The latest jobs report from the government shows the damage to the economy is widening. The Labor Department says the August unemployment rate soared to a five-year high of 6.1 per cent. Employers cut some 84,000 jobs, marking the eighth straight month of contraction in payrolls. Also, with revisions, job losses in June and July were worse than previously thought. The economy lost 100,000 jobs in June and another 60,000 in July. Factories cut some 61,000 jobs, retailers shed some 20,000 posts, while professional and business services lost 53,000 positions. In a written statement, Labor Secretary Elaine Chao says the jobs report “confirms the seriousness of the challenges facing our economy.”
But Eric Nielsen with Korn/Ferry International’s Houston office says Houston’s energy economy is faring better.
“There is no one area that’s specific–the housing sector, certainly the automotive sector is going through, you know, real retrenchment, and financial services surrounding the mortgage crisis. You know, while we’ve had employment losses, we’re still seeing growth in the economy. So it’s kind of an unusual time, if you will. I think the sentiment is probably worse than reality.”
The most recent Robert Half Technology IT Hiring Index and Skills Report indicates 14 per cent of chief information officers in the Houston area expect to hire in the fourth quarter. Two per cent anticipate reductions in personnel.
Job gains in Canada and job losses in the U.S. in the last month have leveled the unemployment rates of both countries, bringing them to par for the first time in more than 26 years. Statistics Canada said that Canada’s unemployment rate remained steady at 6.1 per cent as 15,200 jobs were created in August. Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said Canada’s job gains help to relieve some of the sting from July’s big drop of 55,200 jobs.
The Mortgage Bankers Association says a record nine per cent of U.S. homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June. The focus of trouble in the market has shifted from subprime loans granted to borrowers with poor credit to those with solid credit saddled with exotic loans carrying ballooning monthly payments. The problem is concentrated in a handful of states, notably California and Florida. Real estate booms in the two states were fueled by lending practices now regarded as risky, as well as rampant speculation. The latest quarterly snapshot of the market breaks records for late payments, homes entering the foreclosure process and for the inventory of loans in foreclosure. The trade group’s records go back to 1979.
Retrials of three former Enron broadband division executives have been postponed as they seek a Supreme Court appeal. Joseph Hirko and Rex Shelby now have retrials set for December 1st and Scott Yeager’s retrial is set for March 24th. Federal prosecutors have until mid-October to file a response to their request for a Supreme Court review. The trial of fourth broadband defendant Kevin Howard had been set for that date, but now will have to be postponed. The 2005 trial of Hirko, Shelby and Yeager ended with some acquittals and jurors hung on dozens of other counts. But last March, the U.S. Court of Appeals denied their motions to throw out most remaining charges against them.
The average retail price for a gallon of gasoline in Texas jumped almost seven cents this week to $3.54, and the national average is up a penny to $3.68. AAA says Houston’s average is the lowest in the state at $3.44 per gallon—up four cents from last week. AAA says the price spike may be short-lived with oil and gas producers realizing little damage from Hurricane Gustav.
Shell says its Motiva Norco refinery expects to begin blending product components over the weekend and start making finished products by early next week. The Motiva Convent refinery remains without power. Portable generators are providing electricity to buildings. Initialization of some refinery units could begin sometime next week.
The Occupational Safety and Health Administration has signed an alliance with the Houston Mayor’s Office of Affirmative Action and Contract Compliance to provide safety and health training and resources for small construction contractors. OSHA will provide information, guidance and access to training resources focusing on safety and health management systems information addressing common construction hazards. Alliance partners will speak, exhibit and appear at conferences, meetings and other events.
Former Federal Reserve Chairman Alan Greenspan is advocating a new way of dealing with government bailouts. Troubled by the Bear Stearns debacle, Greenspan says Congress needs to give the government new powers to handle troubled companies to minimize any potential losses to American taxpayers. A self-described Libertarian Republican, Greenspan has a reputation for being wary of giving the government extra powers. However, in crisis situations, he says there needs to be a clear process for handling bailouts, rather than depending on the Fed to do so. He says a high-level panel of financial officials should be given broad authority to quickly determine whether a failing company poses a sufficient threat to the entire U.S. economy. If so, the company would be shut down. He says new laws should specify and limit the conditions for bailouts. He says the Fed is not a “magical piggy bank.”
The latest measure of the severity of the credit crunch is giving mixed signals. The Federal Reserve says banks borrowed more over the past week from the central bank’s emergency lending program. At the same time, Wall Street firms took a pass for the fifth straight week. Commercial banks averaged nearly $19 billion in daily borrowing over the past week. Wall Street firms didn’t take out any loans–the fifth straight period of no action. Their borrowing had averaged as high as $38 billion a day in early April. Separately, the Fed auctioned nearly $25 billion in treasury securities to investment companies Thursday.
Transportation Secretary Mary Peters says the federal highway trust fund will run out of money this month. Peters blames the shortage of funds on the high price of gasoline, which has prompted Americans to drive less. And by driving less, they use less fuel and pay less in federal gasoline tax. At a midday press conference, Peters said the agency will have to delay payments to state road and bridge projects that the federal government is helping finance. At the same time, she wants Congress to pass legislation that includes $8 billion to help cover the shortfall. Four times this year, Republicans in the Senate have blocked a measure that would shore up the fund.
