Congress needs to approve the funding.
Administration officials made clear that Obama, who would be spending the money, will also have to make the case for it.
“The best course of action, of course, is to convince enough members of the Senate to vote positively for the request,” Bush told reporters Monday morning.
Congress has 15 days to act once the formal request is made.
The process for approving the money is complicated, and would require lawmakers supportive of Obama’s request to vote against the measure that comes to the floor — called a motion of disapproval. If they vote against the measure, the Obama White House gets the money. If they vote for the measure, then they are denying Obama that money.
Opponents to the release of the money would need 60 votes to deny the funds, and several sources said that seems achievable.
But they would ultimately need 67 votes to override a likely presidential veto, which would be tougher. In other words, supporters of Obama’s request need only round up one-third of the Senate to approve the money.
Obama’s pick for treasury secretary, Timothy Geithner, has been working with Senate Banking Committee Chairman Chris Dodd, D-Conn., on ways to reshape the program and in turn generate more support for the proposal.
The unpopular bailout has so far featured unconditional infusions of money into financial institutions that have done little to account for it.
Republicans in both chambers are skeptical about the second half of the bailout money, particularly because they think the recent use of some funding to bail out the auto industry signaled that the money is heading toward those with political clout rather than struggling financial institutions.
House Republican Leader John Boehner said it would be “irresponsible” of Congress to release any more money. George Rep. Tom Price, chairman of the Republican Study Committee, said in a written statement that the request for the funding is “troubling and disappointing.”
But Obama at least has the support of the top Republican on the Senate Budget Committee, New Hampshire Sen. Judd Gregg. Gregg told FOX News he feels “very strongly that they need this resource,” though he acknowledged that many lawmakers are “disgruntled” with the package so far.
House Speaker Nancy Pelosi released a statement Monday saying the House will vote this week on separate legislation from Rep. Barney Frank, D-Mass., ensuring more accountability to the distribution of the money.
But that could be a symbolic vote, since Obama might already have the bailout money by the time such legislation moved to the Senate — if it moved to the Senate.
Rather, Democrats are seeking a “letter of assurances” from Obama’s economic team spelling out conditions they will impose on the rest of the bailout money by the time the measure comes up for a vote.
Obama’s transition team on Monday released a letter addressing several of these provisions. The team sent the letter to Democratic and Republican lawmakers spelling out reforms that the president-elect intends to make for the distribution of the second half of the funding.
Obama economic adviser Larry Summers wrote in the letter that the bailout prevented a “crisis” from becoming a “catastrophe,” but that Americans have become “angry” after seeing too little effect from the plan on jobs, incomes and home-ownership. He also wrote that the process has not been transparent.
“That will change when President-elect Obama takes office,” Summers wrote.
Summers pledged to increase oversight of the distribution and ensure a “full and accurate accounting” of the money. He pledged that the administration would help restart lending, address the foreclosure crisis better, encourage private investment over public funding and impose “tough and transparent” conditions on firms receiving the money. Those would include limits on executive compensation and dividend payments.
Summers plans to return to the Senate for another round of meetings Tuesday with Senate Democrats on the finance committee, sources told FOX News.
FOX News’ Jim Angle, Trish Turner, Chad Pergram and The Associated Press contributed to this report.
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Merkel’s Coalition Forges Second, $66 Billion Stimulus Package for Germany
Posted by admin in Mixed Economy, World News on January 13th, 2009
By Brian Parkin and Rainer Buergin
Jan. 13 (Bloomberg) — German Chancellor Angela Merkel’s coalition agreed to spend an additional 50 billion euros ($66 billion) this year and next, its second attempt to stem the worst recession since World War II in Europe’s largest economy.
The coalition parties forged an accord during a six-hour meeting in Berlin last night on measures including lower health- insurance payments, investment in schools and roads, a reduction of the lowest income-tax rate and 100-euro checks for each child. The parties also agreed on a “protective umbrella” for non-financial companies of about 100 billion euros to guarantee loans. A proposal by the Social Democrats, Merkel’s coalition partners, to raise the highest rate of income tax was rejected.
“If we’d failed to do what we did last night, we’d have risked the collapse of parts of our industrial base such as the car industry,” Volker Kauder, parliamentary leader of Merkel’s Christian Democratic Union, said today on ZDF television. “We’re in an exceptional situation.”
The plan, the second German stimulus program in two months, comes after lawmakers approved a 32 billion-euro package in November that includes subsidies, tax relief for families and investment in construction. It may still be too late to bolster Germany’s export-driven economy in 2009, an election year, said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich.
Effect ‘After Summer’
The package “will have an effect, but after the summer of 2009 at the earliest,” Rees said in a Jan. 11 note to investors. “Companies and consumers will be left to their own devices until then.”
