Archive for March, 2008

Employers Slash Jobs by Most in 5 Years

Friday, March 7th, 2008

Employers Slash Jobs by Most in 5 Years
Friday March 7, 11:19 am ET
By Jeannine Aversa, AP Economics Writer

Employers Slash 63,000 Jobs in February, Most in 5 Years, Feeding Recession Fears

WASHINGTON (AP) — Employers slashed 63,000 jobs in February, the most in five years and the starkest sign yet that the country is heading dangerously toward recession or is in one already.The Labor Department’s report, released Friday, also indicated that the nation’s unemployment rate dipped to 4.8 percent as hundreds of thousands of people — perhaps discouraged by their prospects — left the civilian labor force. The jobless rate was 4.9 percent in January.

Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing, financial services and a variety of professional and business services. Those losses swamped gains elsewhere, including education and health care, leisure and hospitality and the government.

The latest snapshot of the nation’s employment climate underscored the heavy toll of the housing and credit crises on companies, jobseekers and the overall economy.

To provide relief to persistent credit problems, the Federal Reserve announced Friday that it will increase the amount of loans it plans to make available to banks this month to $100 billion.

It has already provided a total of $160 billion in short-term loans to cash-strapped banks since the auctions began in December. The Fed’s new step will involve making $100 billion available to a broad range of financial players through a series of separate transactions.

On Wall Street, the Dow Jones industrials were off around 15 points in morning trading as the Fed’s actions helped to blunt worry about the eroding jobs situation.

The Labor report also showed that January’s job losses were worse than the government first reported. Employers cut 22,000 jobs, versus 17,000.

It was the first monthly back-to-back job losses since May and June 2003, when the job market was still struggling to recover from the blows of the 2001 recession.

The health of the nation’s job market is a critical factor shaping how the overall economy fares. If companies continue to cut back on hiring, that will spell more trouble.

“It certainly solidifies the notion that the economy has fallen into a recession,” said Ken Mayland, economist at ClearView Economics.

Friday’s report was much weaker than economists were expecting. They were forecasting employers to boost payrolls by around 25,000. However, they were also expecting the jobless rate to edge up to 5 percent. The reason why the jobless rate went down, rather than up, is because so many people stopped looking for work and left the labor force.

“We are disappointed any time you see a number showing lost jobs,” Commerce Secretary Carlos Gutierrez told The Associated Press. “This is consistent with a slowdown,” he said. Still, he was hopeful that the recently enacted economic stimulus package forged by the White House and Congress will help bolster the economy in the second half of this year.

Workers with jobs, however, saw modest wage gains.

Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. That was on target with economists’ forecasts. Over the last 12 months, wages were up 3.7 percent. With high energy and food prices, though, workers may feel squeezed and feel like their paychecks aren’t stretching that far.

With the economy losing momentum, fears have grown that the country in on the brink of its first recession since 2001.

Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Many economists predict growth in the January-to-March quarter will be worse — around a 0.4 percent pace. Some believe the economy is shrinking now.

Spreading fallout from the housing and credit debacles are the main factors behind the economic slowdown. People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices have set a string of record highs in recent days. Gasoline prices have marched higher, too.

To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists predict another cut on March 18, the Fed’s next meeting. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points in the course of just eight days in January — the biggest one-month reduction in a quarter century.

The White House and Congress, meanwhile, speedily enacted an economic relief package, including tax rebates for people and tax breaks for businesses. That — along with the Fed’s rate cuts — should help give a lift to the economy in the second half of this year, says Bernanke.

Still, unemployment is expected to move higher this year. The Federal Reserve predict the jobless rate will rise to as high as 5.3 percent in 2008. Last year, the unemployment rate averaged 4.6 percent.

All the economy’s troubles are putting people in a gloomy mood.

According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, the worst reading since the index began in 2002.

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U.S. Economy: Payrolls Unexpectedly Decline for Second Month

Friday, March 7th, 2008

U.S. Economy: Payrolls Unexpectedly Decline for Second Month
By Shobhana Chandra

March 7 (Bloomberg) — The U.S. unexpectedly lost jobs in February for the second consecutive month, adding to evidence the economy is in a recession.

