The government says new claims for unemployment benefits reached their highest level in 26 years last week, as companies cut workers at a rapid pace. The Labor Department says initial applications for jobless benefits rose to a seasonally adjusted 573,000, from an upwardly revised figure of 515,000 in the previous week. That was far more than the 525,000 claims Wall Street economists expected. A Labor Department analyst says the jump is partly due to a rebound in claims from the Thanksgiving holiday week when government offices were open for fewer days.
There are three times as many people seeking work than jobs available, according to the Economic Policy Institute. The Bureau of Labor Statistics says there were 3.1 million job openings in October—down almost 25 per cent from the start of the recession in December 2007. The number of job seekers per opening is at 3.3—up from 1.9 last December.
A $14 billion auto industry bailout bill has stalled in the Senate, and Republicans demanded upfront concessions from the United Auto Workers as the price for support needed for passage. UAW officials were in talks with key lawmakers, Congressional officials said, although it wasn't clear what, if any, givebacks the union was willing to discuss. The developments unfolded after Senate Republican Leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to a White House-backed bill that was approved by the House on Wednesday. He called for an alternative that would reduce the wages and benefits of the big three automakers to bring them in line with those paid by Japanese carmakers Nissan, Toyota and Honda.
The White House says the weak economy can't afford the collapse of the nation's automakers. White House press secretary Dana Perino cited the latest bad economic news--a jump in jobless claims to the highest level in 26 years--in arguing for Senate passage of a bailout package for the Big Three automakers. Perino said that the economy is in such a weakened state that adding another million people to the unemployment rolls from an auto industry failure is not possible. She said: "we don't think the economy can sustain it." Perino called the legislation, opposed by some Senate Republicans, a reasonable approach.
President-elect Barack Obama is appealing for approval of an assistance package for the auto industry. Obama says the government can't just stand by and watch the industry collapse. He says it would have a "devastating ripple effect'' throughout the economy. He told reporters in Chicago that he understands the "anger and frustration" over the situation in which the auto companies find themselves. He says leaders of those companies failed to move quickly enough to change. But Obama says he thinks the government should provide short-term assistance to avoid a collapse of the companies, while holding them responsible and protecting the interests of the taxpayers. Obama says the package under consideration in congress is a "step forward."
A lobbying group for the biotechnology industry is calling for government financial relief, according to the Houston Business Journal. BIO says smaller firms are struggling to raise cash amid the economic slump. The BioHouston Web site says Houston's biotech industry has $1.5 billion in annual academic research investments and more than 140 life science companies. BIO says 25 per cent of the 370 publicly-traded U.S. biotech companies have less than six months of cash on hand.
A Houston company created by six University of Houston professors has been sold to a global conglomerate in the disease research and drug discovery industries. VisiGen Biotechnologies was acquired for $20 million from Invitrogen, which recently merged with Applied Biosystems to form Life Technologies. VisiGen will continue to operate under the same name. The company is working on a new process that will be used to sequence individual human genomes. This is one of the largest acquisitions of a UH spin-off company in the university's history. UH will receive nearly half a million dollars from the initial installment of the deal.
America's trade deficit has unexpectedly risen in October as a spreading global recession dampened sales of U.S. products overseas and the volume of oil imports surged by a record amount. The deficit with China has jumped to an all-time high. The Commerce Department reported that the trade deficit rose to $57.2 billion in October, 1.1 per cent higher than the September imbalance of $56.6 billion. Analysts had been looking for the deficit to decline to $53.5 billion on lower oil prices. The average price for a barrel of crude oil did drop by a record amount but that was offset by a record surge in the volume of oil imports. That sent the total oil bill up by three per cent to $37.7 billion.
U.S. households, hit by declining home values and stock market losses, cut back on their debt levels for the first time on record. The Federal Reserve says in its quarterly look at consumer and business finances that households reduced their debt levels by 0.8 per cent at an annual rate in the July to September period, the first drop on records that go back more than 50 years. The Fed report shows that households' net worth fell by 4.7 per cent in the third quarter to $56.5 trillion, reflecting the hit Americans are taking as the value of their homes and investments decline.
The House has voted to extend relief to employers facing billions of dollars in increased payments to pension funds at a time when the market has undermined the funds' value. The House bill also gives a break to seniors who by law are required to withdraw a certain amount every year from their now-depleted IRA and 401(k) accounts. The Senate could take up the legislation this week, sending it to the president for his signature. House Ways and Means Committee Chairman Charles Rangel says it would help workers and seniors safeguard their retirement savings during the economic crisis.