The German stimulus measures amount to 82 billion euros over two years, or about 1.6 percent of gross domestic product, making it the biggest economic injection in Europe. That compares with President-elect Barack Obama’s U.S. plans for a two-year stimulus program of about $775 billion, or about 2.8 percent of GDP.
International Monetary Fund Managing Director Dominique Strauss-Kahn said in an interview Jan. 9 that western European governments are “behind the curve” in implementing stimulus packages and are “still underestimating the needs.”
German manufacturing orders extended their worst decline on record in November and exports dropped by a record, two reports published Jan. 8 showed.
‘Terrible Year’
The “awful” numbers signal a “terrible year for growth,” said Dominic Bryant, an economist at BNP Paribas in London, who expects the economy to shrink 3 percent this year, the worst contraction since 1949. The German government is scheduled to release new economic growth forecasts on Jan. 28.
The infrastructure investment of 18 billion euros will be targeted at improving education facilities, Peter Struck, Social Democrat parliamentary leader, said on ZDF.
Some of the fiscal measures will come into effect on July 1 this year, Struck said. He said that the SPD’s proposal to raise the highest rate of income tax to 47.5 percent from 45 percent for two years to partly fund the package was rejected by Merkel’s CDU and her Bavarian sister party, the Christian Social Union.
Tax Cuts
Lower taxes in the package comprise a tax-free amount that’s been raised to 8,004 euros from 7,664 euros and a reduction to 14 percent in the lowest income-tax rate from 15 percent. Income-tax cuts will lower the tax burden by 9 billion euros a year, said Kauder. The government will also pay for a reduction in health-insurance contributions — shared between workers and employers — to 14.9 percent of gross pay from 15.5 percent.
The measures also include a one-time bonus of 100 euros in children’s allowances, and a 2,500 euro payment for drivers who buy a new low-emission car.
The coalition agreed to lower tax rates for low and medium- income earners to alleviate “cold progression,” the erosion of net wage increases from moves to higher tax classes, Kauder said.
“I’m sure that these programs will have an effect and that we will see that they contribute to the stabilization” of the economy, Kauder said. “We don’t need to talk about a third economic stimulus package.”
Peter Ramsauer, parliamentary leader of the Christian Social Union, said the steps would ensure that Germany would not breach the budget-deficit limit of 3 percent of GDP set by the European Union for the stability of the single currency.
U.S. Economy May Shrink 1.5% in 2009 as Recession Stymies Fed
Posted by admin in Mixed Economy on January 13th, 2009
By Shobhana Chandra and Alex Tanzi
Jan. 13 (Bloomberg) — Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.
The world’s largest economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12. The slump will push inflation below what some Fed officials consider price stability, the survey showed.
“It’s very hard to get anything into place to change the course of the economy in the first half of this year,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. “We’re in the middle of something very deep here.”
How quickly the U.S. will pull out of the slide may depend on the $775 billion stimulus package that President-elect Barack Obama is pushing lawmakers to enact next month. The projections indicate he’ll be seeking to halt what may be the longest recession since World War II.
“This is a once-in-a-century crisis, and we’re about to see a once-in-a-century response,” said Ian Morris, chief U.S. economist at HSBC Securities USA Inc. in New York. “We could be in for a wild ride” depending on the timing and size of the stimulus, he said.
Quarterly Forecasts
Gross domestic product dropped at a 5 percent annual pace in the last three months of 2008 and will contract 3 percent this quarter, with a 0.8 percent drop in the next three months, according to the survey median. All estimates were lower than in the previous monthly survey.
Obama’s spending and tax-cut package will result in GDP increasing 3.7 percent more by the end of 2010 than it would without the stimulus, according to a study compiled by his economic advisers. The two-year plan also will generate or save as many as 4 million jobs, according to the report.
“It’s not too late to change course — but only if we take immediate and dramatic action,” Obama said in a weekly radio address on Jan. 10. “Our first job is to put people back to work and get our economy working again.”
The odds that the economy will be out of the recession in the next 12 months were 55 percent, the survey showed. The slump began in December 2007.
Consumer spending, the biggest part of the economy, may fall at a 1.6 percent pace this quarter after dropping 2.7 percent in the last three months of 2008, the survey showed. Combined with the decline in last year’s third quarter, it would be the first time in the postwar era that spending fell during a nine-month span.
‘Horrendous’ Economy
“There’s nothing good out there for the consumer except cheaper gasoline,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The economy will be horrendous for the next quarter or two.”
Plunging home values and stock prices have eroded household wealth, and the economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate, which climbed to 7.2 percent in December, will surge to a 26-year high of 8.4 percent by late 2009, the survey showed.