Payrolls fell by 63,000, the most in five years, after a revised decline of 22,000 in January, the Labor Department said today in Washington. The jobless rate dropped to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.

“All the lights are flashing red,” said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. “We’re in a recession. I don’t think there is any doubt about it at this point.”

Treasury notes soared after the report on concern that the weakening labor market, combined with lower home prices, higher fuel bills and a global credit squeeze, will force consumers to further reduce spending. Minutes before the figures were released, the Federal Reserve said it will expand two short-term auctions this month to $100 billion in an effort to address a deepening credit crisis.

Traders now anticipate Fed Chairman Ben S. Bernanke and his team will cut the benchmark interest rate by at least three quarters of a percentage point at or before their March 18 meeting.

“We now think the economy can be described as having entered a recession in early 2008,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. In a note last week, he wrote that some of the forces that signal the start of a recession “have not taken hold.”

Worse Than Anticipated

Economists had projected payrolls would rise by 23,000 following a previously reported 17,000 drop in January, according to the median of 76 forecasts in a Bloomberg News survey.

Service industries, which include banks, insurance companies, restaurants and retailers, added 26,000 workers last month. Retail payrolls fell by 34,100, the biggest drop in more than five years.

Payrolls at builders fell 39,000, the eighth consecutive month of cutbacks. Homebuilders are trimming staff as the biggest housing slump in a quarter century deepens. To make matters worse, commercial construction projects are now also on the decline, indicating firings at non-residential builders are likely to increase.

“This is going to be a weak quarter,” Edward Lazear, chairman of the White House Council of Economic Advisers, said in a Bloomberg Television interview from Washington. He said the Bush administration expects “close to a zero quarter” in terms of gross domestic product growth. “I wouldn’t say negative, that’s still up for grabs,” he said.

Housing Meltdown

The real estate recession and meltdown in financial markets have led to growing dismissals at banks, mortgage and management companies.

Still, investors would be mistaken to assume the Fed will continue to cut rates as deeply as it has already this year, Dallas Fed President Richard Fisher said in an interview with Bloomberg Television in Paris today.

“I would discourage you from thinking that simply because of a significant action in the credit markets, like we had yesterday, that suddenly we’re going to have an Open Market Committee meeting, and that suddenly we’re going to move fed funds rates in response,” Fisher said. “It doesn’t work that way.”

Manufacturing Downturn

Manufacturing payrolls dropped by 52,000, the biggest decline since July 2003, after falling 31,000 a month earlier. Economists had forecast a drop of 25,000.

Government payrolls increased by 38,000. That means the total decline in private payrolls for the month was 101,000, the biggest drop since March 2003.

The average work week was unchanged at 33.7 hours. The average factory work week and overtime hours were unchanged. Average weekly earnings rose $1.68 to $599.86.

Workers’ average hourly wages rose 5 cents, or 0.3 percent, to $17.80, in line with forecasts. Hourly earnings were up 3.7 percent from February 2007. Economists surveyed by Bloomberg had forecast a 3.6 percent gain for the 12-month period.

Americans, whose spending accounts for more than two-thirds of the economy, are less upbeat about finding work, a Conference Board report showed last week. The share of consumers who said jobs are plentiful fell and the proportion who said jobs are hard to get jumped, pushing consumer confidence down to a five- year low in February.

Bernanke Outlook

“The economic situation has become distinctly less favorable,” Bernanke said in testimony to Congress last week.

The Fed chairman referred to “downside” risks for the economy four times, including “the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.”

The central bank’s regional economic survey this week said “the hiring pace slowed in various sectors and labor markets loosened somewhat in many districts,” as economic growth cooled in eight of 12 regions since the start of 2008.

Adecco SA, the world’s biggest temporary-employment company, said this week that fourth-quarter profit declined as hiring slowed in the U.S. The Swiss company also said it may miss its long-term goal of sales growth of 7 percent to 9 percent.

“We’ve been seeing a weak U.S. market for more than a year now,” Chief Executive Officer Dieter Scheiff said in a March 4 interview.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

Last Updated: March 7, 2008 10:30 EST

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U.S. Mortgage Foreclosures Rise as Owners `Give Up’ (Update3)

Thursday, March 6th, 2008

By Kathleen M. Howley

March 6 (Bloomberg) — U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.

