Finance & Business World

The U.S. lost jobs for a third month in March and manufacturing contracted at the fastest pace in five years, signs the economy continues to turn down, economists said before reports this week.

Payrolls probably shrank by 50,000, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's April 4 report. The last time the economy lost jobs for at least three consecutive months coincided with the start of the Iraq War in 2003.

“The economy has slipped into a recession,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. “We expect the labor market to weaken, with payrolls falling steadily through the middle of next year.''

Job losses, slumping confidence and the biggest plunge in housing in a generation all point to a slowdown in consumer spending that will weaken growth. Federal Reserve Chairman Ben S. Bernanke will testify before Congress this week after lowering interest rates and extending credit to non-banks in an attempt to calm financial markets.

The projected decrease in payrolls would follow a decline of 63,000 in February and a smaller drop in January. The jobless rate likely rose to 5 percent from 4.8 percent, the survey said.

Factory payrolls in March probably shrank by 40,000 workers, reflecting automakers' efforts to trim costs and a strike at a suppler for General Motors Corp., economists project the jobs report may show.

Strike's Influence

A walkout by workers at American Axle & Manufacturing over pay and benefits that started on Feb. 26 has idled almost half of GM's North American workforce. The payroll figures may be reduced by as much as 20,000 workers because of the effects of the strike, according to Morgan Stanley economist David Greenlaw.

Ford Motor Co., which lost $15.3 billion in the past two years, may cut more jobs in North America, Chief Executive Officer Alan Mulally said earlier this month.

“The old ways of doing business are gone,'' Joe Hinrichs, Ford's manufacturing chief, and Marty Mulloy, vice president of labor affairs, said in a March 19 commentary sent to newspapers in communities where Ford has plants. “We must continue to downsize and simply will not have enough jobs for all of our current hourly workers.''

Job losses in financial markets are also mounting following the collapse in subprime lending payday advance.

Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001, according to the Securities Industry and Financial Markets Association.

Job Losses

This year, banks including Lehman, Citigroup Inc. and Morgan Stanley have been reducing staff in fixed income trading, securitization and investment banking. So far, Lehman has eliminated 18 percent of its workforce, Morgan Stanley has cut 6.2 percent, and Merrill Lynch & Co. has trimmed 4.5 percent.

“Rising unemployment should continue to slow wage growth, adding to the strain on consumers,'' said Lehman's Harris.

Manufacturers are retrenching as demand weakens. The Tempe, Arizona-based Institute for Supply Management may report April 1 that its factory index fell to 47.5 this month, the lowest level since April 2003, from 48.3 in February, according to the survey median. A reading of 50 is the dividing line between expansion and contraction.

The following day, the Commerce Department may report that factory orders in February dropped 0.8 percent following a 2.5 percent decline the prior month.

Services Contract

In another sign that the housing recession is dragging down other areas, service industries contracted for a third month in March, the ISM is projected to report on April 3.

The group's non-manufacturing index, which covers 90 percent of the economy, fell to 48.5 this month, from 49.3 in February, according to the median forecast. Services haven't contracted for three consecutive months since 2001-2002, when the economy was emerging from the last recession.

“The tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters,'' the Fed said March 18 following its last policy meeting. “Growth in consumer spending has slowed and labor markets have softened.''

Bernanke will elaborate on the outlook before the Joint Economic Committee of Congress on April 2.

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The National Transportation Safety Board is investigating an incident in which a panel fell off a wing on a US Airways Group Inc. flight to Philadelphia from Orlando, Fla.

The aircraft, a Boeing B-757, landed safely following the March 22 flight.

Citing "people familiar with the matter," The Wall Street Journal reports the airline had "discovered improper maintenance had been performed on the wings of seven of its Boeing 757 planes."

A US Airways representative says the carrier will "not be commenting beyond what's in the statement" it issued Thursday. The statement, a brief description of the incident, mentioned nothing about improper maintenance.

The US Airways statement said the airline "contacted federal authorities immediately after the incident and began inspections of similar aircraft in the US Airways fleet that day."

The NTSB says a four-foot by five-foot composite panel flew off the trailing edge of the upper side of the left wing at around 9:30 a.m instant payday loan.

The panel "broke loose from the aircraft and struck several of the windows towards the rear of the aircraft," the agency says. "The impact caused the outer pane of one window to crack. The inner pane was undamaged and the pressurization of the aircraft was not compromised."

The NTSB is trying to locate the panel. The Air Line Pilots Association, Boeing Commercial Airplanes, the Federal Aviation Administration and US Airways are involved in the investigation.

