History > 2005 > USA > Economy

Left:

Federal Reserve Board Chairman Alan Greenspan

ponders a question during testimony

before the Senate Banking Committee,

on Capitol Hill in Washington, February 16, 2005.

Greenspan said that the U.S. economy entered 2005 in good shape

but warned that fiscal discipline was essential to meet future challenges.

Photo by Jason Reed/Reuters

Greenspan: Rates Low; Discipline Vital

R

Wed Feb 16, 2005 01:34 PM ET

http://www.reuters.com/newsArticle.jhtml;jsessionid=
DFKHH4J4K0JQECRBAE0CFEY?type=businessNews&storyID=7651151

Right:

Chairman of the Federal Reserve Alan Greenspan listens to a question

while testifying before the U.S. House Financial Services Committee

on Capitol Hill, February 17, 2005.

Greenspan embraced President Bush's vision of an 'ownership society',

saying private Social Security accounts

could foster feelings of wealth among poor Americans.

Photo by Larry Downing/Reuters

'Ownership' Key Soc. Sec. Goal -Greenspan

R        Thu Feb 17, 2005 05:56 PM ET

http://www.reuters.com/newsArticle.jhtml;jsessionid=
4FQFLXNJA3BWMCRBAE0CFFA?type=businessNews&storyID=7666852

Wall St. Bets

on Gambling on the Web

December 25, 2005
The New York Times
By MATT RICHTEL

Internet casinos are outlaw operations in the eyes of the federal government, but they look like solid investments to many of Wall Street's largest firms.

Blue-chip investment houses like Goldman Sachs, Merrill Lynch and Fidelity now hold hundreds of millions of dollars in shares of online casinos and betting parlors, which are publicly traded on the London Stock Exchange and headquartered in places like Costa Rica or Gibraltar.

The growing participation by American investors underscores a striking gap between the federal law-enforcement position on online gambling and the realities behind what has emerged as a booming business.

It also highlights the difficulty of policing cross-border activity in the Internet age at the same time that electronic commerce and a global economy are creating fast economic partners across national boundaries.

Legal experts are divided over whether American investors and the investment houses that operate mutual funds could themselves be seen as criminally liable for their actions by providing financial backing for offshore casinos. To be sure, it is not uncommon for Americans to invest in overseas companies whose operations may be considered illegal or unacceptable here, from sweatshop manufacturers to European energy producers that do business in Iran.

The difference with Internet gambling is that the activity takes place on domestic shores - with Americans placing bets online using their home computers - and the Justice Department has stated clearly that the operators are violating American law.

Jaclyn Lesch, a spokeswoman for the Justice Department, said that the agency considered online gambling illegal but declined to "comment on the liability or hypothetical liability of a company or an individual."

But Internet gambling analysts and company executives said that the investments highlight how widely the federal policy is, in essence, being ignored.

Millions of Americans use the Internet to play games like poker, blackjack and roulette, or to place wagers on sporting events. Online casinos advertise in magazines and on cable television while filling big billboards in Times Square and other places where crowds congregate. Celebrities like Jesse Ventura, the former governor of Minnesota, hawk their wares.

Representative Bob Goodlatte, Republican of Virginia, an opponent of gambling, said that the federal government had essentially given up enforcing laws against offshore casinos. He noted, for example, that casino operators now travel freely within the United States, gathering at trade conventions even though, he said, prosecutors would be within their rights to arrest and bring charges against them.

He said that the involvement of investment firms could be part of a pattern of laws being flouted.

"It's very bad, and the Congress ought to investigate it," Mr. Goodlatte said, adding that it may turn out that the investment houses are knowingly supporting and promoting illegal enterprises.

For their part, the investment houses have taken the position that they indeed know there are legal risks involved in investing in offshore casinos, but that the risks are outweighed by the benefits of owning shares in growing, highly profitable businesses. Those shares can give a lift to mutual funds and other types of investments sold by the investment houses, meaning bigger returns for clients.

"Our analysis shows the gain from these stocks outweighs the very small risk" of owning them, said a spokesman for one major investment house. The spokesman would not agree to be identified by name or to have his firm identified, citing regulatory policy that could restrict the company's ability to buy and sell individual securities if he commented upon them.

The ownership rolls of offshore casinos read like a Who's Who of America's top investment firms. For example, public filings show that tens of millions of shares of SportingBet, a company listed on the London Stock Exchange that allows people to place bets on sporting events, are owned by Fidelity, Merrill Lynch and Goldman Sachs.

Fidelity Management holds shares worth about $363 million, or 14.1 percent of the outstanding shares. Those shares are largely held in mutual funds. Merrill Lynch Asset Management has $164 million in holdings, and Goldman Sachs Group Inc. has $137 million.

Similarly, Goldman Sachs and Morgan Stanley Securities hold big positions in BetOnSports, another publicly traded firm in London that facilitates sports betting, according to public filings. Morgan Stanley has one of the biggest stakes - worth around $25.6 million - but the company said that the position is held on behalf of one large investor, whose identity it withheld.

It is hard to discern how many of the shares are owned by mutual funds available to American investors. Many of the funds, including some that exclude American investors, are operated out of London.

For instance, Goldman Sachs's International Growth Opportunities Fund, which is open to American investors, owns around 175,000 shares of SportingBet, worth around $960,000, according to a recent public filing by the company.

Goldman Sachs also wrote in a report on Nov. 30 that over the next three months it "expects to receive or intends to seek compensation" for investment banking services provided to SportingBet and PartyGaming, two companies that operate gambling sites.

Goldman Sachs, Merrill Lynch and Fidelity all declined to comment.

George Hudson, a spokesman for SportingBet, said that there had been growing interest from the investment houses, and not just their European arms.

"It's not just London, it's New York," Mr. Hudson said, noting that the interest represents a change from two years ago when "the big banks wouldn't touch the industry with a barge pole."

According to Mr. Hudson and several other industry executives and analysts, a watershed event took place on June 30 when PartyGaming began trading on the London Stock Exchange. It was not the first Internet casino to go public in Britain, but it drew a great deal of attention because of the popularity of the company's sites. The ensuing demand for its shares put it among the exchange's top 100 companies in its market capitalization, currently around $9.6 billion.

At the time, I. Nelson Rose, a professor at Whittier Law School in Costa Mesa, Calif., who has written extensively on gambling law, was flown to London to advise a number of large investment houses - both American and European - on the risks involved in owning shares. Mr. Rose declined to specify the companies for which he consulted, but said that he had told them there was at least some risk of owning shares in the casinos.

Today, Mr. Rose said he believed there was only a 10 percent chance that the federal government would take action against the investment houses under the Wire Act, which covers online gambling, or federal statutes that permit the government to charge the partners of illegal operations with aiding and abetting their activities. But he said that if prosecutors did so, they could make a decent case.

The companies are shareowners "in an illegal enterprise," Mr. Rose said. "Therefore they are liable." Potential penalties could range from small fines to prison terms.

But Lawrence G. Walters, a Florida lawyer who specializes in investment law and who has consulted for some prospective American investors, said that the government would have difficulty finding a theory of liability given that the investors do not control the offshore casinos or direct their activities. They are "passive investors," Mr. Walters said.

"Nobody takes them seriously when they say this is a serious crime," he said of the government and anti-gambling laws. "But there is stuff still on the books, and somebody could go down heavily if government decides to turn its attention to them."

The bottom line, according to casino industry executives and some financial analysts, is that the opportunity for profit may be too good for the investment houses to pass up. Over all, Internet gambling is projected to reach almost $12 billion in business this year, up from $8.3 billion in 2004, according to Sebastian Sinclair, a gambling industry analyst with Christiansen Capital Advisors.

Individual companies are enjoying strong growth and big profit margins. Morgan Stanley on Dec. 1 published an analysis of SportingBet that noted that the company had acquired 700,000 new customers in a recent quarter, almost equal to the number of people it signed up all of last year. The Morgan Stanley report said that the company was taking in $530,000 a day just from its poker business.

"There is no other leisure business in the world with the same potential for growth and shareholder returns as online gaming," said David Carruthers, the chief executive of BetOnSports, noting that the major casinos each project 20 percent annual sales growth. "We're in our embryonic stages."

Mr. Carruthers said that the investments from American financial institutions have provided the stability and legitimacy needed to helped the casinos grow. "It says we're running a business legitimately and responsibly," he said, "and we're seen as a worldwide leisure product - similar to KFC, Ford, Coca-Cola, I.B.M. or any other global brand."

Wall St. Bets on Gambling on the Web, NYT, 25.12.2005, http://www.nytimes.com/2005/12/25/business/25gamble.html

Government Finds

Seesaw View of Housing Market

December 23, 2005
The New York Times
By VIKAS BAJAJ

Sales of new homes fell in November from a record-setting pace, and the number of homes for sale touched a new high, the government reported today.

Coupled with data from October, the latest report from the Commerce Department provides a seesaw view of the housing market - a sharp drop after a sharp rise. The herky-jerky movements indicate that even as home sales remain high by historical standards, they are starting to level off from what had been relatively uninterrupted growth in the last four years.

Sales fell 11 percent, to an annual pace of 1.2 million, and the number of homes for sale jumped 3 percent, to 503,000. At the current pace of sales, that equates to a 4.9-month supply of homes, the highest that inventory has been since December 1996 when there was a five-month supply. Median prices for new homes - half the homes sold for more and half for less - was little changed from a year ago at $225,200.

New home sales make up just 15 percent of all housing sales. That is one reason economists caution against reading too much into this report. Another is its significant margin of error, which was plus or minus 8.9 percent this month, enough to erase most of the drop in sales.

Separately, the Commerce Department said orders for durable goods jumped 4.4 percent last month with most of the increase because of surging airplane orders. Excluding the transportation sector, orders for durable goods, which last more than three years, dropped 0.6 percent last month, compared to analysts' expectations of a 1 percent increase.

"The important aerospace industry is expanding again and overall manufacturing activity is growing, but the pace of growth in manufacturing is overstated in the durable goods report," said Daniel Meckstroth, chief economist at Manufacturers Alliance/MAPI, a research firm in Washington.

Also today, the University of Michigan revised up its estimate of consumer confidence in December to 91.5 from 89 percent. That change puts the index slightly above where it was before Hurricane Katrina smashed into New Orleans in late August.

Government Finds Seesaw View of Housing Market, NYT, 23.12.2005, http://www.nytimes.com/2005/12/23/business/23cnd-econ.html

Can America keep it up?

Dec 14th 2005
From The Economist Global Agenda


As the Federal Reserve raises interest rates again and the trade deficit breaks another record, the American economy continues to confound the sceptics. Thanks for that go largely to resilient consumers and booming productivity

FOR several years now, economists have been watching American consumers with the same mixture of astonishment and anticipation that wide-eyed fans bring to endurance sports: amazing that they’ve made it so far, but how much longer can they go on like this? Strong consumer spending has underpinned America’s robust economic expansion, even as most other industrialised countries have struggled to get their economies back on track. But consumers have been running down savings to sustain this level of spending; the personal savings rate has actually been negative since June. Booming house prices and low interest rates have enabled consumers to take on more debt without suffering much, but with interest rates now climbing, Americans have begun to feel the pinch. Data from the Federal Reserve show that the percentage of household disposable income devoted to servicing debt was a record 16.6% in the third quarter.

Yet the consumers soldier on. Figures released by the Census Bureau on Tuesday December 13th show that retail sales in November, when the Christmas shopping season starts, were up by 0.3% from October, and 6.3% higher than a year earlier. And on Wednesday, the Department of Commerce announced that imports of oil, cars and consumer goods caused the already gaping trade deficit to balloon even further in October, to a record $68.9 billion (see chart). This surprised economists, who had been expecting the deficit to fall slightly as oil prices subsided from their September highs.

It seems unlikely that consumers will have the stamina to keep this up much longer. While petrol prices have fallen back, crude oil is still trading above $60 a barrel, pinching the pockets of fuel-guzzling Americans. Long-term interest rates are currently kept low by foreign central banks buying dollars—and dollar-denominated assets—to keep their currencies cheap. But those mountains of dollars are creating ever bigger problems for the banks, which may have to cut back soon. That would bring on a sharp increase in American interest rates, which in turn would deflate the housing bubble—if it doesn’t shrivel on its own first. There is growing evidence that this may be happening already.

Economists have long been warning of these risks. But someone plainly forgot to tell the economy that it was supposed to be in trouble. According to figures released earlier this month, GDP grew at an annualised rate of 4.3% in the third quarter, revised upward from a preliminary estimate of 3.8% issued in November. That is despite the ravages wrought by hurricanes in August and September, which not only destroyed a major port city but closed down a big chunk of the energy industry.

Better still, last week the Department of Labour reported that over the same period, productivity had grown by 4.7%. And payrolls, which barely grew at all in September and October, finally posted a respectable 215,000 new jobs in November. Little surprise, then, that George Bush is once again talking up the economic data, and seeking to claim some of the credit for his policies, particularly tax cuts.

Sadly for Mr Bush, it appears someone also forgot to tell the voters that the economy is doing well. Polls show approval ratings for the economy on a par with the rest of his dismal numbers. Employment has generally lagged behind the economy. Payroll employment troughed in May 2003, 18 months after the recession ended. Since then, the economy has added 4.5m jobs—and unemployment currently hovers around 5%. But wage growth has been sluggish, implying a soft jobs market.

The economy is also posing some difficult questions for the Fed, whose monetary-policy committee met on Tuesday. The central bank has steadily raised short-term interest rates over the past year and a half to fight off inflation. But where does it want to stop? As expected, the Tuesday meeting delivered another 25 basis-point increase in the benchmark interest rate, to 4.25%, but the language of the accompanying statement contained both hawkish and dovish signals. Unlike previous statements, there was no mention of “accommodation”, suggesting that the Fed considers monetary policy to be close to neutral, and will stop tightening soon. But strong wording also indicated that at least one or two more rate increases can be expected before the cycle turns. Nonetheless, the dollar dropped on the news, a decline that grew steeper after Wednesday’s trade figures.

High oil prices may not have translated into slower economic growth yet, but they are creating inflation, which ran well above 4% in September and October. On the other hand, core inflation, which excludes volatile energy and food prices, is still relatively modest. With gasoline dropping back to $2.19 a gallon from nearly $3 in September, fears that high oil prices will feed through into the broader price index have eased. And the stellar productivity figures increase the pace at which the economy can grow without fuelling inflation.

Ben Bernanke, the incoming Fed chairman, will want to be tough, to prove to financial markets that he is serious about keeping prices stable. But if current trends continue, he will not have to be so tough that he causes serious economic pain. Those economists may continue to be astonished for quite some time

    Can America keep it up?, E, 14.12.2005, http://www.economist.com/agenda/displaystory.cfm?story_id=5320706

Consumer Prices

Fell by Largest Amount Since 1949

December 15, 2005
By THE ASSOCIATED PRESS
Filed at 11:16 a.m. ET
The New York Times

WASHINGTON (AP) -- A record plunge in the cost of gasoline pushed consumer prices down by the largest amount in 56 years in November while industrial production posted a solid gain.

The new government reports Thursday provided further evidence that the economy is shaking off the blows delivered by a string of devastating hurricanes. But analysts cautioned that the huge drop in consumer prices was overstating the improvement in inflation.