Texas real estate foreclosures declined in November, according to RealtyTrac. The number of homes entering the foreclosure process dropped 20 per cent from the previous month and a 32 per cent decline from the same month last year. More than 14,400 properties with Houston addresses are on the foreclosure list. Harris County foreclosures totaled 11,837 in 2008—up 0.6 per cent from the prior year, according to The Woodlands-based Foreclosure Information & Listing Service.
Bank of America says it expects to eliminate 30,000 to 35,000 jobs over the next three years. The massive work force reduction reflects the weak economic environment as well as the bank's absorption of Merrill Lynch, the Wall Street investment firm it agreed to buy in September. Charlotte, N.C.-based Bank of America says it hasn't yet completed its analysis for eliminating positions, and a final number will not be determined until early next year. It said the cuts will affect workers from both companies and all types of businesses. The shotgun deal between Bank of America and Merrill, valued at $50 billion when it was initially announced, was struck as the solvency of investment banks was in grave doubt. Shareholders of both companies voted to approve the deal last week.
Defense contractor Textron is laying off more than 120 employees, primarily from its corporate offices in Rhode Island, Michigan and Texas. The manufacturer of Cessna jets, Bell helicopters and E-Z-Go golf carts announced a cost-cutting effort in October, when it reported a drop in third-quarter profits. The firm's financing unit for business jet and other customers got hammered by the global credit crisis. Some employees will leave this week, while others will stay on longer.
KB Toys has filed for bankruptcy protection for the second time in four years, joining fellow retailers Linens n Things and Steve & Barry's in seeking Chapter 11 protection amid weak sales linked to the economic recession. The Pittsfield, Massachusetts-based retailer filed in the U.S. Bankruptcy Court in Delaware, reporting total debt between $100 million and $500 million and total assets in the same range. Like most other retailers this holiday season, the toy seller had aggressively cut prices to entice cash-strapped shoppers, offering hundreds of toys for $10 or less. KB Toys filed for bankruptcy in 2004 and emerged nearly two years later as a subsidiary of investment firm Prentice Capital Management. The more than 80-year-old company operates 460 stores.
Business and education leaders will gather at the Houston Marriott Westchase on Briarpark tomorrow to collaborate on ways to drive the region's $400 billion economy. The Houston Strategic Forum features Clarence Cazalot, Jr., of Marathon Oil, John Mendelsohn from M.D. Anderson Cancer Center, Merrill Miller, Jr., of National Oilwell Varco and UH President Dr. Renu Khator.
Marathon Oil announced it's delayed a decision on whether to split into two separate companies. The Houston-based company cited recent volatility in global financial markets. Marathon in July announced it was considering a move to create one publicly traded company focused primarily on exploration and production and another on refining and marketing. Marathon initially said it expected to make a decision by year's end. Marathon CEO Clarence Cazalot, Jr., says the review so far indicates a separation may enhance shareholder value. But he says the recent extreme volatility in the capital and commodity markets requires further evaluation.
The price of gas keeps tumbling across Texas, settling at $1.57 per gallon this week. AAA Texas reports the average retail price per gallon slipped 12 cents compared to last week. The nationwide average for gasoline also declined 12 cents to $1.66. AAA Texas says gasoline prices this week are about $1.30 less than one year ago. Amarillo has the least expensive gasoline, at $1.42 per gallon, down 15 cents from last week. The association's survey found El Paso with the most expensive gas, averaging $1.69, which is down 11 cents from last week. Association spokeswoman Sarah Schimmer says demand has fallen for oil and gasoline, in part because increased unemployment has led to less commercial activity.
The chairman of the Joint Chiefs of Staff says ineffective cost controls in Pentagon programs could lead to consequences. Admiral Mike Mullen says the military cannot afford continued cost overruns and is hinting that some weapons systems may be cut or scaled back under President-elect Barack Obama. The top U.S. military officer says he's "obviously discouraged by the lack of cost control" in many Pentagon programs. He says the only answer is to "get a grip on that." He says the alternative might be not buying certain programs or not being able to buy the quantities needed. Speaking to reporters at the Pentagon, Mullen says Obama and Defense Secretary Robert Gates plan "to take a very, very intense, focused, comprehensive view" at what the Pentagon is buying. Mullen says that's healthy.
