The jobs picture still looks sour, but there could be light at the end of the tunnel.
The bad news: The private sector slashed more jobs than expected in August, reversing a sixth-month trend of job gains. The good news: Overall employers announced fewer planned job cuts.
Private sector employers cut 10,000 jobs in August — a drop from the downwardly revised 37,000 jobs they added the month before, according to a report by payroll processing firm Automatic Data Processing.
Those cuts were worse than predicted. Economists polled by Briefing.com had expected the report to show 13,000 jobs added in August.
While jobs statistics are often a volatile measure, the drop is still enough to "heighten fears about a double-dip recession," Paul Ashworth, senior U.S. economist with Capital Economics said in a note to investors.
After the report was released, stock futures dipped slightly, but then rebounded as stocks popped up at the opening bell.
Job losses in the goods producing sector dragged down the entire measure, while the services sector actually saw a boost in employment. Both the construction and financial services industries cut jobs in August, continuing a three-year downward trend in those sectors.
ADP looks backward at the month, compiling data from actual payrolls. But earlier on Wednesday morning, a separate report showed employers’ plans for future job cuts sunk to a 10-year low during the month.
After rising for three months in a row, planned job cuts plummeted to 34,768 in August, the lowest level since June 2000 and down 17% from the previous month, according to outplacement firm Challenger, Gray & Christmas Inc.
Compared to a year ago, downsizing activity dropped 55% in August, and job cuts have eased 65% so far this year compared with the same period last year.
"Every other job market indicator seems to be stuck in first gear," said John Challenger, CEO of the firm. "In contrast, the layoff picture has improved so significantly that we are at pre-dot-com collapse levels when it comes to monthly job-cut announcements."
The separate jobs reports use different metrics, with ADP measuring only private sector job growth and Challenger compiling planned job cuts in the government and non-profit sectors as well as private industry.
"The two reports in combination give us a glimpse of exactly where we’re at: companies have stopped firing, but are not yet hiring," said Adrian Cronje, chief investment officer of investment firm Balentine.
Private sector businesses are holding cash on their balance sheets, he said, but are not hiring due to an uncertain outlook about future tax rates and fiscal policy.
According to Challenger, the industrial goods sector announced the most job cuts in August, but looking year-over-year, job cuts in the sector were down significantly overall.
The Challenger report also showed the government and non-profit sector shed the most jobs this year, accounting for 30% of all 2010 job cuts and eliminating three times more jobs than the pharmaceutical sector, which reported the second highest number of year-to-date cuts.
ADP and Challenger’s numbers set the stage for the government’s closely watched jobs report due Friday. Economists are expecting the report to show there were 120,000 jobs lost in August, an improvement over July’s 131,000 job loss.
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This ought to keep the Maytag repairman busy for a while.
The appliance manufacturer along with the Consumer Product Safety Commission on Thursday announced the recall of about 1.7 million dishwashers made by the company between February 2006 and April of 2010.
"An electrical failure in the dishwasher’s heating element can pose a serious fire hazard," said the recall notice issued by the CPSC.
"Maytag has received 12 reports of dishwasher heating element fires that have resulted in fires and dishwasher damage, including one report of extensive kitchen damage from a fire," the CPSC said. There have no reports of injuries.
The recall includes select Maytag, Amana, Jenn-Air, Admiral, Magic Chef, Performa and Crosley brands manufactured by Maytag.
The company has set up a website where customers can check their unit’s serial number to see if it is included in the recall — www.repair.maytag.com. Consumers will be able to choose between having their dishwasher repaired or accepting a rebate toward the purchase of a new dishwasher.
The Maytag repairman has been a staple of the company’s corporate image. Since 1967, Maytag has touted its quality by showing a bored repairman with nothing to do.
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After relatively modest growth in the third quarter, Finance Minister Jim Flaherty says he's optimistic that Canada's economy will pick up the pace into next year.
Flaherty said Tuesday he believes the domestic economy will show more strength in the remainder of this year and into 2010, eclipsing the slow climb out of a recessionary environment that has characterized the recovery so far.
"We hope that we will have a continuation of growth at a greater pace in (the fourth quarter)," Flaherty said in Toronto at an announcement unveiling federal stimulus spending money to help renovate Maple Leaf Gardens.
"We are certainly more optimistic about economic growth in 2010."
Economists generally agree that Canada's economy is going to grow in the near term but that the climb will be sluggish in the coming months as the global economy struggles toward recovery.