The Labor Department report showed the Consumer Price Index fell by 0.6 percent last month, the biggest decline since a 0.9 percent fall in July 1949. It reflected a record fall in gasoline prices, which have been retreating since they surged to above $3 per gallon right after Katrina hit.

Meanwhile, the Federal Reserve said output at the nation's factories, mines and utilities rose a solid 0.7 percent last month following a 1.3 percent rise in October. Industrial output had plunged by 1.6 percent in September, reflecting widespread shutdowns of oil refineries, chemical plants and other factories along the Gulf Coast.

The decline in consumer prices was better than the 0.4 percent drop that analysts had been expecting. Outside of the volatile food and energy categories, so-called core prices were up 0.2 percent, matching the October increase. Both months showed a pickup in core prices from benign readings of 0.1 percent in the previous five months.

Brian Bethune, senior economist at forecasting firm Global Insight, said that he expected to see further increases in core inflation in coming months, reflecting the cumulative effect of higher energy costs.

''Continued pressure on the core index over the next several months will keep the Federal Reserve vigilant on the inflation watch,'' he said, predicting further Fed rate hikes in January and March. The Fed raised rates for a 13th time on Tuesday.

The rise in industrial production reflected a 0.3 percent increase in manufacturing and a 4.8 percent surge in the category that covers oil and gas production, which is recovering as Gulf Coast wells and refineries get back on line. Output at the nation's utilities was up 0.3 percent.

In other economic news, the number of people who have lost jobs because of the string of devastating Gulf Coast hurricanes climbed to 602,200 last week. That gain reflected a rise of 1,500 jobless applications linked to Katrina and Rita and an additional 1,000 claims linked to Wilma, which hit Florida in October.

Overall, the number filing new claims for unemployment benefits totaled 329,000 last week, up slightly from the 328,000 claims filed the week before but still at a level consistent with an improving labor market.

The huge 0.6 percent fall in consumer prices last month followed a small 0.2 percent October increase which had come after a 1.2 percent surge in September, which had been the biggest monthly gain in a quarter-century.

In early September, the nationwide price for gasoline briefly hit a record high above $3 per gallon. But since that time pump prices have been falling, including an additional decline of around 42 cents in November, as Gulf Coast production has resumed.

That decline pushed gasoline prices down by a record 16 percent in the CPI report, a drop that had followed a 4.5 percent decline in October.

Overall, energy prices were down a record 8 percent, reflecting not only the fall in gasoline but also declines of 6.1 percent for home heating oil and 0.5 percent for natural gas. Those drops still left prices higher than a year ago and homeowners will feel the pinch when they pay heating bills this winter.

Food costs were up 0.3 percent in November, with the prices of beef, pork and poultry all up. Fresh fruit prices also rose but the cost of vegetables dropped.

Through the first 11 months of this year, inflation at the consumer level has been rising at an annual rate of 3.8 percent, compared to an increase for all of 2004 of 3.3 percent. The slight acceleration in overall inflation reflected faster increases in energy prices, which are up at an annual rate of 21.7 percent so far this year compared to a rise of 16.6 percent for all of 2004.

Excluding food and energy, prices this year are up 2.1 percent, a well-behaved performance which was a slight improvement over the 2.2 percent rise in so-called core prices last year.

More than half of the 0.2 percent increase in core inflation last month was attributed to a 1.3 percent rise in the cost of hotel and motel rooms.

Medical care was up 0.6 percent last month, driven higher by rising drug costs, while new car prices and airline ticket prices both fell.

Consumer Prices Fell by Largest Amount Since 1949, NYT, 15.12.2005, http://www.nytimes.com/aponline/business/AP-Economy.html

Trade gap widens unexpectedly,

hits record

Wed Dec 14, 2005 9:10 AM ET
Reuters
By Andrea Hopkins

WASHINGTON (Reuters) - The U.S. trade deficit widened unexpectedly in October to a record $68.9 billion despite a drop in the cost of imported oil, as the deficits with China, Canada, the European Union, Mexico and OPEC all hit records, government data showed on Wednesday.

Economists had expected the trade gap to shrink in October to $63.0 billion, and its surprising growth suggests fourth-quarter economic growth will likely be even weaker than first thought.

"The trade deficit certainly came in worse than expected," said Bob Lynch, currency analyst at HSBC in New York. "It was largely energy influenced but I don't think that should detract from the overall deterioration of the external balance. The dollar was already on the defensive this week and this data only reinforces that bias."

The dollar extended losses against the euro and yen, while U.S. Treasury debt prices remained higher after the report.

The Commerce Department said the deficit widened 4.4 percent from September after growing 11.9 percent the previous month.

Imports of goods and services rose 2.7 percent to a record $176.4 billion while exports increased a smaller 1.7 percent to $107.5 billion, the second-highest on record.

While oil import prices declined in the month to an average $56.29 per barrel, the volume of crude imports surged 9.3 percent, driving the value to $17.1 billion, the second-highest on record. Imports of energy-related petroleum products, a wider category that includes propane and butane, hit a record $26.2 billion.

Imports of industrial supplies and materials and automotive vehicles and parts rose to records in October. Imports of consumer goods also climbed, while foods, feeds and beverages and capital goods fell.

Analysts said the strong pace of imports reflect robust business investment and hurricane rebuilding efforts.

"On the import side, the strength is from a rebuilding of inventories from companies and a general expansion of the U.S. economy. Petroleum imports increased, adding to the import bills," said Lynn Reaser, chief economist at Banc of America Capital Management in Boston.

Trade through hurricane-damaged Gulf ports picked up in October. Imports rose $3.6 billion while exports climbed $1.3 billion, on a non-seasonally adjusted basis.

The politically sensitive trade deficit with China widened 2.1 percent to a record $20.5 billion as imports from that country rose 4.8 percent to $24.4 billion.

The increase in the deficit with China came despite a 10.9 percent drop in textile imports in October. Washington and Beijing reached a deal last month to rein in China's surging clothing and textile exports to the United States through 2008. Textile imports from China are up 47.6 percent so far in 2005 compared to 2004.

The deficit with Canada, Mexico, the European Union and OPEC countries also widened to record levels.

Ten months into the year, the overall trade deficit reached $598.3 billion, just $19.3 billion shy of the record $617.6 billion deficit set in 2004.

IMPORT PRICES FALL

More up-to-date information on the economy showed U.S. import prices eased last month, which could help ease the trade deficit in November. The Labor Department said import prices fell an unexpectedly large 1.7 percent last month on the back of the biggest decline in the cost of petroleum imports in almost a year.

Petroleum import prices skidded 8 percent in November, the biggest drop since last December, and nonpetroleum import prices slipped 0.2 percent, the first fall since July.

The report marked an easing in the inflation pressures stemming from high energy costs and may also have reflected a rise in the value of the dollar.

It also showed a surprise drop in prices received by U.S. exporters.

U.S. export prices fell 0.9 percent, the largest drop since December 1991, as nonagricultural export prices posted their biggest decline on records dating to January 1989 and agricultural export prices decreased for the third time in the past four months.

Wall Street economists had expected import costs to fall just 0.5 percent in November, with export prices up 0.2 percent. The department did, however, revise October's import price figure upward to a gain of 0.3 percent from the previously reported 0.3 percent fall.

(Additional reporting by Tim Ahmann in Washington)

    Trade gap widens unexpectedly, hits record, R, 14.12.2005, http://today.reuters.com/business/newsarticle.aspx?type=ousiv&storyID=2005-12-14T141025Z_01_KWA450949_RTRIDST_0_BUSINESSPRO-ECONOMY-DC.XML

Newly Bankrupt

Raking In Piles of Credit Offers

December 11, 2005
The New York Times
By TIMOTHY EGAN

TACOMA, Wash., Dec. 9 - As one of more than two million Americans who rushed to a courthouse this year to file for bankruptcy before a tough new law took effect, Laura Fogle is glad for her chance at a fresh start. A nurse and single mother of two, she blames her use of credit cards after cancer surgery for falling into deep debt.

Ms. Fogle is broke, and may not seem to be the kind of person to whom banks would want to offer credit cards. But she said she had no sooner filed for bankruptcy, and sworn off plastic, than she was hit with a flurry of solicitations from major banks.

"Every day, I get at least two or three new credit card offers - Citibank, MasterCard, you name it - they want to give me a credit card, at pretty high interest rates," said Ms. Fogle, who is 41 and lives here. "I've got a stack of these things on my table. It's tempting, but I've sworn them off."

If it seems odd to Ms. Fogle that banks would want to lend money to the newly bankrupt, it is no mystery to the financial community, which charges some of the highest interest rates to these newly available customers.

Under the new law, which the banking industry spent more than $100 million lobbying for, they may be even more attractive because it makes it harder for them to escape new credit card debt and extends to eight years from six the time before which they could liquidate their debts through bankruptcy again.

"The theory is that people who have just declared bankruptcy are a good credit risk because their old debts are clean and now they won't be able to get a new discharge for eight years," said John D. Penn, president of the American Bankruptcy Institute, a nonprofit clearinghouse for information on the subject.

Credit card companies have long solicited bankrupt people, on a calculated risk that income from the higher interest rates and late fees paid by those who are trying to get their credit back will outweigh the losses from those who fail to make payments altogether. The companies also directed many of those customers toward so-called secured cards, which require a cash deposit.

But the new law makes for an even better gamble for lenders, consumer groups say. It not only makes bankrupt debtors wait eight years to clear their debts again, but it also requires many of those who do go back into bankruptcy to pay previous credit card bills that may have been excused under the old law.

Bankers defend the practice of soliciting the newly bankrupt, saying it gives them a chance to build a new credit history.

"The people coming out of bankruptcy need an opportunity to get back on their feet," said Laura Fisher, a spokeswoman for the American Bankers Association, the industry's largest trade group.

"If you take away the opportunity to get credit," Ms. Fisher said, "it's like taking away the want ads from a job-seeker."

But consumer groups say the new law has put millions of Americans at risk of being in a continuous debt loop through their credit cards. And while the banks have taken a short-term financial hit because of the new filings - leaving banks holding the bills - they will benefit in the long run because the new law makes it much easier to make money on people who live near the edge every month on their credit cards, some consumer groups say.

Credit cards are the most profitable part of the banking industry, with late fees and high interest charges helping make them so. Last year, more than five billion solicitations for new cards were sent out, nearly double the number from eight years ago.

"The whole business model of the credit card industry is built around outstanding debt," said Ellen Schloemer, a researcher at the Center for Responsible Lending, a nonprofit group that tracks lower-middle-class financial issues, based in Durham, N.C. "This is the only industry that calls people deadbeats when they pay all their bills every month."

Among bankers, policies differ in how to approach the newly bankrupt. Bank of America does not give credit cards to people who have filed for debt protection, said Betty Riess, a bank spokeswoman.

However, because there is a delay between a bankruptcy petition filing and a credit report showing the debt consolidation, the bank may still be sending offers to someone who has filed, Ms. Riess said.

Citigroup, whose credit card offers have piled up in Ms. Fogle's home, has its own internal credit rating system that does not always rule out the bankrupt.

"We use direct mail to find many of our new customers," said Samuel Wang, a Citigroup spokesman, in an e-mail message.

As of the end of October, 2,010,567 people had filed for bankruptcy protection this year, a modern record, federal bankruptcy court officials say. In just over two weeks of October, more than 600,000 people filed petitions, leading to long lines outside courthouses across the country, and clerks swamped with petitions.

The debtors were rushing to beat an Oct. 17 deadline when the most sweeping changes in bankruptcy law in a quarter-century took effect.

Most of the newly bankrupt filed under Chapter 7 of the code, which allows them to expunge many unsecured debts. The new law makes it much more difficult to erase debt; it increases the cost of filing and adds requirements like credit counseling.

The banking industry worked in Congress for nearly 10 years to pass the law, and critics say it gave them everything they wanted to increase profits from people prone to debt. Bankers say the law makes it harder for people to abuse the system.

"The hidden agenda of those who wrote the new law was death by a thousand cuts," said Travis B. Plunkett, legislative director of the Consumer Federation of America, which opposed the law.

Opponents, including a group of bankruptcy law professors, argued that the changes gave the banking industry too much of an advantage.

"In our view, the fundamental change over the last 10 years has been the way that credit is marketed to consumers," the bankruptcy professors wrote in a letter to the Senate this year.

"Credit card lenders have become more aggressive in marketing their products, and a large, profitable market has emerged in subprime lending. Increased risk is part of the business model."

Ms. Fogle would seem to be a perfect candidate for long-term debt to credit cards. Though she works regularly as a nurse at Good Samaritan Hospital here, earning $16 an hour, and has health insurance, she said a health emergency pushed her into debt. Last year, she needed surgery for uterine cancer, which caused her to lose days of work and income. Credit cards made up the difference, and soon she was $15,000 in debt.

She filed for protection of the courts in late August, and her debts are now removed. "My plan is to lay off credit cards until I can really afford them," she said. "But it's tempting. I would like to have one in case of emergency."

Ms. Fogle said she was trying to stick to a disciplined new pattern with her finances. "I try to buy only what I need, instead of what I want," she said. "But there are small things that I want - a latte, every now and then, taking my kids to the movies."

The credit card offers inform Ms. Fogle that she is pre-approved, but at higher interest rates - 23 percent or more, which is typical for offers to the newly bankrupt.

"It's obvious what they're trying to do here - start people off with a fresh credit card at a much higher rate than before," she said.

Nearly 60 percent of all credit card holders, about 85 million Americans, carry a balance - that is, they do not pay off the entire debt, according to the bankers' association.

The average debt among those with a monthly balance is $9,000, said the Consumer Federation of America in a recent report. Paying just the monthly minimum - usually 2 percent of the balance - on $9,000, it would take 42 years to pay off the debt, at a typical 18 percent interest rate, the consumer group calculated. Since that study, some banks have raised the minimum to 4 percent.

Opponents of the new bankruptcy law argue that it did not put new restrictions on credit solicitation and will turn the courts and the government into private collection agencies for bankers.

While bankruptcy filings increased 17 percent over the last eight years, credit card profits went up 163 percent to $30.2 billion, according to a report filed with the House Judiciary Committee by opponents of the new law.

"In the eight years since the credit industry first came to Congress seeking relief from the rising rate of personal bankruptcy filings, the extent of credit has not been curtailed, nor have the industry profits been diminished due to bankruptcy filings," Congressional opponents wrote in their report while the bill was under consideration.

Americans owe $800 billion in credit card debt, more than triple the amount from 1989, and a 31 percent increase from five years ago, according to a recent report, "The Plastic Safety Net," by the Center for Responsible Lending, and Demos, a research group based in New York.

The study found that a third of low- and middle-income American households used credit cards for basic expenses - rent, groceries and utilities - in any 4 of the last 12 months.

Those with the worst credit card debt were people ages 50 to 64, who owed $9,124 on average, the study found.

"The people I'm seeing right now, they're mostly middle or lower middle class," said Jack Burtch, a bankruptcy lawyer in Washington State. "In a good many of the cases, credit cards are what got them into trouble. And I don't see how credit cards will get them out of it."

Newly Bankrupt Raking In Piles of Credit Offers, NYT, 11.12.2005, http://www.nytimes.com/2005/12/11/national/11credit.html

Productivity Rise Is Fastest in Two Years

By VIKAS BAJAJ
The New York Times
December 6, 2005

Productivity rose at its fastest pace in two years in the third quarter, far more quickly than earlier predicted, as output rose and labor costs fell, the government reported today.

