Friday AM July 6th, 2007

Supply managers record accelerated business activity…Job market holds steady; firms announce fewer job cuts…ACR Group being acquired by Watsco in $78.5 million deal… A fresh reading of the nation’s services sector finds business activity accelerating. The Institute for Supply Management says its June index rose to 60.7, the fastest rate since April of last year. […]

Supply managers record accelerated business activity…Job market holds steady; firms announce fewer job cuts…ACR Group being acquired by Watsco in $78.5 million deal…

A fresh reading of the nation’s services sector finds business activity accelerating. The Institute for Supply Management says its June index rose to 60.7, the fastest rate since April of last year. It’s up one point from the previous month. Any number above 50 indicates growth. Analysts had been looking for a slight decline.

The number of people filing new claims for unemployment benefits rose by 2,000 last week. The Labor Department says new claims totaled 318,000. The slight change suggests the job market is holding steady, despite strains caused by the housing slump. The government releases the monthly unemployment report today. Analysts are looking for the unemployment rate to remain at 4.5 percent, with about 125,000 jobs added to payrolls.

A new report finds that firms were announcing fewer job cuts last month. The outplacement firm Challenger, Gray and Christmas finds nearly 56,000 job cuts announced in June. That’s down 22 percent from May. For the first six months of the year, Challenger says job cuts totaled some 393,000, down ten percent from a year earlier. June’s reported level of job cuts was 17 percent lower than a year ago.

While the pace of business in some industries may slow down in July and August, the war for talent isn’t going to be taking time off, according to a recent survey of 116 executive recruiters conducted by ExecuNet. Some 68 percent of those polled are confident or very confident that the employment market will improve in the next three months. ExecuNet says the summer months can be a great time to be proactively developing your career, because companies continue hiring and competition among candidates is lighter.

Long-term mortgage rates have dipped for a third straight week. Freddie Mac the 30-year fixed-rate mortgage is averaging 6.63 percent this week, compared with 6.67 percent the week before. A year ago, the rate stood at 6.79 percent. The average for the 15-year loan is 6.3 percent, down four basis points from a week earlier. The 15-year mortgage averaged 6.44 percent at this time last year. Freddie Mac Vice President and Chief Economist Frank Nothaft says the decline is–in part–a refection of a moderation in core inflation.

Heating, ventilating, air conditioning and refrigeration products distributor ACR Group of Houston is being acquired by Florida-based Watsco in a $78.5 million deal, according to the Houston Business Journal. ACR Group has 54 locations and 500 employees in the southwestern United States.

Schlumberger is acquiring Milan-based Geosystem, a provider of land and marine electromagnetics and seismic imaging services. Electromagnetics is a subsurface measurement used by the oil and gas industry for enhanced reservoir description. Geosystem, which provides processing software for electromagnetics surveys, will become part of WesternGeco Electromagnetics.

Rio Vista Energy Partners is purchasing Oklahoma-based Northport Productions in an $18 million deal, according to the Houston Business Journal. The Houston firm will continue employing all the existing employees of Northport, which operates more than 100 wells in Oklahoma, Texas and four other states.

Major U.S. airlines have agreed to sell a military and aviation communications company to a unit of the Carlyle Group. AMR–the parent of American Airlines–said in a regulatory filing that the sale of Aeronautical Radio was agreed upon Tuesday. AMR said it expects to get $194 million in proceeds and record a gain of $140 million when the sale closes October 31st. UAL–the parent of United Air Lines–said in a filing that it expects to get more than $125 million and gain more than $40 million for its share. The airlines announced in April that they planned to sell ARINC, a 77-year-old military and aviation communications company based in Annapolis, Maryland.

American Airlines said it will add flights to London and shift some service to London Heathrow Airport from Gatwick Airport. Fort Worth-based American is the largest U.S. carrier. The company says it will operate up to 20 daily round trips between the United States and London, including a new route between New York and London’s Stansted Airport beginning October 28th. American said it would fly to Heathrow from Dallas and Raleigh-Durham, North Carolina, starting in March 2008. It will keep one Dallas-Gatwick flight.