"Over the next six months we're in a recovery phase," Warren Jestin, the chief economist at Bank of Nova Scotia (TSX: BNS), said in an interview after making a presentation at a Toronto economic conference on Tuesday.
He said inventory adjustments, particularly in the auto sector, will drive growth as companies ramp up production.
"Auto production is starting up and government projects are finally getting into the ground. In general, that will lead us into another phase that will tend to be one of probably sustained growth, but not as strong a growth as we used to think was normal," he said.
Jestin warned that developed countries could risk weakening again as stimulus packages start to run their course, and economies attempt to operate with waning government assistance. Many economists caution that the economy is still walking a knife's edge between recovery and another downturn.
Statistics Canada offered some cause for optimism about next year on Monday when it reported that Canada's real gross domestic product inched ahead in the third quarter at an annualized rate of 0.4 per cent, marking an end to the recession in this country.
However, a report released Tuesday by CIBC (TSX: CM) said that key metropolitan areas in Canada are still feeling the financial pinch.
CIBC, which compiles a metro monitor index, said that 10 of the country's top 25 urban areas showed negative growth in the third quarter.
"On a year-over-year basis, our index continued to trend downward," said Benjamin Tal, a senior economist at CIBC.
"More than two-thirds of Canadian GDP is generated in Canada's major cities. So the tale of those cities is the tale of the economy."
The report said nine of the 10 cities that experienced negative growth were in Ontario and Quebec, which have both been battered by years of weakness in the manufacturing and forestry sectors and hurt by lower demand for their products in the United States and a stronger loonie.
"Calgary and Edmonton, which until recently were the stars of our index, (are) losing ground rapidly and currently hardly above water in terms of overall economic momentum," Tal added.
Jestin said that long-term growth will be mild in Canada over the next couple years, near two-and-a-half per cent, while emerging economies like China and India will grow closer to a rate of seven to nine per cent. Jobs will also see a gradual pickup, Jestin said, with the country adding net new jobs in 2011.
But "they're going to be different jobs than in the past," he cautioned.
"Additional jobs created are probably going to be in areas that are small firms, medium-sized firms and very specialized in their markets. (They will be) less focused on the U.S., more focused on niche markets."
Jestin said the Canadian economy is running stronger than south of the border, though exporters are facing heavy headwinds, with sales volumes down 20 per cent in the summer over a year earlier.
Opel’s top German labor leader said on Sunday he was willing to hold negotiations over a restructuring of the European carmaker under its parent General Motors so long as it gains greater independence.
Klaus Franz was shocked last week when GM’s board abruptly dropped plans to sell a 55 percent stake in Opel to auto parts maker Magna and its Russian bank partner Sberbank.
“GM does not enjoy any credibility or faith in the eyes of the public or the (German) government, so they have to consider whether they now want to seek confrontation or cooperation by finding a common solution,” Franz told Reuters on Sunday.
“To see whether they are interested in cooperation, we need to know whether they are willing to start off where we last stopped — namely, the degree of autonomy and freedom that was set in the contract with Magna and accepted by General Motors,” he said.
He said this was a clear condition for any talks. GM’s chief executive, Fritz Henderson, is due to travel to Opel’s headquarters in Ruesselsheim this week and is expected to discuss the decision with local management on Monday.
Following the sudden decision last week to drop the sale management scared unions by threatening Opel’s bankruptcy and its German boss Carl-Peter Forster left the company after attacking the board’s decision.
A newspaper report said on Sunday that Forster, a former BMW executive and son of a German diplomat who grew up in London, is now slated to take over as head of Indian group Tata Motors’ British carmaker Jaguar Land Rover.
Briton Nick Reilly, currently head of GM’s international operations, is now set to lead the reorganization of Opel, a person briefed on the plan told Reuters on Friday, with GM’s global marketing chief Bob Lutz to be Opel’s new chairman.
Lutz was quoted as saying on Sunday that GM would probably stick to a plan to slash fixed costs at Opel by nearly a third. “The restructuring plan developed at the end of last year is still the basis for a profitable business model. The plan foresees a 30 percent cut in structural costs,” he told Swiss newspaper Sonntag.
Meanwhile Magna’s top European executive, Siegfried Wolf, advised GM to give more freedom to Opel and tread carefully with regard to the brand.
“GM must now smooth things out and win back trust. That requires a lot of sensitivity and tact,” he was quoted as telling German newspaper Bild am Sonntag.