The report eased some economists' fears of rising inflation.

As a measure of how much the economy produced per hour of work, business productivity rose 4.7 percent outside the farming sector from July to September, compared with an earlier reading of 4.1 percent, the Labor Department reported. Real hourly compensation, which adjusts wages and other benefits for inflation, fell 1.4 percent, unchanged from previous estimates.

Also today, the Commerce Department said factor orders bounced back in October, rising 2.2 percent, from a decline of 1.4 percent the month before. And the National Association of Realtors said an index that measures pending home sales for existing homes fell 3.2 percent after a decrease of 1 percent in September, providing more evidence of a housing slowdown.

The Labor Department's report indicates that the productivity boom of the last several years may have more steam left in it than Alan Greenspan, the Federal Reserve chairman, and other economists believed. Typically, productivity tends to slow in the latter parts of an economic expansion because businesses have wrung out most of the efficiencies from their operations and have to compete more aggressively for a thinning supply of employees.

For workers, however, the report shows that the rise in energy costs wiped away any advantage they received in the form of higher wages, at least for a time. Before adjusting for inflation, hourly compensation rose 3.7 percent.

Unit labor costs, which gauge how much compensation it takes to produce one unit of output, fell 1 percent in the quarter, twice as much as previously expected.

From 2000 to 2004, productivity gains averaged 3.28 percent a year, far higher than the average of 2.14 percent for the last 45 years. Those gains are one of the mains reasons cited by Mr. Greenspan and other policy makers for the ability of the United States economy to achieve long periods of growth in recent years without causing significant inflation.

Compared with the third quarter of 2004, productivity in the most recent quarter grew at a rate of 3.1 percent, real hourly compensation rose 1.2 percent and unit labor costs were up 1.8 percent, much closer to the recent trend.

Some economists noted that the report allays concerns about broader inflation outside of the recent spike in energy prices, which in the case of gasoline prices have already fallen back down.

"What this tells us is in terms of the fundamentals the road looks fine," said Brian Bethune, an economist at Global Insight, a research firm. "It doesn't look like there are a lot of hazards on the way."

Investors appeared to agree with that assessment; the Standard & Poor's 500-stock index was up 9.60 points, to 1,271.68, around midday.

Mr. Bethune said a tamer inflation outlook should prompt the Federal Reserve to stop raising short-term interest rates soon after Ben S. Bernanke takes over from Mr. Greenspan as chairman in February. The benchmark federal funds rate on overnight bank loans sits at 4 percent today, and analysts expect it will reach 4.75 before the Fed stops.

Productivity Rise Is Fastest in Two Years, NYT, 6.12.2005, http://www.nytimes.com/2005/12/06/business/06cnd-econ.html

Jobs Surged Last Month

in Rebound From Storm

December 3, 2005
The New York Times
By LOUIS UCHITELLE

The nation's employers added 215,000 jobs last month, the government reported yesterday, as the economy rebounded from the devastating impact of Hurricane Katrina.

The strong November number, the biggest monthly increase since July, suggested that employers are scrambling for workers in response to a strongly growing economy. But on the fourth anniversary of the recovery from the 2001 recession, job growth is still below the levels achieved in previous recoveries, and the unemployment rate has been stuck at 5 percent nearly every month since June.

"We're back on track after the ill effects of the hurricanes," said Mark Zandi, chief economist at Economy.com, referring to Wilma, which hit southern Florida in late October, as well as Katrina in late August. "But it is also fair to conclude that global competition and corporate layoffs are weighing on job growth."

In releasing the employment data for November, the Bureau of Labor Statistics reported that at least 900,000 people age 16 or older - one-third of them black - evacuated in August because of Hurricane Katrina and that half had returned by last month. Most apparently came back to jobs.

The unemployment rate among the returnees was 12.5 percent, while 27.8 percent of those still living elsewhere were unemployed. Hundreds of thousands of other evacuees simply dropped out of the labor force, not even seeking a job, which is necessary to be listed as unemployed.

The November surge in hiring was widespread, covering nearly two-thirds of the nation's industries, the best showing since May of last year. It came after two months in which only 61,000 new jobs were created, because of the hurricanes, and it dispelled concerns that hiring would continue to lag despite robust economic growth.

The White House reacted quickly. "The economy is in good shape," President Bush said in a Rose Garden appearance shortly after the bureau released the November numbers. He declared that the future of the economy is "as bright as it's been in a long time." [Page B4.]

Stock and bond prices barely moved yesterday. That was mainly because "this was one of those rare occasions when forecasters accurately anticipated the numbers," said Stuart G. Hoffman, chief economist at the PNC Bank Corporation, including himself among the accurate forecasters.

The latest employment numbers seemed to track the overall economy. The gross domestic product grew at a 4.3 percent annual rate in the third quarter, the government said on Tuesday. Much of that strength was in construction and in business spending on computers and electronics, and that is where hiring was strong in November.

"This is very much the type of job report you would expect coming off a strong quarter," said Jared Bernstein, a senior labor economist at the Economic Policy Institute, a research organization.

Construction jobs grew by 37,000, on top of 35,000 in October, much of it related to housing, but also to the rebuilding of roads and utilities after Hurricane Katrina, Kathleen P. Utgoff, commissioner of the Bureau of Labor Statistics, said.

Manufacturers added 11,000 jobs in November, on top of 15,000 in October, the first back-to-back monthly gain in more than a year for a sector that has lost 1.6 million jobs since the start of the recovery in November 2001.

The big manufacturing gains last month were in the production of wood products, in computers and electronic equipment, and in food processing, reflecting perhaps a rebound in a sector hurt by Hurricane Katrina.

The stepped-up business investment was evident in job growth in the service sector, in a category called professional and business services, which added 29,000 white-collar jobs, including 5,000 in computer design as well as 6,000 in architectural services.

The biggest gain, however - 39,000 jobs - was in food services, mainly restaurants and bars, which "got whacked by the hurricane and its impact on tourism," as Nigel Gault, chief domestic economist at Global Insight, put it.

"We are now at the point where Hurricane Katrina's effects are adding to job creation rather than detracting from it," Mr. Gault said.

Some economists attributed the hiring rebound to the recent decline in energy prices, particularly the price of gasoline, which they said freed money for spending and improved the confidence of both consumers and corporate executives.

Whatever the reasons, job creation is still off the pace of earlier recoveries going back to the 1960's. Four years into the current one, employment has grown 2.6 percent. That compares with 7.6 percent for the first four years of the early 1990's recovery, the second weakest, Mr. Bernstein reported.

The increased hiring was reflected in the average hourly wage of production workers, who constitute 80 percent of the work force. It rose by 3 cents, to $16.32, on top of a 10-cent rise in October. The latest increase brought the year-over-year wage gain to 3.2 percent.

That is less than the inflation rate of 4.3 percent, as measured by the Consumer Price Index through October, but it "suggests that workers are taking advantage of a tighter labor market to secure wage gains," said Dean Baker, co-director of the Center for Economic and Policy Research.

The worst news in the November report concerned blacks. Their unemployment rate jumped to 10.6 percent from 9.1 percent in October. That might reverse itself in December. But on top of the national setback, unemployment surged among blacks who evacuated the New Orleans area to escape Hurricane Katrina and have not yet returned.

That rate was 47 percent in November compared with 13 percent for whites who have not gone back.

Jobs Surged Last Month in Rebound From Storm, NYT, 3.12.2005, http://www.nytimes.com/2005/12/03/business/03econ.html

Greenspan Expressed Concern

Over Worsening U.S. Budget Deficit

December 2, 2005
By THE ASSOCIATED PRESS
Filed at 1:23 p.m. ET
The New York Times

WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan expressed concerns Friday that America's failure to deal with its exploding budget defict and worldwide efforts to erect trade barriers could disrupt the global economy.

Speaking at an economic conference in London, Greenspan said so far the United States has had no problem financing its current account trade deficit, which last year hit a record $668 billion, because of the flexibility of the American economy.

But he said such flexibility would be threatened by rising protectionism, which would increase barriers to the flow of goods and investments across the U.S. border. He also worried about the harm that could be done if the United States and other nations do not get their budget deficits under control.

''If ... the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested and is compounded by a protectionist reversal of globalization, the adjustment process could be quite painful for the world economy,'' Greenspan said in his prepared remarks, which were released in Washington.

The London speech represented the second warning Greenspan delivered Friday on the threats posed by rising budget deficits. In an earlier speech, he had said that there could be severe consequences for the U.S. economy if policy-makers do not attack a federal budget deficit that is projected to soar with baby boomer retirements.

In that taped speech to a conference in Philadelphia, Greenspan said that Congress would likely have to make ''significant adjustments'' in reducing benefits for future retirees. He said it appears the country has promised more than it can afford to deliver in Social Security and especially Medicare payments, given that health care costs have been exploding.

Greenspan, who will step down as Fed chairman after 18 1/2 years on Jan. 31, used both of the Friday speeches to return to themes he has been emphasizing over the past two years.

He said that the looming retirement of 78 million baby boomers will put severe strains on the country's finances and without changes could disrupt the economy by driving up interest rates from the increased government borrowing.

And he said that the nation's huge trade deficits can be financed as long as the country does not jeopardize the flexibility of the U.S. economy in such ways as increasing protectionist barriers.

''If the currently disturbing drift toward protectionism is contained and markets remain sufficiently flexible,'' Greenspan said, then a rise in Americans' savings rates and other adjustments needed to reduce the U.S. trade deficit should proceed without problems.

Greenspan was in London to attend his final meeting of finance ministers and central bank president of the world's seven largest economies.

In addition to their normal discussions of the global economy, the Group of Seven finance officials were going to honor Greenspan with a retirement party, including a dinner Friday night, during the meetings.

In the Philadelphia speech, which had been taped earlier, Greenspan urged Congress to act quickly so that the baby boomers will have time to adjust to potential benefit cuts.

Greenspan did not outline what benefit cuts should be considered but in the past he has endorsed proposals such as raising the age at which retirees can draw full Social Security benefits.

''The likelihood of growing deficits in the unified budget is of especially great concern because the deficits would drain a correspondingly growing volume of real resources from private capital formation and cast an ever-larger shadow over the growth of living standards,'' Greenspan said.

''In the end,'' he warned, ''the consequences for the U.S. economy of doing nothing could be severe.''

In a brief mention of current economic conditions, Greenspan said that the economy had delivered a ''solid performance'' so far in 2005. ''And despite the disruptions of hurricanes Katrina, Rita and Wilma, economic activity appears to be expanding at a reasonably good pace as we head into 2006,'' he said.

However, he said the positive short-term outlook for the economy was occurring against a backdrop of concern about the government's long-term fiscal health.

''Our budget deficit will substantially worsen in the coming years unless major deficit-reduction actions are taken,'' Greenspan said, echoing comments he made most recently in an appearance Nov. 3 before Congress' Joint Economic Committee.

He again called for Congress to reinstate budget rules that expired in 2002 that required any future increases in benefit payments or cuts in taxes to be paid for by cutting government spending in other areas -- or by increasing taxes.

Greenspan Expressed Concern Over Worsening U.S. Budget Deficit, NYT, 2.12.2005, http://www.nytimes.com/aponline/business/AP-Greenspan.html

Economy Shows

Some Resilience in Quarter

December 1, 2005
By BLOOMBERG NEWS
The New York Times

The economy grew at a 4.3 percent annual rate from July through September, the Commerce Department reported yesterday, the fastest since the first quarter of last year and evidence of resilience in the face of hurricanes and record energy costs.

The revised figure for third-quarter gross domestic product, the value of all goods and services produced in the United States, is higher than economists had forecast and higher than the 3.8 percent initially estimated by the government. Growth was 3.3 percent in the second quarter.

"The economy is booming," said Mike Englund, chief economist at Action Economics in Boulder, Colo. "As much as people may have been concerned about gas prices, consumers took the hit and now gas prices are falling."

The report also showed that the index excluding food and energy, a measure closely watched by Fed policy makers, rose at a 1.2 percent annual rate - the slowest pace since the second quarter of 2003. The government reported a second-quarter increase of 1.7 percent.

In addition, the Federal Reserve said yesterday in its regional survey of businesses that retailers were optimistic about the holiday shopping season. At the same time, the report showed that consumer prices "remained stable or experienced generally modest increases."

A strengthening economy caused wages to rise and made it harder for some companies to find workers, according to the report known as the beige book, a regional survey of businesses by the 12 Fed district banks.

The residential real estate market slowed in many areas, while higher energy costs pushed up prices for construction materials and transportation, the Fed said.

According to another report, manufacturing in the Chicago area remained robust for a third consecutive month in November. A survey of executives by the National Association of Purchasing Management in Chicago fell to 61.7 from 62.9 in October. Readings higher than 50 signal growth and the November figure exceeded the 60.5 average for this year. A measure of order backlogs was the highest since July 1994.

According to the Commerce Department, the gross domestic product rose to $11.2 trillion when annualized and adjusted for inflation. Without adjustment, the economy grew at a 7.4 percent annual pace, to $12.6 trillion, for the quarter.

The government's personal consumption expenditures price index, a measure of prices tied to consumer spending, rose 3.6 percent, compared with a 3.7 percent rise reported last month and a 3.3 percent second-quarter gain.

Business inventories fell at a $13.4 billion annual rate, compared with the $16.6 billion downward pace previously reported.

Consumer spending, which accounts for about 70 percent of the economy, expanded at a 4.2 percent annual pace, compared with the 3.9 percent estimated in October and the 3.4 percent pace for the second quarter. Economists had expected consumer spending to set a 3.9 percent annual pace.

    Economy Shows Some Resilience in Quarter, NYT, 1.12.2005, http://www.nytimes.com/2005/12/01/business/01econ.html

Sales Climb at Retailers on Internet

November 30, 2005
The New York Times
By MICHAEL BARBARO

Shoppers, intent on skipping crowded stores and 6 a.m. squabbles over the last bargain laptop, spent 26 percent more money online over the Thanksgiving weekend than they did in 2004, according to figures released yesterday.

Consumers spent $925 million on retail Web sites from Thursday to Sunday, nudging online purchases since Nov. 1 up 24 percent over 2004, according to comScore Networks, a market research firm.

And after a long weekend of pointing and clicking, millions kept right on shopping at work Monday, beginning at 9 a.m., retailers said, validating the holiday shopping season's latest buzz phrase, Cyber Monday.

VisaUSA said that online buying by its cardholders on Monday rose 26 percent, to $505 million from the same day last year.

Little was accomplished at the office as the number of workers who shopped online jumped to 15 million from 11.1 million in 2004.

Cyber Monday "is actually taking place," said Tom Burke, vice president of BarnesandNoble.com, which, along with Staples, said sales on Monday were the biggest this holiday season. "We are just finally putting a moniker on it."

Holiday traffic peaked on Monday, reaching 27.7 million visits, compared with 23.9 million on Friday, and 21 million on Saturday and Sunday, Nielsen Net Ratings, a marketing research firm, found.

The robust start to the online shopping season buoyed retailers, many of which are still fretting over a lackluster weekend in their brick and mortar stores. ShopperTrak, which measures purchases at stores in malls but not online, said sales over the weekend rose a slim 0.4 percent from last year.

