Gross Domestic Product expands at annual rate of two percent…Jobless benefits claims rise modestly…Conference Board suggests economy will expand at modest pace…
Economic growth was a little weaker in the third quarter than earlier reports had indicated. The Commerce Department says the Gross Domestic Product expanded at an annual rate of two percent during the July-to-September quarter. A month ago, the government put the growth rate at 2.2 percent. The main culprit behind the third quarter’s slowdown was the deepening housing slump. Investment in home building was reduced at a rate of 18.7 percent–the largest cut in 15 years. That took 1.2 percentage points off third-quarter growth–the most in nearly 25 years.
New claims for jobless benefits rose modestly last week. The Labor Department reports first-time applications for unemployment insurance were up by 9,000–to 315,000. Economists surveyed by Dow Jones Newswires had been calling for a surge of 16,000. While there was some softening, labor market conditions are generally favorable for workers. The economy created 132,000 jobs last month, and the unemployment rate is 4.5 percent.
Mortgage rates are a bit higher this week. Freddie Mac says the average for the 30-year fixed-rate mortgage rose to 6.13 percent from 6.12 percent last week. A year ago, it was 6.26 percent. The 15-year loan, which is popular for refinancing, went to 5.89 percent from 5.86 percent last week. Fifteen-year mortgages were averaging 5.79 percent a year ago. Freddie Mac Vice President and Chief Economist Frank Nothaft says the lack of a lot of movement isn’t surprising given that the December holiday season tends to be rather slow for housing.
A report from the Conference Board suggests the economy will expand at a modest pace in the months ahead. The private research group says its index of leading indicators rose by one-tenth percent during November–the third increase in as many months. Economists had expected the index to be flat. Conference Board economist Ken Goldstein says that while the slower economy of the second half of this year might continue into the first half of 2007, it may not get any slower.
A judge in a Texas widow’s lawsuit regarding the Vioxx painkiller reduced a $32 million jury verdict to about $7.75 million. Judge Alex Garza, in a Rio Grande city courtroom, ordered the punitive damage reduced according to state law. The judge cited Texas’ recently enacted caps on punitive damages in the decision. A spokesman for Vioxx-maker Merck’s outside legal counsel said the company was seeking a new trial based on “the undisclosed financial relationship” between the plaintiff and one of the jurors. The state jury in April found Merck and company liable for the death of Leonel Garza, a 71-year-old man who had a fatal heart attack within a month of taking the painkiller. Merck attorneys in September were granted access to bank and cell phone records they said would show an improper financial relationship between juror Jose Manuel Rios and Felicia Garza, the widow. Vioxx has since been withdrawn.
More than 130 employees of Allied Waste Services of Fort Worth are on strike after negotiations for a new contract broke down. Drivers, mechanics and helpers went on strike Monday after Allied suggested the two sides meet again after the new year. The contract with the company expired December 10th. The workers provide services in Fort Worth and more than two dozen other surrounding cities.
Highland Capital Management proposed a refinancing plan–worth up to $4.7 billion–to Delphi’s board. The proposal from Dallas-based Highland Capital competes with a plan already accepted by the company earlier this week. Delphi earlier said a group led by Appaloosa Management and Cerberus Capital Management would spend up to $3.4 billion to help it leave bankruptcy. In a letter to Delphi’s board, Highland Capital–a hedge fund that owns nearly nine percent of Delphi–says it opposes the earlier plan and outlined its own proposal. Delphi spokesman Lindsey Williams said the company had no immediate comment. Delphi is a major auto parts maker that filed for bankruptcy protection in October of 2005.
The Harrah’s Entertainment debt load is expected to nearly double and its priority will shift to paying it down–not as much reinvestment–after a buyout. Details are in documents filed with the Securities and Exchange Commission. Harrah’s CEO Gary Loveman says the company’s debt would rise to $21 billion after being bought by Apollo Management Group and Texas Pacific Group. Other SEC filings show Harrah’s current debt is $10.7 billion. Loveman’s presentation to key employees backs up conclusions by some analysts that the company’s growth plans will take a back seat to debt repayment. Loveman told the Associated Press that he’s confident master plan redevelopments on the Las Vegas strip and Atlantic City, New Jersey, will continue. He says there are no plans to sell any properties.
A federal judge in North Carolina has approved a $30 million judgment for peanut farmers in seven states–including Texas–in an insurance fight. The lawsuit was filed when crop insurance payments were slashed by federal officials. The cuts came after a law eliminated the quota system for peanuts in 2002. Nearly 3,900 farmers in North Carolina, South Carolina, Virginia, Texas, Georgia, Alabama and Florida sued after sustained crop losses in 2002. In Texas, 367 farmers will share $3.4 million. The judgment was signed by U.S. District Court Judge Malcolm Howard of Greenville, North Carolina.
Incoming Dell Vice Chairman and Chief Financial Officer Don Carty will earn $700,000 annually. Round Rock-based Dell this week announced the hiring of the former American Airlines chief, who’ll start January 1st. Carty left fort worth-based American three years ago when its parent was struggling to remain solvent. Details of Carty’s salary, approved by Dell’s board of directors, are included in a regulatory filing with the Securities and Exchange Commission. Carty has been a member of Dell’s board of directors since 1992. He’s chaired the audit committee for much of that time. The computer maker is dealing with a string of problems, including an ongoing federal accounting probe. Carty replaces James Schneider, who recently agreed to become executive chairman of the board of Frontier Bancshares.