“We’re seeing people give up even before they get to the reset because they couldn’t afford the home in the first place,” said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.

The Bush administration is urging lenders to avert foreclosures by modifying mortgage terms amid the worst housing slump in a quarter century. The Federal Reserve has slashed its benchmark interest rate twice this year to try to avert the first recession since 2001. The central bank yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.

The share of all home loans with payments more than 30 days late, both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, the bankers’ group said in today’s report.

Buyers `Overstretched’

About 40 percent of all foreclosures are homeowners with prime or subprime loans who couldn’t make their payments before the reset, Brinkmann estimated in an interview. Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default, he said

Forty-two percent of new foreclosures in the fourth quarter were people with adjustable-rate subprime mortgages, given to borrowers with limited or tainted credit records, according to the report. Those types of loans accounted for about 7 percent of all mortgages, the report said.

“It comes down to an overstretching of buyers to get into homes they couldn’t afford and an overextending of credit by lenders who were more willing to take risk,” Brinkmann said.

Another 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans, according to the report.

Late Payments Data

Twenty percent of adjustable-rate subprime loans had late payments in the fourth quarter, a number that excludes the one of every eight mortgages already in foreclosure, the bankers group said in their report.

The share of late payments for adjustable prime loans was 5.51 percent, from 3.39 percent a year earlier, and the foreclosure inventory rose to 2.59 percent, almost tripling from a year earlier.

The Mortgage Bankers survey examines 46 million residential home loans, about 80 percent of the market. The study gives percentages without providing the number of loans they represent.

Homebuilding executives, economists and securities analysts predict the housing market won’t begin to recover until at least 2009. U.S. sales of new and existing homes probably will fall to 5 million this year, a drop of 33 percent from the all-time high of 7.46 million in 2005, before rising to 5.23 million in 2009, Freddie Mac said in a March 3 forecast.

Freddie Mac and Fannie Mae, the biggest U.S. mortgage finance companies, have posted their largest-ever losses as rising defaults boosted credit costs. Fannie Mae had a $3.55 billion loss in the fourth quarter, the Washington-based company said Feb. 27. Freddie Mac reported $2.45 billion fourth-quarter loss the following day.

The Mortgage Bankers survey came on the same day that the National Association of Realtors reported that the number of Americans signing contracts to buy previously owned homes was unchanged in January.

The Realtors’ index of signed purchase agreements held at 85.9, higher than forecast and the second-lowest level since the Chicago-based group began keeping records in 2001.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ayvTOmZMGXhE&refer=home
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Florida, California push foreclosure starts

Thursday, March 6th, 2008

Florida and California make up a disproportionate part of foreclosure starts in the U.S. and helped push the national number to new highs, the Mortgage Bankers Association said.

California and Florida together represent 21 percent of all loans outstanding, but accounted for 30 percent of foreclosure starts in the country, the report said. They also accounted for 39 percent of all prime adjustable-rate mortgages outstanding and 47 percent of prime ARM foreclosure starts.

Together, the make up 29 percent of all subprime ARMs and 36 percent of subprime ARM foreclosure starts.

In Florida, the percentage of loans on which a foreclosure was started during the quarter rose to 1.46 percent from 1.09 percent in the third quarter. The percentage of loans in the foreclosure process at the end of the quarter climbed to 3.22 percent from 2.19 percent.

The delinquency rate for mortgage loans on one- to four-unit residential properties, which does not include loans in the process of foreclosures, for the state was up to 7.47 percent, up from 6.47 percent in the third quarter.

The delinquency rate for prime loans increased to 4.57 percent from 3.9 percent. Subprime loans had a much higher delinquency rate, up to 19.76 percent from 17.2 percent.

Nationally, the delinquency rate was 5.82 percent, up from 5.79 percent in the third quarter.

The percentage of loans on which a foreclosure was started increased to .83 of a percent from .78 of a percent, and the percentage of loans in the foreclosure process at the end of the quarter was 2.04 percent, up from 1.69 percent.

http://www.bizjournals.com/southflorida/stories/2008/03/03/daily38.html

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