It appears the Web snatched at least part of that mall business. Diana Gonzalez, a 22-year-old legal secretary on Wall Street, said scenes of long lines from the day after Thanksgiving "made it unappealing to go to the stores."

So Ms. Gonzalez waited until Monday, when she spent "most of the eight-hour work day" searching for an MP3 player and "dropping hints" to family members by forwarding links to her favorite products.

The most popular sites were eBay, with 11.7 million visitors Monday; Amazon, with 5.6 million; and Wal-Mart, with 3 million.

The name Cyber Monday grew out of the observation that millions of otherwise productive working Americans, fresh off a Thanksgiving weekend of window shopping, were returning to high-speed Internet connections at work on Monday and buying what they liked.

This year, retailers said they saw a significant spike in the number of visits that translated into sales. That shift, they said, indicated that consumers had researched products and prices at brick and mortar stores before heading into the office to make their purchase online.

"People knew what they wanted," said Georgianne K. Brown, executive vice president for marketing at Baby Universe.com That site, which sells gear for babies like toys, strollers and car seats, had a sales increase of 50 percent over the same day last year, even as the amount of time customers spent on the site fell by an average of one minute, she said.

Raul Vazquez, vice president for marketing at Walmart.com, said that "customers were more decisive in their purchases." Three million shoppers visited walmart.com on Monday, a strong showing, but not enough to overtake the Friday after Thanksgiving, when five million clicked onto the site.

To encourage buying, online retailers dangled the same kind of incentives used in their stores. BabyCenter offered a 10 percent discount on select items; CompUSA, free shipping, and Godiva, a gift with purchase. Dozens of stores also sent e-mail messages to customers dangling special deals Monday morning.

Lawrence Cohen, a 32-year-old investment banker from Cedarhurst, N.Y., flipped on his computer Monday and searched for Amazing Amanda, the popular talking doll, for his daughter. Toys "R" Us did not have it. Neither did Amazon.

So he called his wife, who drove to a nearby store, where she snapped up the store's last Amazing Amanda.

So it still pays to shop offline?

"In this situation, yes," Mr. Cohen said.

Ann Farmer contributed reporting for this article.

    Sales Climb at Retailers on Internet, NYT, 30.11.2005, http://www.nytimes.com/2005/11/30/technology/30cyber.html

November 29, 2005

Upbeat Signs Hold Cautions for the Future

NYT        30.11.2005

http://www.nytimes.com/2005/11/30/business/30econ.html

Economic Memo

Upbeat Signs Hold Cautions for the Future

November 30, 2005
The New York Times
By VIKAS BAJAJ

Gasoline is cheaper than it was before Hurricane Katrina slammed into New Orleans. Consumer confidence jumped last month and new- home sales hit a record. The stock market has been rising. Even the nation's beleaguered factories seem headed for a happy holiday season.

By most measures, the economy appears to be doing fine. No, scratch that, it appears to be booming.

But as always with the United States economy, it is not quite that simple.

For every encouraging sign, there is an explanation. Consumer confidence is bouncing back from what were arguably some of its worst readings in years. Gasoline prices - the national average is now $2.15, according to the Energy Information Administration - have fallen because higher prices held down demand and Gulf Coast supplies have been slowly restored.

The latest reading on home sales, released yesterday, contradicts most recent measures of housing activity, which generally indicate a slowdown. And, yes, manufacturers' fortunes are on the mend, but few besides airplane makers are celebrating.

It all means the economy is likely to end the year with a splash. But before you splurge on a new car, consider this: Many economists do not expect the party to continue, especially if the Federal Reserve continues taking the punchbowl away and raises interest rates. That could further slow the housing market, damp consumer spending and crimp corporate profits.

Indeed, the Organization for Economic Cooperation and Development said yesterday that 2005 growth would most likely settle at 3.6 percent, down from 4.2 percent in 2004. The organization also forecast 2006 growth at 3.5 percent, but other economists think that may be too optimistic.

"The two major concerns are the extent of slowdown in housing and how it can feed into growth and consumer spending," said Joshua Shapiro, chief United States economist at Maria Fiorini Ramirez Inc., a research firm in New York.

Many analysts, including Mr. Shapiro, say a housing slowdown is already under way. Along with rising interest rates and anemic job growth, any such drop-off could sap the economy next year - by just how much is still subject to debate.

Americans have taken advantage of historically low mortgage rates to buy homes, refinance existing loans and borrow money for renovations or other household needs, all of them important and substantial spurs to spending, Mr. Shapiro said. 00

While neither he nor others expect that activity to dry up, even a modest tapering off could knock growth down a peg or two. Mr. Shapiro, for one, says growth could drop from 3.5 percent in 2005 to 3.2 percent in 2006.

The average interest rate on a 30-year, fixed-rate mortgage was 6.28 percent last week, up from a low of 5.53 percent in June, according to Freddie Mac, the housing-finance company.

The Commerce Department said yesterday that new-home sales jumped 13 percent in October, to an annual pace of 1.42 million, a record. But that contradicted earlier data showing sales of existing homes slowing, construction activity easing, mortgage applications falling and confidence declining among home builders.

Two possible explanations for the record pace of new-home sales are that buyers see a final opportunity to purchase a new house before interest rates go up again, and they are taking advantage of sales incentives that some home builders are now offering. But not everyone agrees.

"I basically have a wait-and-see attitude with some healthy suspicion about this report," said David F. Seiders, chief economist at the National Association of Home Builders. "Either there is something that all of those other reports are not telling us, or this will get revised."

In another seemingly upbeat report, the Conference Board, a research group supported by business, said consumer confidence jumped 16 percent. Still, it is below the pre-Katrina level. And the Commerce Department said orders for durable goods - big-ticket items that last more than three years - jumped 3.4 percent, but most of that increase was concentrated in military and commercial planes.

In addition to housing, the Federal Reserve and businesses will have a big part in setting the economy's pace next year - the Fed through interest rates and companies by their hiring decisions.

There is great speculation about how much more the Fed, where Ben S. Bernanke is expected to succeed Alan Greenspan as chairman in February, will raise its benchmark short-term rate, now at 4 percent, before Mr. Greenspan leaves.

There is also the question of whether Mr. Bernanke will feel compelled to prove his inflation-fighting mettle by nudging them higher still. The question may seem like splitting hairs, especially when the debate is whether the rate will be 4.5 percent or 4.75 percent, but it certainly has investors' attention.

The recent rally in the bond market, which is considered a haven in periods of economic stress, indicates that many investors are betting that the Fed "is likely to overshoot in its tightening," Ethan S. Harris, chief United States economist at Lehman Brothers, wrote in a note to clients.

A harder question, and one that could greatly influence policy makers, is whether business will pick up any of the slack if consumers are no longer spending as much.

So far the evidence is inconclusive.

After adding an average of 202,000 jobs a month for the first seven months of the year, companies hit a slow patch late in the summer. In August, businesses created just 148,000 jobs; that was followed by a decline of 8,000 in September after Katrina. And just when economists expected a big bounce back in October, the Labor Department reported a net increase of just 56,000 jobs.

Analysts are eagerly awaiting the Labor Department's next jobs report, out Friday, and hoping the recent weakness will prove temporary. But they worry that job creation may turn out to be disappointing because of deep-rooted concerns about thinning profit margins, caused by, among other things, high energy costs.

"This is only a fear that has sprung up recently," said Mr. Shapiro of Maria Fiorini Ramirez.

Economists expect 220,000 new jobs will be created, according to a survey by Bloomberg News.

Another hard-to-measure factor that could have a positive bearing on both businesses and consumers is rebuilding activity in the Gulf Coast and parts of Florida. The reconstruction that accompanies major disasters has been known to have a greater economic impact than the initial series of shocks.

Many analysts say a housing-led slowdown is likely to be delayed until the second half of 2006 because billions of dollars that the federal government and insurance companies are starting to pump into hurricane-affected regions will make up for softer consumer spending.

"That is going to push up production activity into the first half of the year," said Michael C. Fratantoni, an economist at the Mortgage Bankers Association, which expects 3.7 percent economic growth in 2006, up from 3.6 percent in 2005. "The second half of the year, we see somewhat of a drop-off."

Upbeat Signs Hold Cautions for the Future, NYT, 30.11.2005, http://www.nytimes.com/2005/11/30/business/30econ.html

$430 a Square Foot, for Air?

Only in New York Real Estate

November 30, 2005
The New York Times
By CHARLES V. BAGLI

The price of air has gone up in Manhattan.

It's now $430 a square foot.

Two New York City developers have agreed to pay a record-setting amount for "air rights" so they can build a 35-story apartment tower with views of Central Park from the high floors.

The brothers William L. and Arthur W. Zeckendorf are set to pay $430 per square foot - more than twice the going rate - for unused air rights over Christ Church and the Grolier Club at Park Avenue and East 60th Street in Midtown Manhattan. Christ Church will collect more than $30 million; Grolier will get about $7 million.

Air rights allow developers to build taller by buying the space over low-scale buildings and transferring it (on paper, if not in reality) to spaces over adjacent buildings. Although such transfers occur elsewhere in the country, the prices do not run as high as they do in Manhattan, which generally provides developers with one option: up.

The rights will be transferred to a site west of the Grolier Club on East 60th Street, where the Zeckendorfs and their partners own three tenements that are to be demolished.

If it all goes as planned, the developers will be able to build a taller tower than the zoning ordinarily allows. In a separate deal with Christ Church, the tower will also have a coveted Park Avenue address, despite its location on 60th Street.

The Zeckendorfs are third-generation developers. The brothers disagree with experts who warn about a bursting housing bubble, at least when it comes to what the Zeckendorfs call "super prime" areas.

"We want to concentrate on the very high-end market where we see tremendous strength and a limited inventory," Arthur Zeckendorf said.

M. Meyers Mermel, a real estate broker and a trustee of Christ Church who helped negotiate the deal, said the money would help sustain the Methodist church's programs. Carolyn L. Smith, president of the Grolier Club, a storied society of bibliophiles, confirmed that her club voted on Monday night to approve the deal.

Previously, New York appraisers say that the high end for the price of air hovered around $200 a square foot.

"Nothing shocks me anymore," said Daniel F. Sciannameo, an appraiser at the Albert Valuation Group. "This market is absolutely crazy."

$430 a Square Foot, for Air? Only in New York Real Estate, NYT, 30.11.2005, http://www.nytimes.com/2005/11/30/nyregion/30air.html

Sales of New Homes

Stay Strong in October,

Setting Record

November 29, 2005
The New York Times
By VIKAS BAJAJ

Sales of new homes surged to a record in October, the government reported today, bucking recent reports of a slowdown in the roaring housing market.

New home sales jumped 13 percent last month, to an annual pace of 1.42 million, and selling prices increased modestly, the Commerce Department said. The report comes a day after the National Association of Realtors said existing home sales fell 2.7 percent last month and inventories rose to their highest levels in more than two years.

The positive housing news was accompanied today by two reports that showed a sharp rise in consumer confidence this month and higher orders for big-ticket goods like planes in October.

New home sales, which account for about 15 percent of the overall housing market, tend to increase and decrease more erratically from month to month than the far bigger base of existing home sales. Also, the Commerce Department records sales when contracts are signed, rather than when transactions are closed as the Realtors association does for existing home sales.

Economists had expected new home sales to dip to 1.2 million, according to a survey by Bloomberg News, and analysts cautioned that last month's surge might not be an indicator of a larger trend. Experts noted that the median sales price - half the homes sold for more and half for less - of $231,300 was up just 1.6 percent from September and 0.9 percent from October 2004.

"It's not 100 percent clear where housing really is," said James O'Sullivan, an economist at UBS. "But the weight of the evidence is that it's not as strong as this number on new home sales implies."

Mr. O'Sullivan noted that mortgage applications have fallen in recent months as interest rates have climbed, though they remain close to historic lows. Also, homebuilders are seeing fewer buyers, according to surveys by the National Association of Homebuilders.

New home sales were strongest in the West, where they soared by 46.9 percent, to an annual pace of 457,000, and in the Northeast, where they jumped 43.3 percent, to 86,000. Sales rose by 1.9 percent in the South and fell 9.5 percent in the Midwest.

In other economic news, the Conference Board said that its consumer confidence index surged by 13.7 points, to 98.8, after falling for the previous two months. It credited an improving job outlook and falling gasoline prices, which at an average of $2.16 a gallon are below where they were before Hurricane Katrina struck New Orleans.

"While the index remains below its pre-Katrina levels, the shock of the hurricanes and subsequent leap in gas prices has begun wearing off just in time for the holiday season," Lynn Franco, the board's director of consumer research, said in a statement.

American manufacturers, particularly aircraft makers, also appear to be in better spirits.

The Commerce Department said today that orders for durable goods - or products that last for more than three years - surged by 3.4 percent last month after falling by 2 percent in September. Economists had been expecting an increase of 1.6 percent, according to a survey by Bloomberg News.

Orders for defense aircraft and parts more than doubled to $7 billion in October, after falling by 2.7 percent in September. Commercial plane orders saw a dramatic 50.4 percent increase, to $11 billion, after dropping by 41.5 percent the month before. Some of the rise was related to the end of a machinists' strike, which hurt production at Boeing in September.

Excluding the transportation sector, however, orders rose just 0.3 percent, far slower than the 1 percent increase forecast by analysts. Orders excluding transportation dropped 0.2 percent in September, a figure the Commerce Department revised today from the 1 percent decline it had reported earlier.

Economists have been predicting a rebound in manufacturing activity because purchasing managers have appeared more optimistic in recent surveys after an slowdown earlier this year. Also, the nation's overall industrial output bounced back sharply in October after falling in the aftermath of the Gulf Coast hurricanes.

    Sales of New Homes Stay Strong in October, Setting Record, NYT, 29.11.2005, http://www.nytimes.com/2005/11/29/business/29cnd-econ.html

Housing Market

Showing Signs of Slowdown,

Report Says

November 28, 2005
The New York Times
By VIKAS BAJAJ

Sales of existing homes fell in October from their second-highest level ever the month before and the inventory of houses and condominiums on the market rose to their highest level in more than two years, an industry trade group reported today.

In another indication of a modest slowdown in the booming housing market, the National Association of Realtors said that home sales fell to an annual pace of 7.09 million from 7.29 million in September. In October, there were enough homes for sale to keep the market supplied for 4.9 months, the most since June 2003.

Median prices, half the homes sold for more and half for less, rose to $218,000 last month from $213,000 in September and were 16.6 percent higher than a year ago.

Over all, the report echoes the slowdown seen in other measures of the housing market, like home construction, new home prices and mortgage applications. Economists and real estate industry officials have said the slowdown appears to be tied to a rise in interest rates and, in some hot markets, worries that home prices had risen too fast because of speculation.

The report also appears to confirm the anecdotal reports from real estate agents and others that homes were taking longer to sell, a fact that portends a decline in sales and prices in the coming months, economists said. The inventory increase in condominiums and co-ops, of which there was a 5.5 month supply in October, up from 5.1 months in September, has been particularly sharp in recent months. There was a 4.8 month supply of single-family homes, up from 4.5 months.

"The key number in this report, in our view, is the rise in the supply of homes for sale," Ian Shepherdson, chief United States economist at High Frequency Economics, wrote in a note to clients. "There are now 14.4 percent more homes for sale than a year ago, while actual sales are up just 3.3 percent. With mortgage demand slipping a bit and supply rising, price gains cannot continue at their current pace."