Stocks had the biggest one-week drop since November last week on growing concern over the economy and company earnings.
The first simultaneous recession in the U.S., Japan and euro area means American businesses will keep paring output.
“The worst of the declines in business spending are still to come,” said Peter Kretzmer, a senior economist at Bank of America Corp. in New York.
Holiday Sales
Homebuilders are in the fourth year of a slump and retailers are coming off the worst holiday-sales season in four decades. General Motors Corp. and Chrysler LLC sought government loans to stay afloat.
“It’s going to take several years to pull ourselves out of this,” Dan DiMicco, chief executive officer of Nucor Corp., the largest U.S. steelmaker, said in a Jan. 9 interview. “We know things are getting worse.”
Fed and government efforts to boost growth come at a cost: economists projected the government’s budget deficit for the 2009 fiscal year will reach $1.325 trillion, equivalent to a postwar high of 8.6 percent of GDP, according to the survey.
Prices are retreating as the economy slows. The Fed’s preferred inflation gauge, based on consumer spending and excluding food and fuel costs, will rise 1.2 percent this year, the smallest gain since 1962, the survey showed. The increase would be less than the long-term forecast of 1.3 percent to 1.7 percent that reflects policy makers’ expectations for the level of inflation given “appropriate” monetary policy.
The deceleration, also called disinflation, is less sinister than the persistent decline in costs that economists call deflation. Still, the Fed last month discussed setting an inflation target to discourage expectations that price increases will slow “below desired levels,” according to minutes of the meeting.
“The deflation threat is more real this time around” than the last time policy makers faced similar concerns in 2003, said HSBC’s Morris.
China’s Exports Decline by Most in Decade on Global Recession
Posted by admin in Mixed Economy, World News on January 13th, 2009
By Li Yanping and Nipa Piboontanasawat
Jan. 13 (Bloomberg) — China’s exports fell the most in almost a decade in December as the deepening global recession cut demand for the nation’s toys, clothes and electronics.
Shipments dropped 2.8 percent, the customs bureau said on its Web site today. That compares with a 21.7 percent gain a year earlier. Exports grew 17.2 percent for all of 2008, down from 25.7 percent in 2007.
Waning export demand has led to protests by fired factory employees, an exodus of 600,000 migrant workers from the manufacturing hub of Guangdong, and an estimated urban unemployment rate of more than 9 percent. Premier Wen Jiabao pledged Jan. 11 to add to the nation’s 4 trillion yuan ($585 billion) stimulus package to create jobs and avoid social instability.
“There is little hope that exports will recover this year, as developed economies remain mired in recessions,” said Sun Mingchun, a Hong Kong-based economist at Nomura Holdings. “Textile, steel and electronic exports are the most badly hurt.”
The yuan fell to 6.8376 against the dollar from yesterday’s close of 6.8370, as of 3:38 p.m. in Shanghai. The CSI 300 Index of stocks declined 2.3 percent.
Exports to the European Union, China’s biggest export market, fell 3.5 percent in December from a year earlier. Shipments to the U.S. slipped 4.1 percent.
Tumbling Profits
Profits have tumbled for manufacturers with operations in China, such as Hon Hai Precision Industry Co., the world’s biggest contract maker of electronics. Hisense Group, a state- owned air conditioner and refrigerator maker, has reported plunging orders.
The export decline was less than the 5.3 percent median estimate in a Bloomberg News survey of 16 economists.
Imports plunged 21.3 percent, the biggest decline since Bloomberg data began in 1995, on waning demand for raw materials for manufacturing, leaving a trade surplus of $39 billion, the second-largest on record.
The surplus for all of 2008 climbed 13 percent to $295.46 billion, also a record.
Achieving the government’s 8 percent economic growth target for creating jobs and preventing social unrest will be “exceptionally arduous,” Liu Mingkang, the chairman of the China Banking Regulatory Commission, said in Beijing yesterday. Speaking in Switzerland, central bank Governor Zhou Xiaochuan said he too saw a risk of missing the goal.
Tiananmen Square Crackdown
Growth may slow to 5 percent this year, less than half of the 11.9 percent expansion in 2007, according to Royal Bank of Scotland Plc. That would be the weakest pace since 1990 and the aftermath of the Tiananmen Square crackdown. Growth was 9 percent in the third quarter of last year.
The central bank has cut interest rates five times from September, reducing the key one-year lending rate to 5.31 percent, and allowed lenders to set aside smaller reserves.
China is also aiding exporters by curbing currency gains that would make their products more expensive in overseas markets, restricting the yuan to a 0.5 percent advance against the dollar in the second half of last year after a 6.6 percent increase in the first.