US Airways (NYSE:LCC) has its largest hub at Charlotte/Douglas International Airport. The Arizona-based carrier operates 3,800 flights per day to some 230 destinations in the United States, Canada, Europe, the Caribbean and Latin America.

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Eli Lilly and Co. and Alaska announced a $15 million settlement Wednesday in the state’s lawsuit over the use of the drug Zyprexa in its Medicaid program.

The deal ensures that Alaska will be treated as well as any other state that may settle with Lilly over similar claims involving the drug, which is used to treat schizophrenia and bipolar disorder.

The agreement included no admission of wrongdoing by Lilly.

Suit meant to cover Medicaid costs. The state sued for hundreds of millions of dollars to cover costs to Medicaid for treating what it says are Zyprexa-related health problems, including weight gain, high blood sugar and diabetes.

The settlement ended a case in which jurors began hearing testimony on March 6. Lilly attorneys got a sense of the challenges they faced earlier this month.

Anchorage Superior Court Judge Mark Rindner said on the bench, without jurors present, that without lawsuits like the one the state of Alaska brought, claims that drugs cause health problems "might well go unaddressed."

Rindner was reacting to an assertion by Lilly (LLY, Fortune 500) lawyer George Lehner that drug regulation is up to the federal Food and Drug Administration, not any state payday loans. He argued that Alaska’s Unfair Trade Practices and Consumer Protection Act shouldn’t apply to drugs.

But Rindner said evidence presented by the state had established that the FDA "isn’t capable of policing this matter." 

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Though times are tough now, Americans believe the economy will bounce back by next year, according to a survey released Friday.

A national CNN/Opinion Research Corp. poll found that 60% of respondents think economic conditions in the United States will be "good" next year, as opposed to the 75% who think the economic situation is "poor" now.

"Most people realize that the economy has cycles of ups and downs," said Wachovia economist Sam Bullard. "Fortunately, the last two recessions were some of the shortest on record, so in 2009 we should be pulling up out of this."

Of the more than 1,000 American adults surveyed in the poll, conducted March 14-16, 83% said they are "confident" that they will be able to maintain their standards of living next year, and 85% are "confident" they will keep their jobs over the next six months.

Americans also showed faith that they would be able to pay off their future debts, with 90% of respondents demonstrating confidence they would be able to meet their monthly mortgage payments for the duration of the mortgage.

Nearly as many Americans - 83% - said they could pay off college loans, car payments, and credit cards in the future. The average amount of credit card debt of those polled was $4,000.

"Consumers, in general, are optimists," said Bullard, who believes that increased consumer spending after the tax rebate checks are delivered in the late spring will help boost the economy in the third and fourth quarters of 2008.

"Even when they’re not optimists, they love shopping," he added.

But Americans are less optimistic about their long-term financial situation fast cash. Only 23% felt "very confident" about paying for their children to attend their choice of college.

Furthermore, only 29% said they were "very confident" about saving enough money to live comfortably when they retire, and just 44% believe they will be able to retire when they want to. According to the poll, 58% want to retire sometime in their 60s.

Since respondents were uncertain about their long-term prospects, only 34% said they were "very confident" about maintaining their standard of living over the next 10 years, as opposed to 45% who said the same about next year.

"They’re worried about inflation," said Bullard. "Medical care and education costs are outpacing other price increases, and they’re worried about how they can afford to retire."

As for the more immediate future, however, Bullard thinks consumers are right to be confident.

"The Fed’s rate cuts will start to take their toll later this year, and the economy should bounce back by the end of 2008," he said. 

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Britons selling their home should “get smart'' and price their property more realistically before they lose out when home values decline later this year, Rightmove Plc said.

The average asking price climbed 0.8 percent in March to 239,655 pounds ($475,000) and they rose 1.3 percent in London, Britain's most-used property Web site said in a statement today. It said the gap between what owners charge and buyers can afford is widening as consumers find it harder to get a mortgage.

Bank of England policy maker Kate Barker said on March 19 that buyers will struggle to afford homes even if property prices weaken this year. The bank hosted a meeting of banking executives the next day as officials tried to stem a financial crisis that has prompted lenders to scale back mortgage offers.

“Sellers should price below their competition to achieve more interest now and avoid a larger price drop later in the year,'' said Miles Shipside, Rightmove's commercial director. “If sellers were to price more realistically at the same time as lenders were able to normalize lending criteria, we could see a speedier harmonization of seller expectations and buyer affordability.''

While asking prices are less than 1 percent below their record high of 241,642 pounds reached in October last year, sales are being agreed to at around 10 percent less than that, the report said http://us-no-fax-payday-loans.com. In London, average asking prices were 1.3 percent lower than the record of 412,731 pounds in November.