Home sales were weakest in the Northeast, where they dropped 7.4 percent, and strongest in the West, where they were down by 1.2 percent. Sales in the Midwest fell 1.9 percent and dropped 1.8 percent in the South.

The Realtors association characterized the sales drop as a healthy cooling of a heated market.

"Housing activity has peaked and is coming down a bit, and we expect further cooling in the coming months," David Lereah, the group's chief economist said in a statement. "We feel confident that housing is landing softly as rates continue to rise."

The average 30-year mortgages had an interest rate of 6.28 percent last week, down from 6.37 percent the week before but up from 5.77 percent at the start of the year, according to Freddie Mac.

Housing Market Showing Signs of Slowdown, Report Says, NYT, 28.11.2005, http://www.nytimes.com/2005/11/28/business/28cnd-econ.html

Electronics win in Black Friday sales

Mon Nov 28, 2005 12:23 PM ET
Reuters
By Emily Kaiser

CHICAGO (Reuters) - Electronics retailers and Wal-Mart Stores Inc. were the early winners while some apparel chains faltered as the U.S. holiday shopping season started with a mixed Thanksgiving weekend, analysts said on Monday.

Consumers once again proved to be resilient in the face of steep energy prices and rising interest rates, although aggressive holiday discounts were the biggest draw, suggesting that household budgets remain tight.

Overall sales were either spectacular or flat depending on the survey, but analysts said Wal-Mart's aggressive advertising and discounts clearly paid off with better-than-expected day-after-Thanksgiving results.

Research firm ShopperTrak estimated that sales dipped 0.5 percent to $13.4 billion on Friday and Saturday. But the National Retail Federation (NRF) trade group said sales for the weekend jumped 22 percent to $27.8 billion.

ShopperTrak uses its own proprietary in-store monitoring devices as well as information from retailers to determine how much people spent in stores. The NRF surveyed about 4,200 consumers regarding their in-store and online purchases to come up with its figure, which may help explain the discrepancy.

Analysts listed video games, high-definition televisions and digital cameras among the weekend's hottest sellers, which bodes well for Best Buy Co. Inc. and others.

Apparel demand appeared to be mixed, however, with teen-oriented retailer Aeropostale Inc. getting a lot of attention for offering 50 percent off everything in the store while others, including Gap Inc., struggled to find the right fashions.

Investors dumped apparel and department store stocks, pushing the Standard & Poor's retail index down about 1 percent in early trading.

WAL-MART WINS, WHO LOSES?

"Estimates of the strength of this holiday season's kick-off ranged from cool to incredibly strong," CIBC World Markets analyst Peter Benedict wrote in a note to clients. "One thing for sure -- Wal-Mart started strong with both its Wal-Mart division and Sam's division exceeding plan."

Wal-Mart, the world's biggest retailer, said sales were better than it had expected on the Friday after Thanksgiving -- known as "Black Friday" because it traditionally marks the point when retailers turn a profit for the year.

It was not clear whether Wal-Mart's strength came at the expense of rivals, and the conflicting surveys on holiday weekend sales only clouded the picture.

Target Corp., the No. 2 U.S. discounter, warned earlier this month that November sales would miss its forecast, which analysts blamed at least in part on Wal-Mart's aggressive holiday campaign.

No. 3 discount chain Kmart, which acquired Sears, Roebuck & Co. earlier this year to form Sears Holdings Corp. said electronics, jewelry and toys were among its best sellers over the holiday weekend. Sears does not release monthly sales, but is expected to report third-quarter results next week.

"We're definitely pleased with the weekend's results," Kmart spokeswoman Colleen Cleary said.

Despite the mixed reports, analysts agreed that discounts were key to getting shoppers into stores. Goldman Sachs research showed that some 78 percent of retailers had increased their promotions from last year.

Electronics were among the big sellers with standouts including the Xbox 360 video game console, LCD televisions and digital cameras.

Credit Suisse First Boston analyst Gary Balter advised clients to buy shares of Best Buy and Circuit City Stores Inc. on any weakness in the next couple of weeks, saying the current quarter was shaping up to be a strong one.

Apparel demand was mixed as chains including Gap have acknowledged that their merchandise was unpopular. Analysts said current fashion offerings seemed uninspiring compared with last year, when pink was hot.

Still, Merrill Lynch analyst Mark Friedman said clothing retailers seemed to be sticking to their markdown plans so far, and there was no evidence of last-minute panic discounts.

"Aeropostale's 50 percent off the entire store seemed to be the most effective" promotion, he said in a research note.

Electronics win in Black Friday sales, R, 28.11.2005,
http://today.reuters.com/news/NewsArticle.aspx?type=businessNews&storyID=2005-11-28T172316Z_01_KWA857914_RTRUKOC_0_US-RETAIL-SALES.xml

Economic View

Help Wanted:

Academic Economists, Pro-Bush

November 27, 2005
The New York Times
By DANIEL ALTMAN

IT'S no secret that hurricanes and wars have swamped the economic agenda that George W. Bush planned for his second term. In the commotion, however, one fact has gone largely unnoticed: much of Washington's expert economic team has disappeared.

The chairmanship of the Council of Economic Advisers will soon be vacant, and two spots on the Federal Reserve Board that were recently filled by academic economists already are. There is no assistant secretary of the Treasury for tax policy, and the director's chair at the Congressional Budget Office, currently occupied by Douglas J. Holtz-Eakin, will soon be empty, too.

The White House and Congress need as many as five academic economists of high caliber, and it's not obvious where they will come from. The Republican Party may be facing something of a shallow bench.

"Bush's reputation in at least the academic community is about as low as you can imagine," said William A. Niskanen, who was a member of the council during President Ronald Reagan's first term and is now chairman of the Cato Institute, a libertarian research group. "A lot of people would not be willing to give up a good tenured position for a position in the White House."

Back in 2003, the choice of N. Gregory Mankiw, a Harvard professor, to head the council initially provoked some wonderment from economists. He had condemned supporters of some Reagan-era tax cuts as "charlatans and cranks" in the first edition of his basic economics textbook, and he had suggested replacing part of the income tax with higher taxes on gasoline - a nonstarter in this White House. But it's possible that the administration had few other options.

"It has been true, typically speaking, that Republican administrations have found it harder to find senior, more prominent academic economists for the C.E.A. members and chairman than have Democratic administrations," said Michael L. Mussa, a senior fellow at the Institute for International Economics, a nonpartisan research group in Washington, who was a member of the council during President Reagan's second term.

Mr. Mussa explained that the problem was partly one of specializations. "In the economics profession, on the microeconomic and regulatory side, there you find a substantial number of Republicans," he said, "but macroeconomists tend to lean a bit more to the Democratic side, on average."

And politics do matter for the appointments. "If you have written publicly in strong opposition to the current administration, they will be less likely to be interested in you," said Kristin J. Forbes, a veteran of the council who is now an associate professor at the Sloan School of Management at the Massachusetts Institute of Technology. "On the Council of Economic Advisers, the priority is a very good economist who supports most of the president's economic policies."

The same is likely to be true for the positions at the Treasury, the Fed and the Congressional Budget Office. Two of the three spots being vacated by academic economists - Ben S. Bernanke and Edward M. Gramlich at the Fed, and Mr. Holtz-Eakin at the budget office - could well be filled with more of the same, Mr. Mussa said. (Mr. Bernanke is expected to become the Fed chairman; Mr. Gramlich has returned to the academic world, and Mr. Holtz-Eakin will join the Council on Foreign Relations.) Mr. Mussa added, however, that the economist at the budget office should have experience in policy and management.

That's something that many academics lack. "Generally, economists are not very slick," said Alicia H. Munnell, a professor of management sciences at Boston College who served on the Council of Economic Advisers when Bill Clinton was president and spent years working in the Federal Reserve system.

Economists may not want to be political, either, she added. The reason has to do with incentives. "Everybody wants to go back into academia and be respected, so you don't want to say anything too foolish that people are going to laugh at you afterward," Professor Munnell explained.

Professor Forbes recounted that she and her colleagues on the council had pledged never to support policies that they didn't believe in themselves. Nevertheless, the role of the council's chair can take on a decidedly political tilt. That much was clear when Professor Mankiw, the last chairman to serve for more than a few months, appeared before the Joint Economic Committee of Congress in February of last year.

At times Professor Mankiw, who has returned to Harvard, sounded more like Scott McClellan, the White House press secretary, than an economic adviser. "The president is very focused on putting people back to work, at creating jobs," he said. "The president has said that he wants to make the tax cuts permanent. He believes that is important for economic growth."

Once he even caught himself, but the result ended up the same: "The president has - we've worked with Congress in the past to extend unemployment benefits. The president will continue with Congress on that issue."

Quite a few economists might have a hard time acting as the president's mouthpiece today. Plenty of academics, even some who have supported Republicans in the past, have condemned the White House's current policies. In particular, the enormous federal deficit has elicited ire from both left and right.

"There are a number of Republicans, both the right-wingers and the moderates, who are very uncomfortable about the deficits, and particularly about the spending that we saw in the first four years," Mr. Mussa said.

Dismay about the war in Iraq could also prompt many academics to turn down the White House on principle, Mr. Niskanen said.

One hint that the labor pool is drying up may be in the ages of some recent appointees. Professor Forbes was only 33 when she joined the council in 2003. Katherine Baicker and Matthew J. Slaughter, two academics confirmed as members this month by the Senate, are 34 and 36, respectively. Before taking up their new posts, both were associate professors, as Ms. Forbes is now - not full professors, like the vast majority of their predecessors.

Mr. Niskanen suggested that this change could stem from a perceived drop in the prestige of the council. "Bush has centralized policy decision-making much more than any president in years," he said. "The Council of Economic Advisers has been somewhat bypassed."

Mr. Niskanen said that there were now fewer meetings between members of the council and members of the president's cabinet than there were during his term. The council's offices have even been moved to a building farther from the White House.

ALL of these tensions may have resulted in a sort of Catch-22. The president's inability to move forward with much of his second-term economic agenda - dealing with Social Security, the tax system, immigration and tort rules - may have dulled economists' eagerness to work with him. Yet he may need them in order to start the wheels moving.

"John Snow has talked about turning the tax commission report into legislation," Mr. Niskanen said of the Treasury secretary, "but he does not have the skills on board to do that."

Professor Forbes, who also spent time at the Treasury, said that working in Washington demanded heavy sacrifices and large commitments of time. Her colleague there, Harvey S. Rosen of Princeton, added that spouses were often unwilling to move for short-term stints.

But Professor Munnell praised the experience as "extraordinary," adding that it also had a tendency to change the outlook of academic economists: "Once you taste the real world, it's really hard to ignore it."

    Help Wanted: Academic Economists, Pro-Bush, NYT, 27.11.2005, http://www.nytimes.com/2005/11/27/business/yourmoney/27view.html

Who's in the Corner Office?

November 27, 2005
The New York Times
By DAVID LEONHARDT

ON some levels, corporate America can learn a lot about diversity from the nation's political elite.

When, in 1967, Thurgood Marshall became the first African-American to be nominated to the Supreme Court, Franklin D. Raines was just finishing high school in Seattle. More than three decades would pass before Mr. Raines, at Fannie Mae, became the first black chief executive of a Fortune 500 company.

Today, the corner offices of the nation's largest companies are dominated by white men in a way that few other parts of society still are. Only a handful of women hold prominent chief executive jobs, while 81 women are in Congress. There are more female senators from Maine (two) than there are women running Fortune 100 companies (zero).

Yet the full picture is not as simple as all this suggests. In ways less obvious than race and gender, the corporate elite has become less elite and more diverse over the last decade or two, while its counterpart in Washington has become more homogeneous.

They may be paid like kings, but C.E.O.'s seem to come from a wider variety of economic backgrounds - with growing numbers rising from humble beginnings and fewer having attended Ivy League colleges - than they once did. Many spent just a few years, or none, at their companies before becoming the boss. Being younger than 50 no longer rules out someone for the top job.

"There's much less emphasis on the cosmetic aspects and the cultural aspects and the refinement aspects, as opposed to the down-and-dirty, get-the-job-done aspect," said Gerard R. Roche, an executive recruiter for 41 years, whose firm, Heidrick & Struggles, has recently conducted chief-executive searches for Coca-Cola, Disney and Nike.

Wall Street, for example, was once seen as a club for the well heeled; today it seems much more open. James E. Cayne, the chief executive of Bear Stearns, didn't graduate from college. E. Stanley O'Neal of Merrill Lynch, one of just three black chief executives of large companies, went to Kettering University in Flint, Mich. Kenneth D. Lewis of Bank of America graduated from Georgia State.

With the glaring exceptions of sex and skin color, in other words, the mold for a big-company C.E.O. has been broken, and there isn't a new one to take its place. The story is different in Washington, where political leaders are richer, older, more likely to have gone to an expensive college and more likely to have first held another elected office than they were in the past. So in some ways, corporate leaders now mirror the rest of society more closely than elected leaders do.

IT is almost as if two separate meritocracies have sprung up. The top of the corporate one remains largely closed to women and minorities. But it also rewards skills - like communication, real-world smarts and a common touch, executives say - that require little in the way of a privileged background.

"I think of the people at Whirlpool who failed over the years, and it rarely had to do with their technical skills," said David R. Whitwam, the company's former chief, who worked his way through the University of Wisconsin emptying bedpans as a hospital orderly. "It was usually their leadership capabilities."

The rules for advancement in the political system are different. They bear some resemblance to those of the college-application process that many 17-year-olds are now sweating. Women and minorities, both racial and religious, succeed far more often than they did in the past. The Senate now has almost twice as many Catholics - 24 - as it did in 1980, and more Jews and Mormons, too. (Data on the religious background of C.E.O.'s isn't readily accessible.)

But whether the goal is winning a seat in Congress or a spot in Harvard's freshman class, wealth appears to be more important than it once was. And the types of analytical skills that rarely make the difference at Whirlpool help determine both admissions decisions and Supreme Court nominations.

Not since Richard Nixon in 1969 appointed Warren Burger, who had attended the University of Minnesota, has the court had a new justice who attended a public university for college or graduate school. Since then, every new justice has held a degree from one of four universities: Harvard, Yale, Stanford or the University of Chicago. Judge Samuel A. Alito Jr., who is preparing for confirmation hearings, graduated from Yale Law School and Princeton.

In fact, the changing educational backgrounds of the corporate and political elite may best sum up the trends. In 1980, about 23 percent of chief executives at big companies had attended one of the eight Ivy League colleges, while only 13 percent of senators had. The boardroom, not surprisingly, was a more elite place than the halls of democracy.

Today, the two groups have switched places. The number of senators educated at an Ivy college has risen to 16. Among C.E.O.'s in the Standard & Poor's 500, the share has fallen by more than half, to 10 percent. The University of Wisconsin has tied Harvard as the most common alma mater for top executives, according to Spencer Stuart, an executive search firm.

This is particularly telling because students at Ivy colleges have changed relatively little - in economic terms - over the last few generations. The same is true at other elite colleges like Duke, Stanford and Williams. If anything, the percentage of them coming from middle-class and working-class households has fallen slightly in recent years, recent research shows. At Harvard, for instance, the median family income was about $150,000 last year, financial aid forms suggest.

