You are tethered to the office 24/7 through your CrackBerry, and as a result probably make a few (dozen?) personal calls from that phone. To the wife? The babysitter? Dinner reservations, perhaps?
Odds are, you don’t pay income tax on that "perk" even though the IRS requires companies to treat personal use of a work cell phone as benefit income that can be taxed.
But for the two decades the rule has been in place, it has been largely ignored. Nobody - businesses nor individuals - want to go through pages of cell bills to calculate exactly what portion of your bill is personal and taxable.
"Trying to track any personal calls versus business calls is a headache to document," said Gordon Bernhardt, president of Bernhardt Wealth Management. That would certainly be "cumbersome paperwork" for businesses.
"In the current environment, the rule as it operates now is pretty difficult to comply with," agreed an IRS official.
Jeff Ready, CEO of Indianapolis-based Scale Computing, remembers tracking minutes and what it headache it was. But he no longer worries about work vs. personal calls. "In the past, there were not unlimited plans and you had to track overage," he said. "But now, everyone is on a standard plan with unlimited voice and data, so it doesn’t matter."
Even though he and others see this rule as an "outdated concept," the IRS said it has been approached by some businesses wanting it clarified to make it easier to have employees pick up the tab for their personal calls.
As such, this week the agency proposed three new plans it says might make the process less burdensome. It is seeking public comment on the options until Sept cash till payday. 4. Here are the three proposals currently on the table:
Minimal Personal Use Method: Under this plan, the Treasury would allow the entire expense of the business cell phone to be excluded from your personal income tax, so long as you can provide sufficient documentation that you are using a personal phone for personal calls during work hours
Another option under this plan suggested by the IRS would define certain allowable number of minutes or situations when it would be considered acceptable to use a work phone for personal uses.
Safe harbor Substantiation Method: The second proposal from the IRS would consider that 25% of employer sponsored plans are considered personal.
Statistical Sampling Method: In the third proposal, businesses would use approved statistical sampling methods to average how much time employees spend using business phones for personal purposes. The company would use the average as a multiplier to determine how many minutes the employee would be responsible for covering.
No matter what - if any - changes the IRS makes, Ready says he has no plans to charge his employees for any personal minutes. For him, it would be like determining how much to charge an employee for making a local call from a land line at their desk. "It just seems silly if you put it in the context of a land line."
"When I give you a cell phone, I expect you to carry it," he added. "To get you to carry it, I expect that you are going to give the number to your spouse. To me, that is no big deal."
As Detroit home prices crash, sales are heating up. But with all of the plant closings and layoffs, who’s buying? Investors — some of whom are snapping up five and 10 houses at a time.
"I have investors from all over the country and the world," said Jeremy Burgess, co-founder of Urban Detroit Wholesalers, which buys undervalued homes to rehab and rent or to sell to other investors. "One Lithuanian woman just bought a second house."
"Most of the local investors are out of money," added Mike Shannon, who specializes in Detroit foreclosures and has clients from New Zealand, Australia, England and other places.
Recently a Californian purchased 178 properties, mostly one at a time, and most for under $10,000. Another has purchased six Detroit properties since September and hopes to begin buying five a month.
"The capital needed to get in the Detroit market is so low," said Jason Imbruglio, a 29-year-old from Tacoma, Wash., who has bought three homes so far.
Two years ago, he paid $12,000 for a two-family house with two bedrooms and a bath in each unit. He spent $18,000 repairing it for a total cost of about $30,000. Imbruglio has kept tenants in both apartments most of the time and charges $1,100 a month. After taking into account the 10% he pays a management company, plus utilities, property taxes and maintenance costs, he says he is making double-digit profits.
Plentiful opportunities
The city’s average home price has sunk by a third to less than $80,000. But these cheap houses have got sales jumping, with volume up 23% in April compared with April 2008.
And there is no secret to finding cheap properties. Burgess said he buys through regular sellers and other investors and off the local multiple listing service.
Many are buying in buying in bulk, snapping up properties bundled together and sold by lenders. However, that is becoming less lucrative, according to Burgess. "The quality of the bulk stuff is significantly lower than it was a year ago," he said. "Back them 70% of the houses bought in bulk were nice. Now, 80% or 90% are not."
What he focuses on when selecting properties is the neighborhood. He looks to own in some of the city’s stable, blue-collar communities with high homeownership rates, such as Warrendale, University District and Grandmont.