The Houston Chronicle offered voluntary buyouts this week, hoping to reduce staff by 80 positions. Layoffs could be necessary, depending on how many employees take the buyouts by the end of the month. That amounts to a staff reduction of five to six per cent. The newspaper blames newsprint costs and declines in advertising.
A.H. Belo Corporation says let the layoffs begin at its newspapers. The owner and publisher of the Dallas Morning News and two other dailies says it’s done with a round of buyouts at its newspapers and that layoffs will be done by this fall. The company says 413 employees have accepted voluntary buyout offers, including 270 at the Dallas newspaper. The combined work force reductions are expected to result in a savings of more than $29 million on an annualized basis.
Convoys of concrete mixers will be rolling up to 811 Main this evening from 10 o’clock to pour the nine-foot thick foundation of MainPlace. That’s a new 46-story office building being developed by the Hines CalPERS Green Development Fund. Houston-based Hines says the process involved 125 trucks delivering 12,000 yards of concrete for a total of 18 hours of pouring. MainPlace is slated for completion in 2011.
Lloyd’s of London, the world’s biggest insurance market, has signaled its intention to push its business in emerging markets. Those include Asia and Latin America and oil rich countries in the Gulf. Lloyd’s warns that a shift in world power can not be ignored. Lloyd’s Chairman Peter Levene also hit back at pricing criticism directed at the insurance market amid threats from major Atlantic hurricanes like Gustav. He took a dig at Florida Governor Charlie Crist for asking for lower-than-justified premiums for residents in his state. Lloyds, a society of corporate underwriters and wealthy individuals that make insurance transactions through managing agents and syndicates, currently makes 40 per cent of its premium income in the United States. However, Levene said that the group must build on “markets of the future” to leave a strong business for successors.
Continental Airlines will begin charging some coach customers $15 for a first checked bag. Continental is matching rivals who already charge for checking a single bag. The move is effective immediately, the airline said. Houston-based Continental said the fee wouldn’t apply to elite members of its frequent-flier program, those in first- or business-class seats, customers traveling on full-fare economy tickets, or military personnel and their families traveling on official orders. Most U.S. airlines charge customers who check more than one piece of luggage. Among major carriers, Fort Worth-based American Airlines, was the first to impose a fee for the first checked bag in June. Continental’s decision leaves Atlanta-based Delta Air Lines as the only holdout among the six so-called legacy carriers. Dallas-based Southwest Airlines also doesn’t charge for the first bag.
Federal aviation officials say they are investigating 17 cases in which 11 air carriers did not comply with safety directives. An inquiry earlier this year found seven instances in which four carriers had not complied with directives issued by the Federal Aviation Administration. FAA officials declined to identify the carriers and said they did not know if some of the new cases involve carriers already under investigation. The inquiries were announced by FAA administrator Robert Sturgell, who said 98 per cent of the 5,600 safety directives audited by the agency had been followed by the carriers. Earlier this year, audits of maintenance records were ordered for all domestic airlines following reports of missed safety inspections at Southwest Airlines.
Carrollton-based Securenet has been awarded a $4.98 million contract to increase the Dallas-Fort Worth International Airport’s capacity to gradually add 1,975 security cameras. The Fort Worth Star-Telegram reports the DFW airport board voted to appropriate the funds on upgrades to its terminal building security surveillance system. The appropriation doesn’t include the closed-circuit cameras, which still have to be purchased. Airport official William Flowers says the added capacity will cover security cameras for the next three to five years of airport expansion projects. The airport currently has about 1,590 cameras installed around terminals, runways and airfields. The airport board also voted unanimously to change its rules in order to allow a proposed pet hotel to be located on the Grapevine side of the airport. The city councils of owner cities Fort Worth and Dallas must still okay the code change. Officials hope to break ground in spring 2009.
Cardboard and building products maker Temple-Inland saw its shares slip as investors gauged the effects of Hurricane Gustav. The Austin-based company began curtailing output August 31st to allow adequate time for a safe evacuation and orderly shutdowns of its east Texas paper mills. The company says production downtime in the affected containerboard mills is expected to be about 18,000 tons. Each affected lumber mill is expected to lose two days’ production.
Ford Executive Chairman Bill Ford says his company will still invest in new fuel-saving technology without government loan guarantees, but the loans would get the new products to market faster. Congress reconvenes next week and the auto industry plans an aggressive campaign to get lawmakers to fund up to $50 billion in low-interest loans. They say the money would help them modernize assembly plants and develop next-generation fuel-efficient vehicles. Bill Ford said that the company that bears his name will be fine without the loans, but its work will be more difficult. He says new technology might be slowed without the loans, which is not what society wants. Ford made the remarks at the company’s headquarters at an event marking the coming 100th anniversary of the Model T.
The number of rigs actively exploring for oil and natural gas in the United States fell by 18 this week to 2,013. Of the rigs running nationwide, 1,586 were exploring for natural gas and 416 for oil, Houston-based Baker Hughes reported Friday. Eleven were listed as miscellaneous. A year ago, the rig count stood at 1,814. Texas lost 20 rigs. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted record lows in 1999, bottoming out at 488.