So the colleges offer a rare way to examine the shifting class backgrounds of the nation's elites. The changes seem to say something about both the business world and the colleges themselves.

At a time when the economy was not so brutally competitive, when there was less global trade and when technology had not ripped down the barriers between industries, companies could afford to draw from a relatively narrow talent pool, executives and recruiters say. That isn't the case today.

"Businesses are more complex. God knows they're much larger than they ever were before," said William W. McGuire, chief executive of UnitedHealth Group and a University of Texas graduate. An Ivy League degree "opens doors," Mr. McGuire said. "I'm just not sure that opening doors is tantamount to success in today's world."

The change is not limited to the United States. The number of top executives in Britain who graduated from its most exclusive colleges, Oxford and Cambridge, declined from 1992 to the early part of this decade, The Economist found.

Thomas J. Neff, chairman of United States operations at Spencer Stuart, said he could not remember the last time a client doing an executive search had asked him to focus on graduates of particular colleges.

"I think if a C.E.O. or a board member went to an Ivy League school, there might be a bias. But it's small," Mr. Neff said. "When it comes to senior level appointments, it's 'What have you done for me lately?' "

Executives who attended public universities also say that these campuses bear a closer resemblance to the rest of society than those dominated by the upper middle class. Many of the executives went on to business school at Harvard or Stanford, but they say that their undergraduate experience also helped prepare them for the business world.

"When you look at today's C.E.O., he or she has to be very comfortable talking about the business with folks on the factory floor or customers who are increasingly diverse," said Robert A. Eckert, the chief executive of Mattel and a University of Arizona graduate. "While private schools have the advantage of smaller classes and the financial wherewithal to attract the world's greatest faculty, the public schools offer the diversity and variety that go along with the size they have there."

The high-income students at the Ivies and similar colleges, meanwhile, have been showing less interest in corporate America. First, the antiwar movement of the 1960's and 70's made a business career unappealing to many. About the same time, colleges were changing admissions policies to give more weight to academic skills, said Jerome Karabel, a fellow at the Longview Institute and author of "The Chosen," a history of college admissions.

Capitalism is more popular on elite campuses now than it once was, but many students there still do not see corporate jobs as the best match for their skills. Instead, many turn to law, consulting or hedge-fund management. These fields tend to value skills at which the students have long excelled - skills that can often be measured objectively. Minorities have done better in some of these professions than in corporate America. The pay in these fields also tends to be higher for younger employees, and a career rise can happen quickly.

"The most able students interested in business are increasingly finding their way into entrepreneurial activity, into financial services, into high tech and into consulting," Lawrence H. Summers, Harvard's president, said. "Joining large organizations is no longer the major choice for students interested in business."

Frederick W. Smith, C.E.O. of FedEx, attended Yale in the mid-60's and recalls being surrounded by sons of coal and steel executives. In recent years, he has spoken with Yale's president, Richard Levin, about encouraging students to join corporations. Students "are more interested in Wall Street rather than in manufacturing, transportation and so forth," Mr. Smith said. "They're much more interested in government. They are much more interested in the media."

Not only are they interested in government, but running for office often requires wealth that is common among Ivy League students and alumni. Many candidates spend hundreds of thousands of dollars on their campaigns, and sometimes much more.

Voters now seem to care less about a candidate's background - economic, religious or otherwise - and more about his positions, said Brandice Canes-Wrone, a politics professor at Princeton. The best example may be the willingness of evangelical Protestants to vote for conservative Catholics. But the rise of wealthy politicians from elite schools makes the point, too.

There are almost as many millionaires in the Senate as nonmillionaires, according to Roll Call, a newspaper covering Capitol Hill. Since 1988, 9 of the 10 major-party nominees for president have held a degree from Harvard or Yale, the only exception being Bob Dole. In the previous 24 years, only 1 of the 12 nominees went to Harvard or Yale. That was Gerald R. Ford, who received a law degree from Yale.

"By traditional measures, we have an elected and appointed elite that is more representative of the American public," said Larry J. Sabato, of the Center for Politics at the University of Virginia. "Yet in many ways they're less representative."

Of course, it is hard to argue that C.E.O.'s are representative of the public when almost all of them come from the roughly one-third of Americans who are male and white.

"Clearly, it's an area where there's work to do," Mr. Eckert of Mattel said. "We haven't yet achieved the diversity of our work force and our customer base."

For all the differences between the corporate and political elite, this may be the biggest similarity: both seem to be missing out on a lot of potential talent.

Luke Kummer contributed research for this article.

    Who's in the Corner Office?, NYT, 27.11.2005, http://www.nytimes.com/2005/11/27/business/yourmoney/27ceo.html

Pension Officers Putting Billions

Into Hedge Funds

November 27, 2005
The New York Times
By MARY WILLIAMS WALSH and RIVA D. ATLAS

Faced with growing numbers of retirees, pension plans are pouring billions into hedge funds, the secretive and lightly regulated investment partnerships that once managed money only for wealthy individuals and elite institutions.

The plans and other large institutions are expected to invest as much as $300 billion in hedge funds by 2008, up from just $5 billion a decade ago, according to a study by the Bank of New York and Casey Quirk & Associates, a consulting firm. Pension funds account for roughly 40 percent of all institutional money. This month, the investment council that oversees the New Jersey state employees pension fund said that the fund would invest $600 million in hedge funds, less than 1 percent of its assets, over the next several months.

While most pension plans have modest stakes in hedge funds, others have invested more than 20 percent of their assets. Weyerhaeuser, the paper company, has 39 percent of its pension fund's assets in hedge funds. In Congress, there has been a push for amendments that would make it easier for hedge funds to manage even more pension money, without having to comply with the federal law that governs company pensions.

Pension officials who have been shaken by market downturns and persistent deficits are attracted by hedge funds' promise of richer, or more consistent, returns. But the trend has caused some consultants and academics to voice cautions. They question whether hedge funds, with risks that are hard to measure, are appropriate for pension funds, whose sole purpose, by law, is to pay out predetermined benefits to retired workers.

Those benefits are considered so crucial that they are guaranteed: corporate pension failures are covered by the Pension Benefit Guaranty Corporation, a government agency, while pension failures by governments are covered by state and local taxpayers. Given that the benefits are paid out on a set schedule, critics wonder whether it makes sense to rely on investments whose returns are hard to predict, managed by private partnerships that disclose little about their operations and charge some of the highest fees on Wall Street.

"It's very inappropriate when the company is offering a pension plan that is guaranteed by the federal government," said Zvi Bodie, a professor of finance and economics at Boston University who writes and lectures on sophisticated investment techniques and is enthusiastic about hedge funds in other contexts.

Hedge funds make large, sophisticated investments based on the premise that by swimming outside the currents of the markets, often betting against conventional wisdom, they can outperform other investments. Hedge funds became famous in the 1990's, when managers like Michael Steinhardt and George Soros made huge swashbuckling bets that sometimes produced returns of 30 percent or more.

More recently, hedge funds have made headlines when they ran into trouble: Long-Term Capital Management, a hedge fund whose principals included two Nobel Prize-winning economists, nearly collapsed in 1998; and this summer, Bayou Group, a $450 million hedge fund based in Connecticut, shut down after most of its money disappeared. Its two officers have pleaded guilty to fraud charges. Hedge funds are meant to be only for wealthy, sophisticated investors so regulators have not monitored them as they have stocks or mutual funds, although there have been calls for increased regulation.

The news of splashy gains and scandals may not accurately reflect a business that in many ways has become more conservative as a result of the flood of pension fund money. To attract that money, many hedge fund managers emphasize stability.

Among pension fund managers, however, "the whole mentality has changed," said Jane Buchan, chief executive of Pacific Alternative Asset Management, which manages $7.5 billion in funds that invest in hedge funds, primarily for large pension funds. "They are saying, we need returns and we will be aggressive about getting them. They just don't want any downturns."

One of the first pensions to start working with hedge funds is also the nation's biggest corporate pension fund, the $90 billion General Motors fund. It started with a small test investment in 1999 and increased it to about $2 billion in 2003, said Jerry Dubrowski, a G.M. spokesman.

The company is using hedge funds, along with other unconventional investments, in hopes of getting something close to stock market returns without the market's volatility, Mr. Dubrowski said. To pay out the $6.5 billion G.M. owes to its retirees each year, the pension fund must produce annual returns of a little more than 7 percent. Otherwise, G.M. will have to dip into the fund's principal. At current interest rates, G.M. cannot get those 7 percent returns with bond investments, and if it tries to juice returns by betting on the stock market, it will have to cope with market swings.

"It's really not helpful to have that up-10, down-10" performance, Mr. Dubrowski said. "You want a return that allows you to cover the benefits payments without attacking the capital." It is that kind of consistency that some pension mangers are seeking.

"We are looking for consistently positive returns rather than the absolute highest returns," said Robert Hunkeler, manager of International Paper's $6.8 billion pension plan, which has been invested in hedge funds for around five years.

Most pension funds have modest stakes of less than 5 percent, according to a recent J. P. Morgan survey. Verizon has 3 to 4 percent of its portfolio invested with hedge funds, and is considering adding to its investment, said William F. Heitmann, senior vice president for finance.

The New Jersey state pension fund hopes eventually to raise its total investment in hedge funds to $3 billion as part of a plan to diversify its portfolio, said Orin Kramer, the chairman of the oversight board.

The New Jersey fund has been wrestling with a $30 billion shortfall, after the stock market bubble burst five years ago. "In recent years, conventional stock investments haven't worked," said Mr. Kramer, who is also a hedge fund manager.

Other pension plan managers are far more aggressive. Weyerhaeuser's big position has significant benefits for the company. Accounting rules let companies factor expected pension returns into their operating income; Weyerhaeuser's hedge-fund-laden portfolio allows it to claim expected annual returns of 9.5 percent.

For Weyerhaeuser, each 0.5 percent increase in the expected rate of return is worth an additional $21 million to the company's pretax income this year, according to S.E.C. filings. Weyerhaeuser did not respond to phone inquiries about its hedge fund investments, but said in S.E.C. filings that its actual pension investment returns more than justify its assumption of 9.5 percent.

Weyerhaeuser is not alone: Eli Lilly has about 20 percent in hedge funds and the Pennsylvania state employees' pension fund has 22 percent.

Employees of G.M., Verizon or International Paper will not find any reference to hedge funds in those companies' annual reports, however. In their footnotes, these and other companies drop hints that a sophisticated investor might recognize as a reference to hedge funds, but they do not give the particulars. International Paper's description of its pension asset allocation, for example, breaks it down into "equity securities," "debt securities," "real estate" and "other."

Some companies and governments, like Pennsylvania, make the argument that hedge funds are not really an asset class at all, but an "asset management tool" that does not have to be disclosed as part of the pension fund's allocation to stocks or bonds.

That lack of disclosure has some regulators and pension specialists worried. Labor Department officials, who regulate pension funds, declined to discuss the hedge fund phenomenon, but referred to a 1996 letter the department wrote to the United States controller of the currency.

The letter said that the Labor Department still expected pension officials to exercise prudence when investing in derivatives, a form of trading in which hedge funds often engage. The letter also said pension officials were responsible for understanding and fully vetting their hedge fund investments, and measuring how they might perform - and how they might affect the pension fund - under a variety of conditions.

Susan M. Mangiero, author of "Risk Management," a textbook for pension officials, said she had come across pension executives who had not done that level of analysis. Some did not even know they had derivatives in their portfolios, she said.

"A lot of well-intentioned people don't know they don't know," she said.

In Washington, despite concerns over the health of the nation's pension system, there has been little discussion of the shift of pension funds away from traditional, caretaker investments. Even as Congress has been working to shore up the pension system and strengthen the Pension Benefit Guaranty Corporation, a provision to relax the pension law for hedge funds has been proposed.

The provision would raise the limit on how much pension money a hedge fund can handle before it is deemed a fiduciary under the pension law, which would require it to be more prudent and careful than is required under securities law and would bar some trades entirely. The provision was added to a broad pension bill in the House shortly before the Committee on Education and the Workforce approved the legislation.

Currently a financial institution becomes a pension fiduciary when more than 25 percent of its assets consist of pension money; the bill would raise that to 50 percent. The House bill would also change the definition of "plan assets," so that only corporate pension money would be counted, not pension money from government plans or foreign plans.

These two changes are not in the counterpart Senate pension bill that was recently approved, but they could be added soon during efforts to reconcile the House and Senate pension bills.

Wall Street's interest in overcoming these legal barriers shows the allure of pension money, which tends to stick with an investment strategy and is far less likely to fly out the door the moment the markets turn bad.

"Pension money is the stickiest form of capital," Mr. Kramer of New Jersey noted.

A number of firms have sprung up in recent years to cater to pension funds' interest in hedge fund investment strategies. "We've built our entire business based upon increased demand by pensions and other institutional investors for hedge fund strategies that will allow them to improve the performance of their portfolios," said Philip N. Duff, the co-founder of FrontPoint Partners, a hedge fund firm created four years ago largely to cater to pensions and other institutions.

But the surge of pension money into hedge funds is coming at a time when the returns of many hedge funds have been disappointing, raising questions about whether pensions are arriving at the party late. Hedge funds are up an average of 5.7 percent this year, according to Hedge Fund Research.

Indeed, with the proliferation of hedge funds, there is no guarantee that they will continue to beat the market.

"There is no such thing as a free lunch," said Frank Partnoy, a professor at the University of San Diego law school and a former trader at Morgan Stanley whose clients once included large pension funds.

"And even if there were, nobody is offering it to pension funds."

    Pension Officers Putting Billions Into Hedge Funds, NYT, 26.11.2005, http://www.nytimes.com/2005/11/27/business/yourmoney/27hedge.html

Initial Reports Are Mixed

for Retail's Busiest Day

November 27, 2005
The New York Times
By MICHAEL BARBARO

Two reports measuring consumer spending for Friday, both released last night, painted an unusually muddy portrait of what has become the busiest shopping day of the year.

ShopperTrak, a national survey firm, said sales for the day after Thanksgiving - called Black Friday in the industry because of hopes that it will catapult retailers into the black for the year - fell 0.9 percent over last year, to $8.01 billion.

Visa USA, on the other hand, reported that use of its credit cards had risen 13.9 percent.

Both companies characterized the results as a healthy start to the season, but the wide gap between them raised questions about the strength of the holiday shopping period, which accounts for as much as 25 percent of annual sales for the retail industry.

Merchants are already skittish about the season, worried that higher fuel prices and heating costs will pinch consumer budgets. But several major retailers, including Wal-Mart, Toys R Us and J.C. Penney, reported higher foot traffic in their stores on Friday than on the same day last year.

ShopperTrak, which measures spending at mall-based stores but not discount chains like Wal-Mart or online merchants, speculated that steep discounts may have lowered overall sales for Friday.

"The figure did not dramatically grow, as anticipated," said Bill Martin, a ShopperTrak cofounder. He added that sales for Black Friday last year, which rose 10.8 percent over 2003, made for a tough comparison this year.

Paul Cohen, a vice president at Visa USA, said the jump in cardholder spending on Friday "is a very positive sign for merchants."

Visa found that shoppers spent 24 percent more on electronics this Black Friday - a category ShopperTrak largely overlooks - while purchases at specialty retailers inside the nation's malls rose 16 percent. Consumers, Mr. Cohen said, "are clearly in the spending mood."