"In the good areas, rents are actually going up," said Burgess. "I just had a house rent for $950 that I was thinking I would get $850 for cheap car insurance."
The bad areas, ones with vacant homes and foreclosed properties, such as the Brightmoor district, are no-go zones for Burgess. Rents and values are low in those communities — and falling.
"I wouldn’t touch anything, not even for a dollar, in those areas," he said.
Making it work
In general, Shannon said investors are "looking for long-term investment of five to 10 years. They sock away some profits [on rentals] and wait for prices to appreciate."
To make sure they have a steady rent roll, some investors are getting their properties qualified to be Section 8 housing, which is the housing voucher program run by the federal government to help low-income families. Under this program, some tenants can rent units in private housing with the government picking up part or all of the cost, which must be "fair-market rent."
"You put in a Section 8 tenant and collect $850 to $1,200 a month on a three-bedroom home," said Shannon, who specializes in foreclosure properties.
Another option is to work with local nonprofits to sell rehabbed units to credit-damaged - but worthy - buyers. These organizations identify families and offer them credit-repair counseling and assistance finding an affordable financing so that they can buy the investors’ rehabbed properties.
"We shifted away from speculative investing into restoring affordable housing," said investor David Butler, who buys through Burgess.
The deals are often structured like a lease-option contract, with the tenant/buyers paying rent on the property plus a premium charge that is applied to the future sale price. They buyers complete the purchases when they get affordable mortgage loans.
To keep costs down, Butler looks to pay no more than $45,000 for a property, including repairs and any back taxes. When finished these homes typically appraise for about $80,000. Because his company partners with a nonprofit, it accepts narrower margins, about 12%. Normally, buy-rehab-flip investors prefer margins of 35% or more.
Have you applied for a loan modification or refinancing under the Obama administration plan? Did you run into roadbloacks or were you able to avoid foreclosure? E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
Stocks ended modestly higher Thursday, with all three major gauges closing at multi-month highs after the day’s economic reports fed hopes that a recovery is brewing.
The Dow Jones industrial average (INDU) gained nearly 32 points, or 0.4%. Despite falling short of its 2008 finish, the index ended at its highest level since Jan. 6.
The S&P 500 (SPX) index added over 5 points, or 0.6% and closed at its highest point since Nov. 5.
The Nasdaq composite (COMP) climbed 9 points, or 0.5% and closed at the highest point since Oct. 6.
Stocks have been on the rise since bottoming March 9, with the Dow up 34%, the S&P 500 up 40% and the Nasdaq up 47%, as of Thursday’s close.
But stocks have seesawed this week after rising Treasury yields and higher commodity prices sparked worries about inflation hampering a burgeoning recovery.
Thursday restarted the advance, as a rise in retail sales and a bigger-than-expected dip in jobless claims raised hopes that the pace of the recession is slowing. But the early advance lost momentum; the S&P 500 failed to hold on after briefly hitting a key level that traders and other market pros watch.
Nonetheless, the trend remains upward.
"The market keeps chugging along and it’s pretty impressive," said Michael Church, president at Addison Capital. "None of the economic data screams outright recovery, but the market tends to move first."
He said that the runup has been liquidity driven, with investors not wanting to miss the boat, even after three months of gains. However, the pace of the advance has been slowing lately and that’s bound to continue.
He said that the immediate concern over the next few weeks is the rise in interest rates.
On Friday, May import and export prices are due from the Labor Department. Also, the University of Michigan releases its June consumer sentiment index.
Bonds: A comparatively strong 30-year bond auction Thursday helped temper worries about pricing pressures, at least in the short term.
Treasury prices jumped, lowering the corresponding yields. The benchmark 10-year note yield fell to 3.85%, down from 4% early Thursday morning. The yield touched 4% during Wednesday’s session for the first time since last October.
Economy: Retail sales climbed 0.5% in May, the Commerce Department reported. The report was in line with forecasts and showed an improvement from April, when sales fell a revised 0.2%.
Sales excluding autos rose a bigger-than-expected 0.5%. Economists surveyed by Briefing.com thought sales without volatile autos would rise 0.2% after falling a revised 0.2% in April.
But the report mostly reflects the recent rise in gas prices, rather than any new direction for the consumer, said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.
"Basically the consumer is still dead in the water," he said cash loans no credit check. "We’re not going to see a rise in consumer spending in the second quarter like we did in the first. Household balance sheets are a disaster."