(Reporting by Christiaan Hetzner, additional reporting by Emma Thomasson in Zurich; Editing by Greg Mahlich)
Oil edged off a peak just above $80 a barrel on Tuesday as investors an eight-day rally cooled.
U.S. crude for November delivery fell down 52 cents and settled at $79.09 a barrel, after reaching $80.05 earlier in the session.
Oil has ended higher for the past eight days, but analysts have questioned whether the recent rally is justified as crude market fundamentals remain weak. Supply has climbed steadily in recent months, while demand remains unclear pending a broader economic recovery.
Additionally, investors were looking ahead to an inventory report from the Energy Information Administration on Wednesday. Research group Platts predicted crude supplies increased by 2.2 million barrels last week.
Stocks tumbled in midday trading after DuPont (DD, Fortune 500) and Coca-Cola (KO, Fortune 500) reported weaker revenue that missed forecasts 24 hour payday loan. Crude prices have tended to move in tandem with the stock market lately, because it is considered a barometer for the overall economy and a gauge for when oil demand will recover.
The currency market also pressured oil prices, as the dollar reversed direction to gain versus the euro and the yen. A firmer greenback tends to sink crude because oil is priced in dollars around the world.
According to Reuters, OPEC Secretary-General Abdullah al-Badri said on Tuesday that oil prices at $80 a barrel were "a bit high."
Former Enron CEO Jeffrey Skilling will be given a hearing before the Supreme Court in his effort to overturn his 2006 convictions on securities fraud and other charges.
The justices accepted his appeal and will hold oral arguments early next year over the culpability of Skilling’s corporate duties.
Skilling’s attorney, Daniel Petrocelli, said "pervasive media coverage" prevented his client from receiving a fair trial from a Houston, Texas, jury.
Skilling, 55, is currently in federal prison. He was convicted of 19 counts of fraud, conspiracy, and insider trading relating to the collapse of the Texas-based energy services giant in late 2001.
He had been a longtime executive at what became the world’s largest wholesaler of gas and electricity, with $27 billion traded in a single quarter at Enron’s height. Skilling was named CEO in February 2001, but resigned under pressure six months later as the company began to collapse financially. Thousands of investors and company employees lost their savings and their jobs in a case that became emblematic of corporate corruption cases during the past decade.
Skilling and Enron’s top executive, Kenneth Lay, were accused of spearheading a massive campaign to mislead investors and shareholders with an aggressive investment strategy aimed at suppressing the company’s shaky financial footing.
Both men were convicted in May 2006. Skilling was sentenced to more than 24 years in prison and fined $45 million. Lay died in July 2006 before being sentenced. Skilling’s conviction was upheld by a federal appeals court.
Skilling’s attorney claims all 19 convictions should be overturned because Skilling was improperly convicted of withholding his "honest services" from Enron’s shareholders, a violation of federal law dealing with fiduciary responsibilities. Petrocelli said the government never proved his client’s conduct was designed to achieve "private gain," as the law required, as opposed to advancing the company’s interests. He also said the "honest services" requirement is too vague.
"The government did not contend, and the record did not suggest in any way, that Skilling intended to put his own interests ahead of Enron’s," the appeal noted.
And Petrocelli claimed, "The widespread, persistent, and scathing demonization of Skilling by the Houston media far exceeded the editorial commentary" allowed by the high court in similar cases, said the appeal. Questionnaires submitted by potential jurors "confirmed the breadth and intensity of the hostility toward Skilling."
There was no immediate reaction from the Justice Department, which had told the court Skilling’s claims were all without merit, and urged the justices to let the conviction and sentence stand.
Petrocelli, a Los Angeles, California-based trial attorney, told CNN in May when the appeal was filed that questions raised by this case had current relevance, given the ongoing financial meltdown. "The issues presented in this appeal cry out for resolution by the Supreme Court," he said.
The case is Skilling v. U.S. (08-1394).
Wall Street’s job woes don’t appear to be over just yet.
At this time a year ago, layoffs were rampant at big investment banks and other securities firms. Companies were scrambling to exit some of the businesses that delivered massive profits in prior years but became big problems once the credit markets collapsed.
Since Lehman Brothers filed for bankruptcy last September, the securities industry in New York has lost a little more than 20,000 jobs, according to state employment data. And many leading Wall Street firms subsequently took a hatchet to payrolls around the globe.