The nation’s currency policy and trade surplus may exacerbate tensions with the U.S., which last month complained to the World Trade Organization that China was using prohibited subsidies to boost exports from apparel to high-tech electronics.
President-elect Barack Obama should press China to allow the yuan to appreciate because weakness in the currency is hurting U.S. jobs and manufacturing, according to Professor Peter Morici, from the University of Maryland’s Robert H. Smith School of Business.
Rising Unemployment
Shipments may fall 10 percent in 2009, Nomura’s Sun estimated, dragging down economic growth by 2.5 percentage points.
The state-backed Chinese Academy of Social Sciences forecast 9.4 percent urban unemployment by the end of 2008, to rise in 2009 as exports and production cool.
The central bank will keep the yuan trading within a narrow range against the dollar in 2009 to help exporters, Goldman Sachs Group Inc. said in a report yesterday.
“This is viewed as a critical issue for trade development in the face of unprecedented uncertainties in the global economy,” wrote Helen Qiao and Song Yu, Hong Kong-based economists.
The decline in exports was the biggest since April 1999.
Northwest Layoff Update: Agilent, Attachmate, Intermec, and ON Semiconductor Slash Jobs
Posted by admin in Mixed Economy on January 10th, 2009
Northwest Layoff Update: Agilent, Attachmate, Intermec, and ON Semiconductor Slash Jobs
Gregory T. Huang 1/9/09
2009 is barely a week old, and already the Washington and Oregon tech industries have seen massive new layoffs in the struggling economy. A quick recap of the latest bloodletting (see the updated Xconomy Seattle layoff litany here):
—Agilent Technologies (NYSE: A) cut 120 jobs at its plant in Liberty Lake, WA. The Santa Clara, CA-based maker of instruments for electronics and life sciences companies has nearly 20,000 employees worldwide. The layoffs are effective January 30.
—Seattle-based software firm Attachmate has laid off 120 employees, or 10 percent of its staff, as reported by TechFlash. It is not clear yet how many jobs are being cut in Seattle. Attachmate is a Seattle-area icon that helps businesses manage and deliver IT services. It has some 65,000 customers, according to its website.
—Intermec (NYSE: IN), an Everett, WA-based maker of technologies for radio frequency identification and mobile computing, has laid off 7 percent of its global workforce, or about 150 people. The cuts are mostly in sales, general, and administrative areas.
—ON Semiconductor (NASDAQ: ONNN), which operates a 500-person chip manufacturing plant in Gresham, OR, is laying off 10 percent of its worldwide staff, or about 1,500 jobs. The Phoenix, AZ-based company is reportedly closing its Oregon plant for at least four weeks in the first half of this year.
Gregory T. Huang is the Editor of Xconomy Seattle. You can e-mail him at gthuang@xconomy.com or call 206-624-2249.
U.S. Civilian Unemployment Rate Past Trend Present Value & Future Projection Percent Unemployed Seasonally Adjusted.
Posted by admin in Mixed Economy on January 10th, 2009
U.S. unemployment rate continues sharp rise!
Posted by admin in Mixed Economy on January 10th, 2009
The nation’s unemployment rate rose to 7.2 percent in December as employers slashed 524,000 jobs.
According to information released Friday by U.S. Labor Department, the the country lost 2.6 million jobs in 2008. That was the most since 1945, when nearly 2.8 million jobs were lost. Although the number of jobs in the U.S. has more than tripled since then, December’s numbers are no less staggering.
With employers battered by a growing recession, a meltdown on Wall Street and a crumbling housing market, the nation’s jobless rate averaged 5.8 percent last year. That was up sharply from 4.6 percent in 2007 and was the highest since 2003. The nation’s unemployment rate stood at 6.8 percent in November before December’s layoffs shot the rate to 7.2 percent.
Arizona’s unemployment rate stood at 6.3 percent in November. December numbers aren’t in yet, but an increase is expected.
Construction companies around the country slashed 101,000 jobs in December, and factories axed 149,000. Professional and business services cut 113,000 jobs. Retailers eliminated nearly 67,000 jobs, and the leisure and hospitality sector reduced employment by 22,000. That more than swamped gains in education, health care and government jobs.
Workers with jobs saw only small wage gains at the end of last year.
Average hourly earnings rose to $18.36 in December, up 0.3 percent from the previous month. Economists were expecting a 0.2 percent increase. Over the year, wages have increased 3.7 percent, although high prices for energy and food early in 2008 took a big bite out of those gains.
Despite a series of government bailouts and the Federal Reserve slashing interest rates in the past year, the unemployment rate is expected to keep rising. Some economists think it could hit 9 or 10 percent at the end of this year.
Phoenix Business Journal – by Adam Kress