A Federal Reserve report showed Americans saw $1.3 trillion in wealth disappear in the first quarter of this year, as home values declined and the stock market tanked. But the rate of decline was slower than last year. In the fourth quarter alone, $5.1 trillion in wealth disappeared, the biggest quarterly plunge since the Fed started tracking data in 1951.
Another report showed that foreclosure filings fell 6% in May from April, but still saw the third-worst month on record. The report showed that one of every 398 households received some kind of filing in the month, including notices of default, scheduled auctions or bank repossession.
The number of Americans filing new claims for unemployment fell 24,000 to 601,000 last week, according to a Labor Department report released Thursday morning. Economists though claims would dip to 615,000.
However, continuing claims, the number of Americans who have been receiving benefits for a week or more, rose to 6,816,000 from a revised 6,757,000 in the previous week.
BofA: Bank of America (BAC, Fortune 500) CEO Ken Lewis stressed Thursday that pressure from the government played a key role in the company’s decision to complete its purchase of Merrill Lynch last year.
Lewis said the federal government threatened to remove management or board members if the company went back on its promise to buy Merrill, even though Merrill’s financial state was deteriorating.
Other markets: In global trading, Asian markets ended mixed and European bourses ended higher.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for July delivery rose $1.35 to settle at $72.68 a barrel on the New York Mercantile Exchange, the highest close since October.
COMEX gold for August delivery rose $7.30 to settle at $962 an ounce.
Market breadth was positive and volume on the New York Stock Exchange was light for the fourth session in a row. On the New York Stock Exchange, winners beat losers three to two on volume of 1.22 billion shares. On the Nasdaq, advancers topped decliners nine to five on volume of 2.49 billion shares.
Has the recession actually helped you? From lower debt payments to cheaper home prices, many people have benefited from the current downturn. If you’ve made out financially and want to share your story, please email steve.hargreaves@turner.com.
For the CNNMoney.com Comment Policy, click here.
Bud Light has been around for 27 years. And Bud Light Lime is, like, so 2008.
Beer fans with short attention spans, fear not. Anheuser-Busch is about to launch what it hopes is the next big thing: Bud Light Golden Wheat.
The October launch will give Bud Light three formidable prongs as Anheuser-Busch continues to expand the muscle of its best-selling brand.
Will Golden Wheat prove a worthy cousin to Bud Light Lime? The citrus-flavored brew was the first major extension of Bud Light and one of the most successful newcomers in recent years. It sold more than 1 million barrels in its first few months, and sales continue to grow.
Anheuser-Busch — a division of Anheuser-Busch InBev, the world’s biggest brewer — doesn’t necessarily expect Golden Wheat to produce the same results as Bud Light Lime. But it expects a big splash nevertheless.
"Our expectations are fairly big for this, given that it’s got Bud Light’s name on it," said Keith Levy, A-B’s vice president of marketing.
Sales of wheat beers have grown dramatically in recent years, bolstered by brands such as Molson Coors’ Blue Moon, Boulevard Unfiltered Wheat and Widmer Hefeweizen. Anheuser-Busch got its toes wet in the category with beers such as Michelob Honey Wheat and Shock Top Belgian White.
Golden Wheat will be supported by an annual advertising budget of roughly $30 million — in the neighborhood of Bud Light Lime. "We’re going to have fairly aggressive targets" for sales, Levy said.
Golden Wheat — whose existence was first reported Wednesday on the Post-Dispatch’s Lager Heads blog — has been in development for nearly two years. It will roll out across the country during the week of Oct. 5.
Anheuser-Busch has done a brisk business tacking extensions onto its dominant brands. Bud Light itself, now the biggest beer brand in the U.S., was an offshoot of Budweiser in 1982. It was A-B’s response to the success of Miller Lite.
"Line extensions are typically a very good idea, because you’re attracting people who are seeking something new," said Haim Mano, associate professor of marketing at the University of Missouri-St free credit report instantly. Louis.
Companies have been doing similar things for years, Mano said. He noted Pepsi’s and Coca-Cola’s excursions into diet cola, as well as A-B’s effort to reach active women with Michelob Ultra.
Golden Wheat’s marketing themes are still being worked out. Levy said the target audience would be drinkers ages 25-44 — including "loyalists" who lean towards A-B’s beer, as well as "trendsetters" who like to be on the leading edge of new beverages. The trick will be attracting new fans without alienating Bud Light’s core drinkers — men ages 21-27.