Ellen Davis, a spokeswoman for the National Retail Federation, said sales on Black Friday "are not always an indicator of the holiday season," adding that "people went out for the deals on Black Friday and are saving a large part of their holiday shopping for later."

    Initial Reports Are Mixed for Retail's Busiest Day, NYT, 27.11.2005, http://www.nytimes.com/2005/11/27/national/27retail.html

Customers raced into a Wal-Mart in Renton, Wash.,

as the store opened Friday offering deep discounts.

A Wal-Mart executive said

foot traffic in the chain's 3,500 stores suggested sales were strong.

Meghan E. Jones/King County Journal, via Associated Press

November 25, 2005

Dawn Rush Hints at Strong Start to Holiday Sales        NYT        26.11.2005

http://www.nytimes.com/2005/11/26/business/26retail.html

Karen Kats, 54,

shopped early Friday morning at Toys "R" Us in Times Square.

Hiroko Masuike for The New York Times

Initial Reports Are Mixed for Retail's Busiest Day        NYT        27.11.2005

http://www.nytimes.com/2005/11/27/national/27retail.html 

Saks joined in the price-cutting,

but at least one customer looked shopped out.

Photograph: Fred R. Conrad

The New York Times

Initial Reports Are Mixed for Retail's Busiest Day

NYT        27.11.2005

http://www.nytimes.com/2005/11/27/national/27retail.html 

Dawn Rush Hints

at Strong Start to Holiday Sales

November 26, 2005
The New York Times
By MICHAEL BARBARO

At 12:05 a.m. yesterday, moments into the earliest store opening on the busiest shopping day of the year, the beleaguered employees at the CompUSA on 57th Street in Manhattan laid down some ground rules: no more pushing and no more grabbing deeply discounted merchandise out of the hands of other customers.

"Civilized! Civilized!" implored one employee, as he dumped a cardboard box full of computer equipment into the outstretched hands of two dozen shoppers, who nevertheless lunged at one another to secure some of the limited supply of wireless adapters and Internet cards.

"For an outsider, this must seem nuts," confessed Mala Mathur, 25, who emerged from the scrum with a hard drive (regularly $150, on sale for $50). "But for us," she said of her fellow early risers, "it's perfectly natural."

Across the country, millions of Americans mobbed discount stores, raced into suburban malls and swarmed downtown shopping districts in a retail ritual that appeared to set a record for sleep deprivation. [Page C1.]

Merchants, eager to lure large crowds, opened even earlier than last year - by an hour (at Wal-Mart), six hours (at CompUSA) and even a day (at Kmart).

Official tallies of how much people bought yesterday will not be available until Sunday, at the earliest. But initial reports from retail executives, who monitor the day's sales by the hour for clues about the health of the holiday shopping season, suggested a strong start.

"There are definitely more people out there," said John Barbour, the president of Toys "R" Us, which unlocked the doors at more than 100 stores before a scheduled 6 a.m. opening to accommodate larger-than-usual crowds.

Pam Kohn, Wal-Mart's senior vice president for operations for the Southeast, said foot traffic inside the chain's 3,500 stores suggested that "it's going to be a good day" - a relief for the discount giant, which stumbled badly on the same day last year.

Retailers had been fretting about the holiday season, speculating that higher gas and home heating prices, combined with the upheaval wrought by the three hurricanes that swept through the Gulf Coast and Florida, would pinch consumer budgets on what has become the biggest shopping day of the year (a title held, until 2003, by the Saturday before Christmas, according to ShopperTrak, a market research firm).

So to ensure a respectable season, retailers dangled a long list of incentives, from free cordless phones to $20 gift cards with a purchase, all abruptly ending around noon, when less generous discounts kicked in. Even Saks Fifth Avenue joined in: it offered 40 percent off selected Juicy Couture and Kate Spade handbags all morning.

Employees at Old Navy handed out cranberry and vanilla chip breakfast bars to shoppers in San Francisco, while Fortunoff, a jewelry and home furnishings chain in the metropolitan New York area, hired a team of masseurs to rub down customers on beds in the home department.

Stores are putting a greater emphasis on the day after Thanksgiving because they find it strongly influences decisions about where to shop for the rest of the holiday season. Deep discounts, in particular, they say, create the impression that a retailer is offering better values than competitors. "If we don't have the right doorbusters we don't have a good Christmas," said Ron Gregory, district manager for Sears in Chicago.

In Columbus, Ohio, Janet Roads, a 43-year-old public school administrator, said she left the house at dawn to shave a few dollars from the electronics her family covets: an MP3 player for her son and a DVD surround-sound music system for her husband.

In Atlanta, Mesha Mullen, a 23-year-old librarian, recruited six family members to wait in lines outside Target, Best Buy and Wal-Mart. But the plan hit a snag: her sister-in-law did not arrive until 4 a.m., leaving her No. 300 in a line outside of Wal-Mart and unlikely to find any $378 laptops left inside.

"We're all pretty mad about that," Ms. Mullen said.

With the Microsoft Xbox 360 video game system sold out at dozens of chains - "No more Xbox! I repeat, none!," one Toys "R" Us employee shouted all morning - consumers turned to the season's remaining must-have toys: Dora the Explorer, the cartoon character whose line of play kitchens and singing dolls has taken the preschool set by storm; Bratz dolls, whose funky clothes and curvy figures have dislodged Barbie from wish lists; and all things LeapFrog, the educational toy maker, whose computerized pen, called the Fly, has become an unexpected hit.

Top sellers for adults this year include cashmere sweaters and scarves and, as in every year in recent memory, electronics. Four major chains advertised a 15-inch L.C.D. flat-panel television on the covers of their circulars, with each jostling for the lowest price. Circuit City won, offering a Polaroid model for $187.99, a penny less than Target.

Craig Johnson, president of Customer Growth Partners, a retail consulting firm, said he watched all morning as consumers carted the bargain TV sets out of Wal-Mart, Best Buy and BJ's Wholesale Club stores. The prices, he said, have finally dipped below the "magic price points" (like $200 for the 15-inch L.C.D.) that have kept the technology out of reach of middle-income consumers.

Dave Perron, executive vice president for merchandising at Staples, said "electronics and digital have been the big sellers." A 19-inch Samsung L.C.D. computer monitor for $199 and a Hewlett-Packard digital camera for $78 "have done extremely well," he said.

The upbeat assessments of Black Friday, so-called because it traditionally was the day merchants turned a profit for the year, contrast with the more restrained predictions that came earlier in the season.

Pollsters, who surveyed thousands of Americans before Thanksgiving, reported that shoppers were "gloomy" and "anxious." One analysis found that even the wealthy felt "less rich" because of higher gas and home-heating costs.

But gas prices have fallen, the biggest heating bills will not arrive until January and Americans are buying - enough so that the National Retail Federation raised its sales forecast for November and December. It now expects a performance that is 6 percent better than 2004, up from a 5 percent prediction back in September.

To be sure, retail prognosticators have a mixed record when it comes to the holidays. Most of them sharply underestimated sales in 2001, after the Sept. 11 terrorists attacks, and overestimated them in 2002, in what appeared to be an overcorrection for the year before.

Janet Gonzalez, a 31-year-old mother of two who lives in Brooklyn, said gas prices "have taken their toll, especially with two cars." She estimates she saved at least $40 at Toys "R" Us yesterday by taking advantage of a well-advertised early-morning deal: a $79 Nintendo Game Boy that included a free copy of the film "Shrek 2" and a free Shrek-themed video game.

Duane Rawlins, a 27-year-old data entry processor who stopped into the Filene's department store in downtown Boston, said he was on "a much stricter budget this year" because of higher fuel costs. "My nieces and nephews will probably get fewer presents, maybe 5 instead of 10."

But those budgets may prove hard to trim. In New Jersey, Hope Johnson, 32, gave herself $150 to buy four Cabbage Patch Kids, for her daughters and nieces, and a 20-inch flat-screen television, for her 13-year-old son. But her shopping list grew as she walked the aisles of the Wal-Mart in Secaucus, N.J., absorbing two Walt Disney Cinderella Deluxe Dress Up sets and a Star Wars Electronic Light Saber.

Preparations for Black Friday, which begins days and sometimes weeks, in advance, have become more sophisticated than ever. Debbie and Tom Hogle, who live in Gahanna, Ohio, drew up a plan of attack on paper with three columns, one for each child. The list, along with circulars from Wal-Mart and Kohl's, was secured on a clipboard as they shopped. "We have a serious game plan," said Ms. Hogle, 45.

But even some of the best-laid plans were foiled yesterday.

Kevin Scott, 19, arrived at a Best Buy in Atlanta by 4 a.m. and took his place near the front of the line. Noticing few competitors, he ducked into his car to warm up. "I turned around, and I don't know if they got off a bus or something but 70 to 80 people rushed the door," he recalled. As a result, he was too far back to snap up the bargain laptop that had drawn him to the store. Dejected, he joined the line at a nearby Target.

In Union Square in San Francisco, Elizabeth Perez, a 16-year-old high school student, searched the discount racks at Macy's for her favorite brand name fashions: Baby Phat, Rocawear and Ecko Red. Though she had little luck finding what she wanted, Ms. Perez said her Black Friday outing came with one big advantage this year: a shopping allowance from her mother. "Last year she only gave me cash," Ms. Perez said. "This year I have her A.T.M. card."

Cathy Hughes, a 53-year-old day care provider who lives in West Roxbury, Mass., said she was determined to find her son an Xbox 360, despite warnings that they will be scarce until after Christmas. "I'm not going to give up," she said. "I'll get it."

Reporting for this article was contributed by Chris Maag in Columbus, Ohio; Rachel Metz in Secaucus, N.J.; Brenda Goodman in Atlanta; Katie Zezima in Boston; and Michael Falcone in San Francisco.

    Dawn Rush Hints at Strong Start to Holiday Sales, NYT, 26.11.2005, http://www.nytimes.com/2005/11/26/business/26retail.html

States' Coffers Swelling Again

After Struggles

November 25, 2005
The New York Times
By JOHN M. BRODER

LOS ANGELES, Nov. 24 - After four years of tight budgets and deepening debt, most states from California to Maine are experiencing a marked turnaround in their fiscal fortunes, with billions of dollars more in tax receipts than had been projected pouring into coffers around the country.

The windfall is a result of both a general upturn in the economy and conservative budgeting by state officials in recent years, and it is leading to the restoration of school funding, investments in long-neglected roads and bridges, debt reduction, and the return of money borrowed from cities and counties.

In Sacramento, officials are setting aside part of a multibillion-dollar revenue windfall to build up California's depleted cash reserves. Delaware has appropriated money for a pilot program for full-day kindergarten, and Florida will spend nearly $400 million on a new universal preschool program for 4-year-olds. Some states, including New York, New Jersey, Hawaii and Oklahoma, are pouring significant new sums into public colleges and universities after several years of sharp cutbacks.

One sign of the improved fiscal health, according to the National Association of State Budget Officers, is that only five states were forced to make midyear budget cuts, totaling $634 million, in the fiscal year that ended, for most states, on June 30. In 2003, by contrast, 37 states cut spending in the middle of the budget year, by a total of $12.6 billion, the association said.

But the good news is not universal and may prove short-lived. The Great Lakes States continue to be hammered by the loss of manufacturing jobs, and full recovery from the hurricanes in the Gulf Coast States will take years.

And experts warn that even though tax revenues are rising in most of the country, demands on state budgets - particularly for education, health care and pensions - are growing even faster.

"The general picture is that revenue is coming in better than expected for quite a few states," said Scott Pattison, executive director of the National Association of State Budget Officers.

"The problem," Mr. Pattison said, "is that the states are like the guy who had been laid off and his income went way down, and now he's got a job again. But in the meantime, he put a lot of expenses on his credit card, his kids' tuition went up and he tapped into his retirement fund. That's exactly what a lot of states did."

During the lean years, states resorted to a lot of one-time fixes to balance their budgets while maintaining services. They cut spending, raised taxes, drew down their rainy-day funds, relied on federal programs, delayed payments to employee pension funds and borrowed heavily. Now they are coping with the hangover from those stopgap solutions.

In California, for example, increased tax collections and the cumulative effect of state spending cuts produced a turnaround in the state's budgetary fortunes, to the tune of nearly $4 billion, according to analysts for the governor's office and the Legislature. Officials now project a surplus of $5.2 billion at the end of the current fiscal year, up from an earlier projection of $1.3 billion. But all of that excess revenue will be consumed during the coming fiscal year, and the state will find quickly itself back in the red unless Gov. Arnold Schwarzenegger and lawmakers agree on longer-term solutions to the chronic imbalance between revenue and spending.

"We still have to control the rate of growth in spending," said H. D. Palmer, spokesman for the California Department of Finance.

Governor Schwarzenegger, a Republican, sponsored a ballot measure this fall that would have forced reductions in state spending when revenue fell short of projections, but it was soundly rejected by voters, who responded to heated warnings from state employee and teachers unions that it would mean steep cuts in education and other services. Mr. Palmer said the governor would work with the Legislature on another approach.

The picture in New York is similar to that in California. New York entered the fiscal year that began in April with a projected deficit of $4.2 billion. Instead, because of a sharp rise in personal income taxes and capital gains receipts, the state now expects to end the year with a surplus of $1 billion, a $5 billion turnaround in one year. But Michael Marr, the communications director for the New York state budget office, said rapidly rising costs for Medicaid, education and other state programs demanded continued fiscal caution.

New York City has also seen a significant brightening of its fiscal picture. Income, sales and real estate transfer taxes are coming in above forecasts, cutting the projected deficit for the next fiscal year to $2.25 billion from $4.5 billion, the City Hall budget office reported this week.

New Jersey's finances, too, have benefited from the upturn in the economy and a relatively strong stock market, with state tax revenue growing at a double-digit rate over last year. New Jersey is one of several states considering tax cuts in the current fiscal year. The newly elected governor, Senator Jon Corzine, a Democrat, promised property tax relief in the recent campaign.

Indiana is also considering property tax cuts, perhaps offset by an increase in cigarette taxes. Lawmakers in Utah are looking at ways to reduce sales or income taxes after the state took in $90 million more in taxes than anticipated in the first four months of the current fiscal year.

Michigan's economy remains in the doldrums because of the deep slump in the auto industry, and its state budget woes have eased only slightly, said Jay Wortley, senior economist at the Michigan Senate Fiscal Agency. Revenues are expected to grow by a modest 3.2 percent in the current year over the year just ended, Mr. Wortley said. But that rate of growth will not begin to make up for five years of cutbacks in virtually all state services, he added.

Mr. Wortley said prison costs were rising, local governments were not getting promised payments from the state and financing for state universities remained tight. The state is selling publicly owned property and is borrowing against anticipated revenue from the nationwide settlement with tobacco companies to make ends meet.

Despite all that, Michigan officials are debating a package of business tax cuts to attract and retain high-technology companies to replace the jobs lost in manufacturing.

State officials know that the tax cuts will create additional stress on the budget, Mr. Wortley said. "But they feel they have to do something to turn the economy around," he said. "The only thing state government can do to help business is to cut taxes."

And then there are Mississippi and Louisiana.