Last October, Goldman Sachs (GS, Fortune 500) slashed 10% of its workforce, or approximately 3,360 jobs, as a result of difficult market conditions. Citigroup (C, Fortune 500) grabbed headlines a month later when it announced plans to eliminate more than 50,000 jobs.
While the pace of job cuts has slowed in recent months, many experts think that the number of people working on Wall Street will dwindle even further.
"Many, if not most, financial services firms are restructuring and laying people off, even though it may not be in massive numbers," said Marisa Di Natale, senior economist at research firm Moody’s Economy.com. "I expect that will continue."
In late May, the Independent Budget Office, a non-partisan agency that reviews the annual New York City budget, published a report projecting that an additional 32,400 jobs at the city’s financial firms would lost over the next two years.
The job cuts do make sense. Since most Wall Street firms are not as profitable as they once were, they can’t afford (and probably don’t need) as many employees.
Di Natale added that the threat of sweeping Congressional reforms looming over the financial services industry could lead to even more layoffs.
But despite the grim employment outlook, there have been encouraging signs for those some industry veterans or those looking to break into the business.
Even as recruitment numbers are off from their pre-crisis peaks, Wall Street firms continue to hire freshly minted MBAs in droves, notes Greg Ruf, CEO of MBA Focus, which maintains an online database of business school job seekers used by companies around the world.
"Banks are nervous if they don’t hire enough they will be caught two years from now without having enough people to be involved in major deals," he said.
Higher up in the ranks, hiring continues in such key areas as bond trading, notes John Rogan, a partner and head of the global banking and markets practice at executive search firm Russell Reynolds Associates.
And if the current trend of companies looking to sell stock and make acquisitions continues, Wall Street firms will also need to add more experienced investment bankers.
"Once deal activity really accelerates, people at that level with great experience will be like gold dust," said Rogan.
But even in down markets, companies can usually identify an area to expand, said Richard Staite, a London-based banking analyst with Atlantic Equities.
For example, Goldman Sachs is said to be looking to hire up to 200 staffers for its asset management business, according to a report in the Financial Times reported earlier this week.
"I don’t think you can say there has been any widespread rebound," Staite said. "Companies are simply hiring where they feel they are missing out on current opportunities."
Despite a drop in inflation, the annual cost of employer-sponsored family health insurance coverage has risen 5% this year to $13,375, according to a new survey released Tuesday.
Employers picked up the lion’s share of that tab. Companies paid an average of $9,860, while their workers picked up the other $3,515, according to the 2009 survey of employers from the Kaiser Family Foundation and Health Research & Educational Trust. Kaiser is a nonprofit, nonpartisan health policy research foundation.
For individual coverage, annual premiums rose more modestly, up an average of 2.6% to $4,824. But those increases came as prices fell roughly 1% this year because of the recession.
Over the past decade, the annual cost of family coverage has risen 131% and the annual cost for single coverage is up 120%, according to Kaiser. In each of the past 10 years, insurance increases have outpaced inflation — sometimes by as much as 11 percentage points.
"When health care costs continue to rise so much faster than overall inflation in a bad recession, workers and employers really feel the pain," said Kaiser president and CEO Drew Altman in a statement.
Even though companies pay far more of health insurance premiums than their employees, many economists note that increases to the employer portion of health costs reduce workers’ wages over time. This year, workers’ wages have risen 3.1%, according to the Kaiser survey.
In response to the economic downturn, 22% of large employers and 21% of small employers offering health insurance to workers said they reduced the cost of health benefits or increased how much their workers had to pay through deductibles and co-payments.
The same percentage of large employers and 15% of small companies said they increased their workers’ share of the premiums.
And 42% of all firms said they are likely or somewhat likely to increase what workers pay in premiums next year, while more than 35% said they would increase deductibles or worker copayments and share of drug costs free credit report and score.
According to the survey, more than 20% of workers with employer-sponsored insurance plans must pay $1,000 in deductibles for individual coverage before their insurance policy kicks in. That’s up from 10% in 2006.
The survey comes during one of the most pivotal weeks in the health reform debate, as Senate Finance Committee Chairman Max Baucus, D-Mont., prepares to release a much-awaited reform bill worked on — although not always supported — by a bipartisan group of senators. Whether that bill can generate bipartisan support among the broader committee and others in the Senate is still an open question.