Bud Light Golden Wheat will be positioned as a flavorful alternative with the "drinkability" expected from Bud Light, Levy said. He was careful to insist that A-B would not try to "out-craft" craft beers.
"We’re going for people who are interested in light beer but want a little more flavor, a little bigger taste," he said. The goal is to "stay true to what the mother ship, Bud Light, has to offer."
The problem for Bud Light is that its sales and market share are shrinking. Bud Light Lime is siphoning off some sales. So are cheaper beers such as Busch Light and Natural Light.
Tacking on an extension to Bud Light is a calculated risk.
The hope is that Golden Wheat will draw in people who aren’t drinking much beer, or are drinking competitors’ brews, said UMSL’s Mano.
Even if Bud Light Golden Wheat steals some sales from standard Bud Light, that will work out OK for Anheuser-Busch, Levy said. That’s because Golden Wheat will sell for roughly $1 to $1.50 more per six-pack than standard Bud Light. That means more money per swig for Anheuser-Busch.
Golden Wheat soon will start flowing out of A-B breweries in New York, Georgia and Colorado.
"The brand is ready to go," said Levy. "It’s a great new offering. We’ve got a lot of ideas in the pipeline that we can pull the trigger on at the right time."
A spike in U.S. mortgage rates drove down total home loan applications last week as demand for refinancing shriveled to the lowest level since November, the Mortgage Bankers Association said on Wednesday.
Borrowing costs have soared as bond yields have risen, even as the Federal Reserve has sopped up hundreds of billions of dollars in bonds to keep rates low and stimulate the housing market.
The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57%. That was nearly a full point above the record low rate of 4.61% in March, the trade group said.
The vast majority of mortgage activity this year has been from homeowners cutting costs with new loans at rock-bottom rates.
The Mortgage Bankers Association’s seasonally adjusted index of total applications dropped 7.2% to a four-month low of 611.0 in the latest week.
The refinancing index slumped 11.8% to a nearly seven-month low of 2,605.7 last week, and refinancing accounted for about 59% of all applications, the lowest share since November. As recently as April, refinancings accounted for almost 80% of all home loan applications.
Purchasers have been slower to act in the current housing market, with some waiting in hopes that prices will fall further and others paralyzed by unemployment or wage cuts.
Demand for loans to buy homes was little changed last week, rising 1.1% to 270.7, having basically been stuck in neutral throughout the important spring sales season.
"I’m not optimistic for 2009 or 2010," Mark Goldman, real estate lecturer at San Diego State University and mortgage broker, said on Tuesday no teletreck payday advance.
The swift percentage point rise in mortgage rates cuts the purchasing power of a borrower by about 10%, he estimated.
"Employment is still bad, wages are still low, interest rates are up. That’s going to hurt the housing market," said Goldman.
The number of U.S. jobs cut in May was the lowest level since September, but the unemployment rate rose to 9.4%, the highest since July 1983.
First-time buyers taking advantage of new tax credits and investors snapping up foreclosed properties at distressed levels have in recent months buttressed the hardest-hit housing market since the Great Depression.
But borrowers will foreclose in record numbers at least for another year, several industry sources, including the Mortgage Bankers Association, predict. Those homes will add to the already large supply of unsold properties and will keep pressuring prices.
Home prices on a national level have tumbled more than 32% from the peak three years ago, according to Standard & Poor’s/Case-Shiller indexes.
"Prices continue to erode on a national level, and with the rest of the economy not doing well either and the jobless rate constantly increasing, we don’t see a recovery in housing on a national level coming soon," Kevin Marshall, president of Clear Capital, based in Truckee, Calif., said this week.
"That doesn’t mean there aren’t values to be had out there," he added.
General Motors Corp, which filed for bankruptcy protection a week ago, said Monday that it would cease production of medium-duty trucks by July 31 after attempts to sell the operation failed.
"After four years of working with multiple potential buyers, General Motors has decided to wind down its medium-duty truck operations," the automaker said in a statement.
GM (GMGMQ) plans to cease production of Chevrolet Kodiak and GMC Topkick medium-duty trucks by July 31. The automaker sold about 20,000 of the vehicles last year, down from roughly 30,000 in 2007, as the U.S. economy sank into a deep recession.
Chief Executive Fritz Henderson told reporters at an event in Warren, Michigan, that the medium-duty truck the business had not been successful for years and workers would be deployed to other facilities or offered an attrition program.