Continental Airlines said it has agreed with India’s Kingfisher Airlines to sell seats on each other’s flights and offer reciprocal frequent-flyer privileges. Continental said customers of each airline will be able to earn and redeem miles on all flights operated by the other carrier beginning October 1st. Flyers will also get reciprocal airport lounge access. By the end of the year, the airlines plan to begin code-sharing, under which Continental will sell seats on Kingfisher flights that connect to Continental flights. The arrangement allows for a single check-in for multiple flights. Kingfisher has operated for two years and offers 187 daily flights to 29 destinations in India. Continental operates daily non-stops between Newark, New Jersey, and Delhi and will add service from Newark to Mumbai on October 1st.

NASA has exercised a $294 million option to extend a contract with the Houston office of California-based Wyle Laboratories to support the Space Life Sciences Directorate at the Johnson Space Center. The option extends the contract to 2011. Major subcontractors include Barrios Technology, Bastion Technologies, Easi, Muniz Engineering and Lockheed Martin, all of Houston, and the University of Texas Medical Branch at Galveston.

The Texas Department of Transportation is expected to add a sixth vessel to the Galveston-Port Bolivar ferry fleet. Officials hope the addition will improve efficiency and reduce wait times. A Department consultant studying the possibility of replacing the ferry with a bridge has reported that summer wait times can exceed two hours. Wayne Welsh, assistant ferry operations manager, says manpower is the biggest issue the ferry faces. The ferry sometimes doesn’t have enough crew to staff all of its boats. The ferry is the only way motorists can cross the waterway between Bolivar Peninsula and Galveston Island. The free service links two segments of State Highway 87. Department spokesman Norm Wigington says wait times will shorten once repair work is complete on two new docks at Galveston and one at Port Bolivar.

Offshore drilling contractor Transocean has joined the Gulf of Mexico Foundation, which promotes conservation of the Gulf through education, awareness and research, according to the Houston Business Journal. Transocean CEO Bob Long is joining the foundation’s CEO council, and the company’s environmental adviser, Ian Hudson, will represent Transocean on the foundation’s board of directors. Other members include BP, ConocoPhillips, Dominion, Rowan and Shell Oil.

A new federally designed flood plain map has county leaders in the Rio Grande at odds with FEMA. Under the new map, property owners in Hidalgo County would have to purchase flood insurance–an expense that civic leaders worry will repel developers. FEMA says it plans to release the preliminary map as planned on September 30th. Hidalgo County officials say the map changes aren’t necessary, arguing that levee repairs would prevent the area from being a flood hazard. Hidalgo County Judge J.D. Salinas says taxpayers shouldn’t have to buy flood insurance just because “the federal government isn’t living up to its responsibilities.” Salinas says he plans to meet with attorneys in Washington D.C. next week to discuss possible legal action against FEMA.

For the past decade, the numbers of farmers, ranchers and oil field workers in west Texas have been on a steady decline. Now the region is reinventing itself–this time as a hub of alternative energy. Among the plans the region has on its drawing board are ethanol plants and wind farms, plus possible nuclear reactors and coal-powered plants. Economists and analysts say this shift from farming and oil-producing is necessary for the region’s economy and growth. Just last week, a University of Tennessee study projected that Texas would lead the nation in production of renewable energy by 2025. The study says the projects will create more than 173,000 jobs and add about 22.8 billion annually to the state’s economy. Currently in west Texas, there are three ethanol plants already under construction. Billionaire T. Boone Pickens recently announced plans to build the world’s largest wind farm in the panhandle, and in the Permian Basin, a feasibility study is underway for a possible $400 million nuclear reactor that would be built by 2012. Texas Agriculture Commissioner Todd Staples says the region is eager to expand its economy beyond food and fiber. Staples says the projects are an opportunity to attract new minds and new talents to the rural parts of Texas that have been hamstrung by small populations.

The economic loss from 9-11 was not just domestic. Because of a decline in foreign tourism, the U.S. lost billions more, plus immeasurable good will. Now, several Senators want to create a non-profit agency to promote America and clear up misperceptions about U.S. travel policies. Visits from six countries that provide the most tourists–Britain, Japan, Germany, France, South Korea and Australia–are off 15 percent since 2000. Recovery won’t be easy. A business group called the Discover America Partnership says European papers are “filled with horror stories” about why international travelers don’t want to come to the U.S. But a spokesman says about 70 percent of foreign tourists have a great time once they get out of the airport.

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