But one idea that has generated support among many in both parties is that any reform should be built around the employer-sponsored insurance system, which currently insures the majority of Americans. Efforts to curb costs within that system remains one of lawmakers’ — and employers’ — biggest challenges.
If health care costs continue to grow at an average annual rate of 8.7% — which they did over the past 10 years — Kaiser estimates the annual premium cost for employer-based family coverage will top $30,000 by 2019.
"There’s no reason to believe we’ve done anything meaningful to address the fundamental drivers of health care costs," Altman said in a conference call with reporters.
Should health reform take place and should it succeed in reducing costs the long-term trend could be altered, he said, but cost containment won’t be immediate.
While Detroit has benefited from Cash for Clunkers, foreign automakers have gained even more.
Some critics of the program warned that because it let consumers buy domestic or foreign cars, Clunkers could end up spending more American tax dollars to help foreign companies than American ones.
And in fact, foreign automakers — and foreign auto factories — have gained somewhat more from the program than domestic automakers have.
The differences aren’t enormous, but Cash for Clunker buyers have tended, more than auto buyers ordinarily do, to prefer foreign-made cars.
Domestic automakers usually account for about 47% of all cars and trucks sold in the U.S, according to data from J.D. Power and Assoc. But they sold just 38.5% of vehicles in the Clunkers program.
That’s in part because companies like Toyota (TM), Honda (HMC) and Hyundai are still perceived as making cheaper, more fuel-efficient cars, experts said.
Factories, not just brands
Even taking into account the fact that some foreign brands are manufactured in the U.S. and vice versa, Cash for Clunker buyers were more likely to buy a car made in another country.
The DOT recently said that roughly 52% of cars being bought under the Clunker program were made in America. According to J.D. Power, about 63% of the cars usually sold in America are made here.
Not that the domestic automakers are complaining about any of this. Even if foreign automakers saw a somewhat bigger lift in sales, domestic automakers still got significant benefits from the program. Ford (F, Fortune 500) and General Motors have restarted factories to deal with the added demand and Chrysler says it’s already making new cars and trucks as fast as it can.
The shift towards foreign cars also reflects changes that were already underway in the auto market, with or without Clunkers, said Jeff Schuster, an analyst with J.D. Power and Associates. Bankruptcies, bail-outs and factory shutdowns put U.S. automakers at even more of a disadvantage in 2009.
In the first half of 2009, domestic manufacturers sold only 45% of all vehicles. In the same period last year, the figure was 48%.
Product shift
For the most part buyers in the Clunker program were focused on maximizing fuel efficiency, said Tom Libby, president of the Society of Automotive Analysts. When the goal is gas mileage, consumers turn more often to import brands, since they’re thought to make better small cars and foreign makers offer more options in that category.
"You look at the product portfolios and it explains it completely," he said.
But when it comes to trucks, domestic automakers generally sell more of them. And the Clunker fuel economy requirements for truck purchases were much less stringent than they were for cars.
That should have helped boost U.S. Clunker sales, but most buyers were still focused on making big fuel economy gains.
That’s probably not because of their concern for the environment, said Libby. More likely, he said, it’s because most car shoppers didn’t bother to read the rules closely enough to understand they didn’t have to buy small cars.
"The general impression is that the program is designed to sell more fuel-efficient vehicles," said Libby, "so the buyer who is the market for a larger vehicle is probably dismissing the program."
Compact cars come out ahead
John McDonald, a spokesman for GM, has a different explanation for all of this. He argues that Toyota outsold GM at least in part because GM dealers simply ran out of cars.
He points out that, until recently, GM’s share of Clunker sales closely mirrored its share of the general auto market. It dropped off because GM, like other domestic automakers, was struggling with "historically low" inventory.
"It’s probably the fact that the domestics [were] running out of cars on their lots," he said.
But McDonald does agree that lower price points on foreign cars also hurt domestic sales. Many Clunker buyers are only in the market because they smell a deal, he said, and Japanese and Korean automakers have more to offer the customer who just wants a dirt cheap set of wheels McDonald said. He cited one advertisement he’d seen offering a new small car for $5,500 after the Clunker rebate.
"That’s motorcycle or snowmobile money," he said.
Jeff Schuster, an analyst with J.D. Power and Associates, agreed with that assessment. His statistics show a big spike in sales of so-called "compact basic" cars, a term that translates to "econo-boxes."
"Things do tend to skew toward the imports if you’re looking at how low you can get the vehicles price down to," he said.
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