GM has moved quickly since it filed for bankruptcy on June 1 to disclose plans for brands and operations not part of its long-term strategy. GM plans a quick sale of its profitable assets by the end of August to a new company affordable health insurance.
Last week, GM said it had reached preliminary agreements to sell its Saturn brand to dealership group Penske Automotive Group and its Hummer brand to little-known Chinese heavy equipment maker Sichuan Tengzhong Heavy Industrial Machinery.
About 400 hourly and salaried workers are involved in the production of the medium-duty trucks at a GM plant in Flint, Michigan, spokesman Jim Hopson said.
The Flint plant has more than 2,100 employees overall and also builds light pickup trucks for GM. The automaker plans to continue production of the pickup trucks at the plant.
Navistar International Corp had been one of the potential buyers for the GM medium-duty truck operation. GM and Navistar had reached a tentative agreement on a sale, but the pact expired in August 2008 without a deal being reached.
It was supposed to be a dream home for the Swidlers of Clermont, Fla., but it turned out to be a nightmare.
Jill Swidler recalls the string of mishaps that eventually became the clue that something was wrong. "The AC went out, the appliances went out, we had jewelry tarnishing and the plumbing fixtures tarnishing, but none of that seemed to be related," she recalls.
The Swidlers had built their home themselves. Michael Swidler, a construction foreman by trade had overseen the building of more than 500 homes in Florida. For his own home, he bought 289 sheets of Toughrock brand drywall, made by Georgia Pacific, at a nearby lumberyard.
In the months after they moved in, however, the couple’s air conditioning broke down, and other appliances also faltered. Metal faucets corroded. The fire alarm would go off randomly, copper wires turned black and soot blanketed fixtures. The house smelled of sulfur.
The Swidlers knew about complaints regarding tainted Chinese drywall, which had posed similar problems for homeowners in many states. But their walls were lined with a product made by an American company.
Brian Warwick, who represents the Swidlers in their lawsuit against Georgia Pacific, says the problem with the drywall used in their home, a Georgia Pacific brand called Toughrock, is that its key ingredient is synthetic gypsum — which contains chemical material scrubbed from the exhaust of coal-fired power plants payday advance.
The Consumer Product Safety Commission has an investigation into drywall, with a focus on electrical and fire safety issues in homes and consumer reports of health symptoms. CPSC staff has collected samples of both imported and domestically manufactured drywall and is testing that drywall. The commissioner said in a statement that no conclusions have been reached. A report is expected in the coming weeks.
The Florida Department of Health and the Department of Environmental Protection says the Swidler’s home "appears to have the same symptoms as homes containing Chinese drywall" in which state and federal studies have found sulfur.
Georgia Pacific declined to comment on the Swidler’s suit. However, the company released this statement: "We are disappointed that they elected to pursue a lawsuit without first informing us of their concerns, ..We stand behind the quality of our products and take customer complaints seriously."
For now, the Swidlers have moved out of their home and into a rental home nearby. They are afraid for the health of their family.
The Securities and Exchange Commission on Thursday filed securities fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other former executives.
The trio was charged with deliberately misleading investors by telling them the company was a quality lender of mostly prime mortgages and had prudent underwriting standards, while it actually was engaging in very risky lending practices in order to build and maintain market share.
Mozilo was also charged with insider trading for selling his Countrywide stock for nearly $140 million in profits while knowing that Countrywide’s business model was deteriorating.
Along with Mozilo, the SEC charged former Chief Operating Officer and President David Sambol and former Chief Financial Officer Eric Sieracki with hiding the company’s true practices and condition from shareholders.
"This is the tale of two companies," said Robert Khuzami, director of the SEC’s Division of Enforcement. "Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
From 2005 to 2007, Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans, according to the SEC. The senior executives knew that defaults and delinquencies would rise.
In particular, the SEC pointed to Countrywide’s increased origination of pay-option mortgages, which allow borrowers to choose their monthly payments even if they don’t cover the entire interest amount. While the lender maintained they were being prudently underwritten, the SEC says, Mozilo wrote in an email that there was evidence that borrowers were lying on their applications and many would be unable to handle the eventual higher payments.
Also, Mozilo was very concerned about the lender’s 80-20 mortgage product, which allowed borrowers to take out two loans to cover the entire cost of the house. He called it "the most dangerous product in existence."
"In all my years in the business I have never seen a more toxic prduct[sic]," he wrote in an email to Sambol, according to the SEC.