`Urgent' Action

Rightmove also called for the government, the Bank of England and lenders to take “urgent coordinated action to ease mortgage liquidity.''

British banks have raised the cost of borrowing for homebuyers with the smallest deposits to a seven-year high, declining to pass on two Bank of England rate cuts to 5.25 percent. The average rate offered by lenders on loans for 95 percent of the price of a property, fixed for 24 months, rose to 6.55 percent central bank data showed this month.

The U.K. housing market slumped to the worst since the eve of the nation's last recession in 1990, a survey by the Royal Institution of Chartered Surveyors showed this month. Mortgage approvals stayed close to the lowest in nine years in January, the Bank of England reported Feb. 29.

House prices rose 5 percent on the year, compared with an annual 5.8 percent in February, Rightmove said today.

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The Food Bank of Contra Costa and Solano has received a donation of 24,000 fresh eggs from NuCal Foods Inc. of Ripon, part of a nationwide contribution of 12 million eggs from the industry to food banks across the country during the month of March.

As part of the same program, the Alameda County Community Food Bank in Oakland received a donation of 78,000 eggs.

Officials of the Concord-based Food Bank of Contra Costa and Solano said the timing of the egg donation is important, since they face high demand and low inventory during the spring, and the cost of eggs has skyrocketed 35 percent over the past year paydayloans.com.

"The agencies were very happy to have eggs not only for breakfast, but Easter, too," said Theresa Pate, remote service coordinator for the Food Bank, which offers food assistance to 82,000 people in the two counties every month.

NuCal is a cooperative of four family-operated egg-farming operations in the Central Valley.

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Wal-Mart Stores will buy the rest of Japanese chain Seiyu as the U.S. retail giant seeks the flexibility it says it needs to turn around the money-losing supermarket operator.

Seiyu, Japan’s fifth-biggest retailer by sales, said shareholders approved the move at a meeting earlier Tuesday. The vote allows Wal-Mart to buy the remaining 4% of Seiyu it doesn’t already own.

Since entering the Japanese market in 2002, Wal-Mart has been gradually raising its stake in Seiyu, which has about 400 stores nationwide. But Wal-Mart has also struggled to make money in Japan. Although mall-style shopping is increasingly popular here, for everyday food and other needs, shoppers tend to go to smaller neighborhood stores.

In February, Seiyu reported a net loss of $216 million for last year, underscoring the tough time Wal-Mart is having in returning the Japanese company to the black.

Weak sales of clothing and other seasonal goods led to a 0.9% fall in revenue to $9.82 billion for the year, down from about $9.92 billion a year earlier.

The poor performance suggests Wal-Mart’s "Everyday Low Price" strategy has backfired in Japan, where consumers tend to equate low prices with low quality.

Wal-Mart’s track record at its international operations has been uneven online cash advance. While its business has flourished in Mexico and Latin America, shopping cultures in other countries and regions have failed to respond to the sales format that proved successful in its home territory.

The Bentonville, Arkansas-based company sold its German operations to rival German retailer Metro AG in 2006 and earlier sold 16 stores it owned in South Korea.

Wal-Mart (WMT, Fortune 500) has more than 4,000 domestic stores and about 3,000 stores outside the United States. 

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Steve Horstmeyer, WKRC-TV's longtime weatherman, will move to WXIX-TV (Fox19) as chief meteorologist, the station announced Monday.

Horstmeyer had spent 19 years at WKRC, a CBS affiliate. Prior to that, he was a meteorologist with WLWT-TV, and a mathematics teacher with Cincinnati Public Schools payday loans.

A Cincinnati native, Horstmeyer graduated from Moeller High School and Miami University. His first on-air day at Fox19 will be Aug. 7, the station said.

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Battered Wall Street brokerage Bear Stearns said Friday that it is receiving short-term emergency funding to prevent its collapse.

JPMorgan Chase & Co. and the Federal Reserve Bank of New York said they would provide Bear Stearns funding for up to 28 days, with the Fed providing the money to JPMorgan through its discount window.

With the credit crisis worsening, the government took action to prevent the investment bank from going under and igniting widespread panic through the financial markets.

Bear Stearns (BSC, Fortune 500) shares closed at $30, down 47.4%, reportedly the largest one-day drop in the firm’s history.

The announcement did not indicate how much funding Bear Stearns would receive, but executives said in a conference call Friday afternoon that with the money, the firm will "have the ability to fund ourselves every day, to do business as usual."

"It’s a bridge to a more permanent solution," said Chief Executive Alan Schwartz.