The International Energy Agency is predicting global oil demand will shrink in 2008 for the first time in 25 years as rich economies sink into recession and growth slows in developing countries. The Paris-based agency is also cutting its forecast for global oil demand next year. The agency says in its closely watched monthly oil market report that the world will have consumed 85.8 million barrels of oil a day this year. That is 350,000 barrels a day less than the agency forecast last month. In percentage terms, oil demand in 2008 is expected to drop 0.2 per cent from 2007. The agency says that would represent the first drop in demand since 1983.
EU regulators announced they'll investigate Poland's $68 million subsidy to computer maker Dell. Critics doubt the Round Rock-based company's new Polish plant needed a state subsidy. EU rules allow governments give money to businesses operating in disadvantaged parts of Europe. The European Union admitted that Lodz, Poland's third-largest city, has an abnormally low standard of living and high unemployment. Regulators say they'll look carefully at the payment—which covers more than a quarter of the $245 million cost of the factory — to make sure it doesn't enrich Dell. The factory aims to employ 3,000 people turning out desktops, notebooks and servers. Dell has said it picked Poland as a manufacturing center because it was close to a large, growing customer base in central and Eastern Europe.
Merck is considering an appeal after a Texas state appeals court reversed its own prior dismissal of a $7.75 million judgment in a Vioxx personal injury lawsuit against the drug maker. A three-judge panel of the Texas 4th Court of Appeals ruled there should be a new trial in the case, which was brought by the widow of 71-year-old Leonel Garza. A longtime smoker with a history of heart disease, he died of a heart attack in 2001 after taking Vioxx briefly. The three judges sent the case back to the original trial court, in Rio Grande City, where a jury in 2006 had awarded $32 million to Garza's widow. That amount was cut to about $7.75 million under a Texas law limiting damages. Then last May, the three-judge panel overturned the verdict and threw out the award, saying there was insufficient evidence Vioxx caused Garza's heart attack to support the verdict. Garza family attorney David Hockema says a new trial could be held as soon as next summer.
The Federal Reserve says commercial banks and investment firms borrowed slightly less from its emergency lending program. The Fed report shows commercial banks averaged $90.2 billion in daily borrowing over the week ending Wednesday. That was down from $90.3 billion in average daily borrowing logged over the week ended December 3rd. Investment firms drew $52.8 billion over the past week. That compared with an average of $57.2 billion the previous week. This category was recently broadened to include any loans that were made to the U.S. and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch.
Federal regulators are making more than $40 billion available to support several credit unions that suffered losses from mortgage securities, and will provide another $2 billion to help struggling homeowners. National Credit Union Administration Chairman Michael Fryzel says the credit unions should "use these programs constructively as they work through these difficult times." The new borrowing from the Treasury Department will be available under a special facility that congress approved for the agency in September.
The government says it has supplied $3.84 billion to 35 banks in a third round of payments from the $700 billion financial system rescue program. The Treasury Department says it authorized the payments, bringing the total supplied to banks to $165.3 billion. That leaves less than $85 billion to be spent out of the $250 billion that has been earmarked to make direct purchases of stock in banks as a way of bolstering their balance sheets and encouraging them to resume more normal lending.
U.N. Secretary-General Ban Ki-Moon has warned the world against backsliding in the fight against climate change as it tackles the global financial crisis. Ban says managing the financial crisis requires a massive global stimulus and "a big part of that spending" should be directed at fighting global warming. Ban spoke to a U.N. conference that is working on a treaty to replace the Kyoto Protocol on greenhouse gas emissions, which expires in 2012. The aim is to agree on a new treaty late next year. About 145 environment ministers and other senior officials are meeting through Friday to help push forward that effort. Ban said, "there can be no backsliding on our commitments to a future of low carbon emissions."
There is such a thing as a free lunch — just ask a growing number of school districts across the country. Schools report that many more lunches are being provided under the national school lunch program as the flailing economy hits families hard and they look for ways to economize. The program fed more than 30 million children in the 2006-07 school year with federal and state funds. According to the School Nutrition Association, which represents workers who provide the meals, almost 80 per cent of schools surveyed report an increase in the number of free lunches served this year. The organization said an average of 425,000 more students are participating in the programs overall. But as those numbers rise, schools could feel their budgets stretched as well.
Pope Benedict XVI says the global financial crisis is a result of the quest for short-term gains at the expense of the common good. Benedict examined international economic problems in an annual peace message that linked poverty to world conflicts. The written message says the gap between rich and poor has become more marked, even in the most economically developed countries. Benedict has been speaking out frequently on the world financial crisis. He said in the message that international finance should sustain long-term investments and development but that finance limited to the short term "becomes very dangerous to everyone, even for those who benefit when the markets perform well."