By the end of 2006, Countrywide’s underwriting guidelines were as wide as they had ever been, the SEC said. Countrywide made an increasing number of loans based on exceptions to those already wide guidelines, even though these mortgages had a higher rate of default.
The SEC’s civil action seeks financial penalties and the return of ill-gotten gains.
An attorney for Mozilo called the SEC’s allegations "baseless."
"Mr. Mozilo acted properly and lawfully at all times as the CEO of Countrywide," said David Siegel. "Those sales were entirely lawful, complied with applicable laws and regulations, and were made under the terms of a series of written sales plans which were reviewed and approved by responsible professionals free business cards."
Siegel said it is "demonstrably false" that Mozilo knew about risky lending practices at Countrywide and refused to disclose them. "The mix and risks of Countrywide’s loan portfolio and its underwriting standards were well disclosed to and understood by the marketplace."
Sambol’s attorney said the SEC has no case against his client.
"Indeed, Dave’s own statements during investor presentations and earnings calls demonstrate that he provided the detailed, accurate information the SEC now falsely asserts was absent from Countrywide’s public filings," said Walter Brown.
Sieracki’s attorney said her client did not violate any securities laws.
"The Company provided robust, timely information concerning the risks affecting its business and monthly information on loan delinquencies," said attorney Shirli Weiss.
Countrywide acquired by Bank of America
Mozilo, who founded the company in a New York apartment, built Countrywide into the nation’s largest mortgage lender. But Countrywide buckled during the housing meltdown and was acquired last year by Bank of America (BAC, Fortune 500).
BofA came under heavy fire for originally naming Sambol to lead the combined company’s mortgage operations. A few months later, the bank reversed course before the acquisition was completed, saying Sambol would retire and appointing a BofA veteran to the top mortgage post instead.
"Current economic and business conditions have highlighted the need for strong and focused executive leadership with a deep understanding of the Bank of America culture and operating model," said BofA Chief Executive Lewis said at the time.
Soon after the acquisition closed, BofA entered into an $8.7 billion settlement with a group of state attorneys general over Countrywide’s lending practices. The bank agreed to modify the loans of certain Countrywide borrowers with subprime and pay-option mortgages.
In the first four months of the program, BofA contacted more than 100,000 potentially eligible borrowers, twice the requirement in the agreement, and completed modifications for more than 50,000 of them.
Bank of America referred comment to Siegel, saying the Countrywide executives were not employed at the company following the acquisition.
Mozilo became a poster boy for the subprime crisis. He reportedly stood to collect a windfall of $115 million in the $4 billion sale to BofA. But after facing heavy criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.
CNN Senior Producer Scott Spoerry contributed to this report.
Service industries in the U.S. shrank at a slower pace in May, while job losses mounted, indicating that any economic recovery will be slow to develop.
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, climbed less than forecast to 44 from 43.7 in April, the Tempe, Arizona-based group reported today. ADP Employer Services estimated companies cut 532,000 workers from payrolls.
“These reports throw cold water on the notion that this aircraft carrier that is the economy will turn on a dime,” said Tim Quinlan, an economist at Wachovia Corp. in Charlotte, North Carolina. “We are heading into a long, gradual recovery that will finally culminate in positive economic growth at the end of this year.”
Federal Reserve Chairman Ben S. Bernanke today projected the economy will suffer “sizable” job losses in coming months that will restrain consumer spending. Stocks retreated for the first time in five days because of concern that increases in unemployment will hobble the early stages of any expansion later this year.
The ISM index was projected to increase to 45, according to the median forecast in a Bloomberg News survey of 70 economists. Estimates ranged from 40.5 to 47. Readings less than 50 signal contraction.
Stocks Fall
The Standard & Poor’s 500 index fell 1.4 percent to close at 931.76. Treasury securities climbed, pushing the yield on the 10-year note down to 3.54 percent at 4:23 p.m. in New York from 3.62 percent late yesterday.
Another report today showed orders placed with factories in April rose for the second time in three months, as demand for automobiles, electrical equipment and construction machinery increased. Bookings gained 0.7 percent, after a revised 1.9 percent drop in March that was more than twice the previous estimate, the Commerce Department said.
Bernanke, in testimony to lawmakers, said large U.S. budget deficits threaten financial stability and the government can’t continue to borrow indefinitely at the current rate to finance the shortfall. He projected economic growth will return “later this year,” and said unemployment will probably continue to rise into 2010. Fed officials expect growth will not be “robust” this year, he said.