During the call, Schwartz said the firm’s liquidity crunch hit Thursday, when many customers demanded cash after hearing rumors of trouble at Bear Stearns all week.

Bear Stearns had already been working with investment bank Lazard & Co. to explore alternatives when the cash calls came in. The brokerage house decided to secure funding from JPMorgan to give it time to "get some more facts out to the marketplace and give people time to assess them," Schwartz said.

The company, which is continuing to work with Lazard, also announced it is moving up the date of its first-quarter earnings release to Monday and provide more information about its current condition. Prior to Friday’s announcement, the consensus among analysts was that the New York-based broker would post a profit of $135 million on revenue of $1.35 billion. Executives reiterated that they were comfortable with the range of earnings estimates.

Schwartz said the firm’s capital position, a measure of its soundness, is in "good shape."

Move gets backing of Fed

JPMorgan’s move was blessed by the nation’s Federal Reserve Bank, which said in a statement that its board members voted unanimously in favor of the arrangement. The Fed added that it would continue to monitor market developments and provide liquidity as needed. Earlier this week, the Fed pumped $200 billion into the market by allowing big bond dealers to offer as collateral certain hard-to-trade mortgage-backed securities for cash.

Wall Street has had plenty to worry about when it comes to Bear Stearns credit reports. Shares of the company plunged Thursday morning on fears about how hard the company could get hit by declining values in the mortgage securities market.

Thursday’s selloff knocked Bear’s stock down to about $57 a share - almost a third of the price it traded at last year before the firm’s bad bets on subprime mortgages blew up two of its hedge funds.

Strategic alternatives sought

In the Friday morning announcement, JPMorgan (JPM, Fortune 500) said it was working closely with Bear Stearns on securing permanent financing or other alternatives for the company, although Schwartz warned that there was no assurance that any strategic alternatives would succeed.

JPMorgan, seeking to allay fears of its own shareholders, said that it did not believe the transaction would put them at risk. Shares of the Wall Street firm, however, sank about 4% by midday.

How Bear Stearns handles its current crisis will be of more importance to investors than its earnings report, said Kathleen Shanley, senior analyst at Gimme Credit, a corporate-bond research firm.

She noted the company is not as diversified as some of its larger peers and that its reputation for conservative risk management has been tarnished by recent events.

The firm will have to show shareholders "whether it can prevent further erosion to the value of its franchise," Shanley said.

The crisis, however, is not isolated to Bear Stearns, said Christopher Whalen, managing director of Institutional Risk Analytics, who predicts that the liquidity crunch will only get worse. The heart of the problem is that no one knows how to value the assets these Wall Street firms are carrying so noone wants them.

"A lot of firms are right behind Bear," he said.

After Bear Stearns’ announcement, Treasury Secretary Henry Paulson said the Bush administration is working with the Fed and the SEC to address the challenges in the financial markets.

"Our financial system is flexible and resilient and I am confident that the efforts of regulators and market participants will minimize disruption to the system," he said. 

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The federal budget deficit for the first five months of this fiscal year has risen more than 60% from the prior year after ballooning by more than expected in February, the Treasury Department said Wednesday.

In its monthly finance review, the Treasury Department said the budget deficit totaled $263.3 billion for the fiscal year that began Oct. 1, up from $162.2 billion reported in the same period a year earlier.

The deficit for the month of February reached $175.6 billion. A consensus of analysts polled by Briefing.com expected a budget deficit for the month of $170 billion.

Thus far, government spending has risen 10.2% to $1.2 trillion compared to the previous year, while revenue has risen only 1.3% to $967.2 billion.

"In the short run, given the economy is weak, budget deficit is probably a good thing because that means the government is spending money to stimulate the economy," said Gus Faucher, an economist with Moody’s Economy.com.

Faucher said that we still have yet to see the affect of the government’s stimulus package how to get a free credit report. Stimulus rebate checks - $600 for individuals and $1200 for couples filing jointly, plus $300 per child - are expected to be mailed out to qualifying households in May.

The government projected that the budget deficit for all of fiscal 2008, which includes stimulus package spending, will total $410 billion, unchanged from last month’s estimate, and near 2004’s record high of $413 billion.

However, "budget deficit in the long-term means that the government is essentially soaking up money that would normally be invested in the private sector to grow the economy," added Faucher.

Congress began debating two rival plans Wednesday aimed at balancing the budget. One, backed by Democrats, would rely on tax hikes when President Bush’s tax cuts expire in about three years.

The other, backed by Republicans, would preserve the tax cuts, but slash costly entitlement programs such as Medicare and housing. 

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