Economic expansion in Texas softened in April and May, but Houston remained robust, according to the Federal Reserve's June Beige Book survey. Retail sales growth and service sector activity softened, but businesses with national sales report that economic growth is stronger than in the rest of the country. Construction and real estate activity weakened. There are hiring and skill shortages, such as for engineers, mechanics and administrative positions. Higher energy costs are pushing costs for most products and services, and rising fuel costs have forced some truck drivers to stop their trucks or leave the industry.
Retail sales jumped by the largest amount in six months in May as 57 million economic stimulus payments helped offset the headwinds buffeting consumers. The Commerce Department reported that retail sales soared one percent last month, the biggest increase since November. A wide variety of retailers enjoyed a good month, including the biggest increase at department stores and other general merchandise stores in a year. The May increase was double what economists had been expecting and indicates that the economy is getting a major boost from the $50 million in economic stimulus payments the government sent out in May, just under half of the total stimulus aimed at consumers.
Businesses added to their stockpiles by the largest amount in three months in April, a better-than-expected showing that provides support for economic growth. The Labor Department reported that business inventories grew by 0.5 percent in April, more than double the 0.2 percent rise in March and the best showing since inventories rose by one percent in January. The increase in stockpiles held on shelves and back-lots was significantly higher than the 0.3 percent gain that analysts had been expecting and will provide a boost to economic activity in the April-June quarter. The overall economy, as measured by the gross domestic product, grew at an annual rate of 0.9 percent in the first three months of the year.
The number of people filing new claims for unemployment benefits jumped last week to the highest level since late March. The Labor Department reports that new applications for jobless benefits rose to 384,000, an increase of 25,000 from the previous week. That was a much bigger gain than analysts had been expecting and indicated that the labor market still remains under pressure. Last week, the government reported that the unemployment rate jumped to 5.5 percent, up from five percent in April. That was the biggest one-month gain in 22 years.
Despite some Republican support, Democrats fell three votes short of the two-thirds vote needed to pass the extension of jobless benefits with a veto-proof majority. Some Republicans accuse Democrats of political maneuvering in order to blame the GOP for blocking help for the unemployed. The effort will require only a simple majority vote. The bill would extend unemployment benefits by 13 weeks. Job seekers in high unemployment states like Alaska, California, Michigan and Rhode Island could get an extra 13 weeks on top of that. The White House says emergency steps are only needed if unemployment goes well above the 5.5 percent reported for May. The Bush administration also complains that extended benefits aren't needed in states where joblessness is low.
Travelers in Cleveland and Houston will be hardest hit as Continental Airlines starts cutting flights starting in September. Nearly eight percent of available seats at Bush Intercontinental Airport, its second biggest hub, will be cut. Continental's biggest hub at Newark Liberty, just outside New York, will see capacity cut three percent, but the carrier is slashing 13 percent of available seats in Cleveland. Nine smaller U.S. cities will lose Continental service from Houston, as well as some international destinations, including Cali, Columbia; Guayaquil, Ecuador and Monclova, Mexico. Continental will also pull out of Bali, Indonesia; Cologne, Germany; Santiago, Dominican Republic; and Guayaquil, Mexico. The cuts are part of a plan announced last week to slash capacity by 11 percent. Continental says it plans to cut most of the 3,000 jobs anticipated "through voluntary programs." Continental expects travel demand to remain solid this summer.
Continental Airlines said it'll get a $413 million initial payment under its co-branded credit card deal with Chase Bank USA. That adds a needed cash cushion to the Houston-based airline as it prepares to book severance and other charges in the coming months. Continental tells the Securities and Exchange Commission that the deal with chase extends the Credit Card deal through the end of 2016. Of the initial payment, $235 million covers the advance purchase of frequent flyer mileage credits. Continental says it expects to have between $3.2 billion and $3.3 billion in cash on hand at the end of the second quarter. Including fuel taxes and hedges, the carrier predicts it'll spend an average of $3.45 per gallon on fuel this year, and a penny more per gallon during the second quarter.
METRO posted a 15.9 percent increase over the same month last year in the number of riders on its Park and Ride routes. METRO is adding an additional 14 trips to its busiest Park & Ride routes. METRO is running routes slightly earlier to cycle its buses for one more run.
BAE Systems has received another U.S. Army contract, just a week after announcing its $1.65 billion contract with the U.S. Department of Defense. The company has made all 48,000 Family of Medium Tactical Vehicles at its Sealy plant, and will be making 10,000 more. The newest $34 million contract is for making B-kits, or removable armor, for 730 FMTVs ordered earlier this year.
Most West Virginians looking to get their oil changed at a Jiffy Lube will need to cross state lines to do so. Eight West Virginia locations of the national service center--all owned by a single franchisee--closed on Tuesday. The Houston-based corporation says the eight were owned by a franchisee incorporated as JDSK Oil. The company only said that the closing down of all locations was a decision made by JDSK. Jiffy Lube says it's working with other franchisees to reopen the service centers in the near future.
Yahoo! says it has ended all talks about any kind of business deal with Microsoft, burying lingering hopes that Microsoft might revive its attempt to buy the Internet pioneer. The development is expected to lead to an advertising partnership between Yahoo! and another rival, Internet search leader Google. That alliance is expected to be announced after the stock market closes. Yahoo! shares plunged more than 13 percent on the news. Microsoft told Yahoo "unequivocally" that it has no interest in renewing a takeover attempt, even at its last offer of $47.5 billion, according to a Yahoo! statement. Yahoo! had sought $37 per share, causing Microsoft to abandon the bid May 3rd.
A new version of the Firefox Web browser is scheduled for release Tuesday with improvements in security, speed and design. Many of the enhancements in Firefox 3 involve bookmarks. The new version lets Web surfers add keywords, or tags, to sort bookmarks by topic. A new "`places" feature lets users quickly access sites they recently bookmarked or tagged and pages they visit frequently but haven't bookmarked. Firefox is the number two Web browser behind Microsoft's Internet Explorer. It comes from Mozilla, an open-source community in which thousands of people, mostly volunteers, collectively develop free products. Mozilla has been developing Firefox 3 for nearly three years and has been publicly testing it since November for Windows, Mac and Linux computers. Supporters are organizing launch parties around the world next week, and Mozilla is trying to set a world record for most software downloads in a 24-hour period.