Job Losses
Economists project a Labor Department report in two days will show the unemployment rate in May topped 9 percent for the first time in more than 25 years and payrolls probably fell by more than 500,000 workers, according to a Bloomberg survey.
An inability by consumers to sustain gains in spending on concern over rising unemployment is among reasons the next expansion will probably be subdued Faxless payday loans. The economy has lost 5.7 million jobs since the recession began in December 2007, the worst performance of any post-World War II downturn.
The ISM non-manufacturing industries index of employment rose to 39 from 37 the prior month, and its gauge of new orders fell to 44.4 from 47.
Measures of order backlogs and exports also fell, while inventories contracted at a slower pace.
Two of the worst-performing parts of the economy show signs of steadying. Manufacturing fell the least in eight months in May as new orders climbed for the first time since the recession began, ISM reported two days ago. At the same time, auto industry bankruptcies, including those at General Motors Corp. and Chrysler LLC, may limit any rebound in factory activity.
Housing Steadies
Homebuilding, which is included in the services index, may be past its worst declines. Construction of single-family homes advanced in April after holding near a record low the previous two months, according to figures from the Commerce Department.
The stabilization reflects steadier sales. Total home purchases have hovered around an average annual pace of 4.98 million since November.
Recent increases in borrowing costs have restrained a refinancing boom without hindering sales, a report today from the Mortgage Bankers Association showed. The group’s loan applications index fell 16 percent last week, led by a 24 percent drop in refinancing as the rate on a 30-year fixed loan climbed to the highest level since January.
Starwood Hotels & Resorts Worldwide Inc., the third-largest U.S. lodging company, is among companies still cutting costs even as demand is likely to pick up. Starwood owns brands including St. Regis, Westin and Sheraton.
“There is some healthy growth coming ahead for the industry,” Chief Financial Officer Vasant Prabhu said in a June 1 conference presentation. “People are not as spooked as they were three to six months ago, where they were unwilling to act.” Still, “I think it’s too early to call a turn,” he said.
Tiffany & Co., the world’s second-largest luxury-jewelry retailer, is among merchants sensing the slump is easing. The New York-based company last week reiterated its annual profit forecast and said year-over-year sales declines are lessening.
NEW YORK — A federal bankruptcy judge approved the sale of most of Chrysler LLC’s assets to Italy’s Fiat, moving the American automaker a step closer to its goal of a quick exit from court protection.
But a trio of Indiana state pension and construction funds filed an appeal, saying that the ruling sets aside the rights of the company’s secured lenders while doling out the company’s assets to others.
Judge Arthur Gonzalez said in his ruling late Sunday that a speedy sale — the centerpiece of a restructuring plan backed by President Barack Obama’s automotive task force — was needed to keep the value of Chrysler from deteriorating and would provide a better return for the company’s stakeholders than if it had liquidated.
"Any material delay would result in substantial costs in several areas, including the amounts required to restart the operations, loss of skilled workers, loss of suppliers and dealers who could be forced to go out of business in the interim, and the erosion of consumer confidence," Gonzalez wrote in his ruling.
As a result, the proposed sale must be approved in order to preserve the value of Chrysler’s business and what is ultimately left for its stakeholders, Gonzalez said.
"While this has been an extremely difficult chapter in Chrysler’s history for all involved, the new company and its customers, employees and suppliers can now begin on a fresh page," Robert Nardelli, Chrysler’s outgoing chairman and chief executive, said in a statement payday loan lenders.
Nardelli is slated to leave Chrysler once the sale is final. The ruling came ahead of fellow U.S.-automaker General Motors Corp.’s government-backed bankruptcy protection filing on Monday.
President Barack Obama released a statement Monday saying that Gonzalez’s decision "paves the way for the new Chrysler to successfully emerge from bankruptcy as a new, stronger, more competitive company."
Gonzalez’s ruling came after three days of testimony last week, during which everyone from the automaker’s outgoing chief executive to dealers slated to lose their franchises took the stand.
Chrysler has maintained that selling the bulk of its assets to Fiat Group SpA is the only way it can avoid selling itself off piece by piece.
With the approval of the sale, Chrysler could emerge from Chapter 11 bankruptcy protection as soon as this week, defying observers who said that the company could linger under court oversight for years.
Powered by WordPress -- XHTML 1.0