Both states entered the current fiscal year on a high note. In Louisiana, oil and gas royalties were coming in at a record pace and sales tax revenue was growing at a double-digit clip. Mississippi ended the last fiscal year with a healthy surplus, and the current year began strong, with sales, corporate and individual income taxes exceeding estimates in July alone by $22 million.

Then Hurricane Katrina hit in late August, followed by Hurricane Rita.

"In the absence of these storms," said Greg Albrecht, chief economist for Louisiana's legislative fiscal office, "we were rocking and rolling. Just before they hit, we were sitting around saying, Look at all the money we're going to have. We were finally going to come back from the recession of 2001."

"Then the storms came along and just pulled the rug out from underneath us," Mr. Albrecht said.

Louisiana has emptied its rainy-day fund and cut $600 million from its $7.3 billion annual budget, and the state is still looking for ways to fill what has become a gaping hole in its finances.

Mississippi, which was also hit hard by Hurricane Katrina, took out a $500 million line of credit to make up for lost sales and income taxes and to provide disaster assistance to state residents. J. K. Stringer Jr., executive director of the Mississippi Department of Finance and Administration, said that despite the devastation after the storm, revenue rebounded in October because of heavy spending by federal workers, insurance companies and thousands of evacuees from neighboring Louisiana.

But Mr. Stringer said the state faced unknowns that made it impossible to draft a budget for the coming year.

"We got things under control here," he said, "other than three little unknowns: how much state revenue we're going to collect, how much this thing is going to cost us and how much money we're going to get from the feds."

"Other than that," Mr. Stringer said, "we've got a firm handle on things."

    States' Coffers Swelling Again After Struggles, NYT, 25.11.2005,
http://www.nytimes.com/2005/11/25/national/25states.html

G.M. to Cut 30,000 Jobs

and Close 12 Facilities in 3 Years

November 21, 2005
The New York Times
By MICHELINE MAYNARD and VIKAS BAJAJ

DETROIT, Nov. 21 - General Motors said today that it would cut up to 30,000 jobs and close a dozen automobile and parts factories and distribution centers in the next three years in an effort to stem the company's billion-dollar losses.

Rick Wagoner, G.M.'s embattled chief executive, announced the cuts this morning at the company's headquarters here in a televised address that was broadcast to the company's employees, many of whom will be offered early retirement packages.

All together, the restructuring would reduce the company's costs by $7 billion a year by the end of 2006, $1 billion more than its previous target. The company's production capacity will be cut by one million cars and trucks, a reduction that comes on top of a cutback of one million automobiles from 2002 to 2005. After the latest round of cuts, the nation's biggest automaker will have the capacity to produce 4.2 million cars and trucks in North America, down about 30 percent from 2002.

Shares of G.M. were up 10 cents, to $24.15, on the New York Stock Exchange around midday.

"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," Mr. Wagoner said. "But these actions are necessary for G.M. to get its costs in line with our major global competitors."

G.M. has been working on the restructuring plan for the past several months. In recent weeks, speculation has circulated among investors that G.M. could be forced to seek Chapter 11 bankruptcy, sending G.M.'s stock to new lows for the year.

Last week, Mr. Wagoner flatly denied the auto company was considering the step, which was taken in October by the Delphi Corporation, G.M.'s biggest parts supplier. Delphi was part of G.M. until 1999.

Mr. Wagoner had vowed to announce a plan to bring G.M.'s production capacity in line with its United States sales by 2008. The automaker has been meeting with officials of the United Auto Workers union to discuss its plan. Mr. Wagoner said today that he expected to reach a deal with the union soon on reducing jobs through attrition and early retirement packages.

The 30,000 job cuts, which make up almost 10 percent of the company's global staff, includes the 25,000 positions it previously announced plans to eliminate in the United States. At a news conference, Mr. Wagoner said he has not thought about resigning. He declined to provide a financial forecast for 2006 but said the company would reduce its non-union, salaried work force in 2006 as well.

The U.A.W. decried the company's announcement and said it would make coming contract negotiations "much more difficult."

"Today's action by General Motors is not only extremely disappointing, unfair and unfortunate, it is devastating to many thousands of workers, their families and their communities," Ron Gettelfinger, the union's president, said in a statement. "While G.M.'s continuing decline in market share is not the fault of workers or our communities, it is these groups that will suffer because of the actions announced today."

G.M. said it will shut down five automobile assembly plants in Oklahoma City; Lansing, Mich.; Spring Hill, Tenn.; Doraville, Ga.; and Oshawa, Ontario. Seven parts factories and distribution centers will be closed in Pennsylvania, Michigan, Oregon and Ontario.

Analysts said that the cuts were a necessary first step to turning G.M. around, but that they would not be enough if the company did not introduce appealing cars and trucks that stand up well against competitors' products.

"The primary question is, are you going to be able to produce cars and trucks that are compelling enough to sustain or even gain market share," said Brett D. Hoselton, an analyst at KeyBanc Capital. "Health care and pension costs are important issues but the primary issue is always what does your top line look like."

G.M. - and to a somewhat smaller extent the Ford Motor Company - has struggled to remain profitable as it loses domestic market share to Toyota, Honda and other foreign automakers, which have lower costs and have a reputation of building more reliable automobiles. Weak sales of sports utility vehicles and the high cost of employee and retiree benefits are also hurting G.M., which pays for the health care of one million Americans.

Recently, U.A.W. members at G.M. voted to accept modest changes in their health care benefits, which had been virtually free. That agreement is expected to eventually save the company $3 billion in annual expenses before taxes. Despite that, G.M. still faces huge liabilities for retiree health care and pension benefits.

Micheline Maynard reported from Detroit for this article, and Vikas Bajaj from New York.

    G.M. to Cut 30,000 Jobs and Close 12 Facilities in 3 Years, NYT, 21.11.2005, http://www.nytimes.com/2005/11/21/business/21cnd-gm.html

G.M. to Cut 30,000 Jobs and Close 12 Facilities in 3 Years

NYT        21.11.2005

http://www.nytimes.com/2005/11/21/business/21cnd-gm.html?hp

Economic View

As the McMansions Go,

So Goes Job Growth

November 20, 2005
The New York Times
By DANIEL GROSS

THERE'S a growing consensus that the housing market is cooling off. This month, Toll Brothers, the luxury home builder, warned that sales of McMansions were falling, and its highflying stock fell to earth. Last Thursday, the Commerce Department reported that housing starts, a reliable gauge of present activity, fell 5.6 percent in October from year-ago levels, while building permits, a reliable gauge of future activity, fell 6.7 percent.

These data points are potentially worrisome, and not only for the legions of real estate brokers and Sheetrock layers toiling in offices and job sites across the country. In recent years, economists from Alan Greenspan on down have been discussing the way rising home prices and the growth of home-equity borrowing have fueled consumer spending, the piston that drives the country's economic engine. But in recent years, housing, real estate and the related industries have become a huge factor in another crucial economic area: employment growth.

After the brief and shallow recession of 2001, the resilient United States economy stubbornly failed to create payroll jobs at the rate of past recoveries. Economists and politicians blamed factors and trends like outsourcing, global trade, high benefit costs and productivity growth. But amid the gloom, the real estate sector shouldered the burden of job creation.

Asha Bangalore, an economist at Northern Trust in Chicago, tallied figures from the Bureau of Labor Statistics for sectors like construction, building material and garden supply stores. She found that from November 2001 to October 2005, housing and real estate accounted for a whopping 36 percent of private-sector payroll job growth. "In four years, 2.3 million private-sector jobs were created in the U.S., and 836,000 were related to the housing sector," she said.

Given everything else happening in the corporate world, the housing sector was the ideal place to have an investment boom. Building, selling, decorating and renovating homes is labor intensive. And unlike much investment in the broader manufacturing sector, the money pouring into the housing industry creates demand for American labor. Yes, some housing materials come from overseas. But virtually all the labor associated with housing - the roofers, the investment bankers who securitize mortgages into bonds, the clerks at Home Depot - is based in the United States.

As a result of the boom, the economy is more concentrated on housing than ever before. "Residential investment as a share of gross domestic product is at the highest level in 50 years," said Jan Hatzius, senior economist at Goldman, Sachs.

Mark Zandi, chief economist at Economy.com, notes that real-estate-related industries accounted for 9.7 percent of total domestic employment in the second quarter of 2005, up from 9.0 percent in the fourth quarter of 2001. And in areas with the hottest markets, housing plays an even more important role. In California, 13.4 percent of jobs in the second quarter of 2005 were housing-related, versus 12.3 percent in the fourth quarter of 2001. In Las Vegas, the figure rose to 14.6 percent from 12.9 percent; in Panama City, Fla., it rose to 15.4 percent from 11.7 percent.

So what should we expect, now that housing appears to be cooling off?

If the frothy regional markets go flat or if prices simply stop rising at the rates of recent years, there will surely be wide-ranging economic effects on consumer spending and on jobs. "Housing and the job markets are joined at the hip," Mr. Zandi said. "And if housing cools, so too will hiring and the job market more broadly, particularly in the more juiced-up housing markets."

If housing prices are flat in 2006 and residential investment falls 5 percent, there could be a direct loss of a few hundred thousand jobs related to real estate, Mr. Hatzius said. And the indirect effects will certainly be larger, Mr. Zandi said: "Housing is going to go from being a key contributor to the job engine to being a significant drag on job growth."

But there's some good news. Ms. Bangalore notes that while housing's contribution to job growth has declined in recent months, "other sectors are picking up the slack."

Daniel Gross writes the "Moneybox" column for Slate.com.

    As the McMansions Go, So Goes Job Growth, NYT, 20.11.2005,http://www.nytimes.com/2005/11/20/business/yourmoney/20view.html

That sinking feeling

Nov 18th 2005
From The Economist print edition

The world’s largest carmaker is at sea and floundering

FOR years General Motors (GM) was the undisputed titan of the world’s car industry, effortlessly dominating everything. Now, to suppliers, employees and pensioners it must seem less like a titan and more like the Titanic, holed below the water-line, sinking slowly by the bow to the sound of loud shocks and bangs as bulkheads give way, one after the other. The chief executive on the bridge, Rick Wagoner, can rush around and bark orders, but to little effect.

At its peak in the early 1960s, the giant controlled over half the American car market and set the standards by which most of the world’s manufacturing industry was measured. But it has been more than a generation since GM’s dominance went unchallenged and, despite billions of dollars invested in new factories and vehicles, it has suffered a relentless decline in market share (see chart below). Earnings have plunged, especially in its core North American market. The good ship GM scraped even more icebergs lately, the most recent being an announcement last week that it would have to restate earnings for 2001, due to improperly booked credits from suppliers.

Although this latest news is relatively minor (affecting a four-year-old financial report by only $400m) it had the sound of another groaning bulkhead and made people nervous. Since the announcement, GM’s share price has plunged even further. By close of trading on Wednesday November 16th, the stock was 22% below its level at the beginning of the month; it dipped again on Thursday, to an 18-year low. And for the first time since the carmaker’s last big brush with disaster—in 1992, when the company came within 40 minutes of bankruptcy—GM’s bonds are back in the junkyard. Analysts and observers are muttering again about possible bankruptcy. So loud is the speculation, in fact, that Mr Wagoner wrote to the company's 325,000 employees this week to deny that GM had any intention of filing for Chapter 11 protection from its creditors.

Exactly how and why things have gone so wrong is a matter of debate. Certainly, the situation was dire 13 years ago when a newly energised GM board flexed its muscle. They turned to Jack Smith, who in turn signed on Mr Wagoner, then barely 40, as one of his top lieutenants. The new management closed plants, cut the workforce, sold lacklustre component operations and seemingly restored much of the company’s former lustre. By the boom years of the mid-1990s, GM was again rolling up record profits.

Yet, despite a few exceptional years, sales continued to decline. Critics, such as Dan Gorrell of Strategic Visions, a Californian consulting firm, say GM concentrated more on finance and marketing than designing and making cars. Indeed, after the company’s annual meeting, Mr Wagoner conceded: “If we had a chance to rerun the last five years, we probably would have done a little more thinking about making sure that each product was distinctive and had a chance to be successful.”

GM paid a lot of attention to the development of its newest, full-sized sport-utility vehicles (SUVs), which will arrive in the showrooms early in 2006. But even the company’s bullish “car tsar”, the vice-chairman, Bob Lutz, admits that the potential market for these vehicles has declined dramatically with higher oil prices.

Misreading the SUV market might be bad enough, but GM also played down the need for a new generation of more fuel-efficient “crossover” vehicles. These are like SUVs, but lighter. The company scored a hit with its first models, such as the Chevrolet Equinox, but by the time the rest arrive Japanese competitors are likely to have taken control of the segment. GM refused to believe there would be enough demand to justify investment in petrol-electric hybrids. Yet again, it is now racing to catch up in a part of the market where the Japanese overwhelmingly dominate.

But products are only part of the problem at GM. Mr Wagoner was able to put a positive spin on GM’s bleak, third-quarter earnings report (losses are $3.8 billion so far this year) by announcing that the United Auto Workers Union (UAW) would grant unprecedented concessions, shaving $1 billion from the carmaker’s mounting health-care bill. He has turned his attention to attacking so-called legacy costs. The huge cutbacks of the 1990s saddled GM with nearly three retirees for every active worker. Yet the situation may only get worse in the short term, with more closures expected to be announced next month. This could amount to up to six factories being shut.

Then there is the worsening situation at Delphi. Made up of former GM parts operations, the supplier is struggling to stay alive under Chapter 11. Its chief executive, Steve Miller, has given warning that he may ask the bankruptcy court to overturn the firm’s current labour contract. If that happens, Delphi’s well-paid American workers could suddenly find themselves taking home a meagre $9 an hour. UAW leaders are threatening to strike if Mr Miller goes ahead. A walkout could disrupt the entire motor industry, but as Delphi’s biggest customer by far, GM would suffer the most.

Not everything has gone wrong on Mr Wagoner’s watch, of course. He has been successful in expanding abroad. The company’s European operations are slowly recovering and Brazil has bounced back. GM’s acquisition of South Korea’s Daewoo is looking like a bargain and is doing exceptionally well. Then there is China, where Mr Smith defied conventional wisdom at the time by being one of the first to open an assembly plant. Mr Wagoner has since ramped up Chinese operations, lining up a string of highly profitable joint-ventures and assembly operations. Ironically, it is the Buick badge that has connected best with Chinese motorists, and soon the brand may sell more cars in Asia than at home, where its staid image leaves many Americans cold.

Buick epitomises GM’s challenge as it seeks to improve its global operations while reducing its dependence on America. One of Mr Wagoner’s first steps as chief executive was to pull the plug on the ailing Oldsmobile division. He has repeatedly insisted that he has no intention of scuttling any more of GM’s eight surviving car brands. But with its market share only around 25%, it is becoming increasingly difficult to justify the economics of feeding so many car divisions with truly new and exciting products.

The mystery passenger

As if Mr Wagoner did not have enough to worry about, there is Kirk Kerkorian. The reclusive Las Vegas billionaire now owns 9.9% of GM, a stake which has so far lost him a great deal of money, at least on paper. The octogenarian investor is “a difficult taskmaster”, cautions Gerry Meyers, a former chief executive of American Motors and now a professor at the University of Michigan. If things do not turn around, he expects Mr Kerkorian “will make himself very visible”. Mr Kerkorian made that clear when he once mounted an ultimately unsuccessful takeover bid for Chrysler. He is reportedly angling for a seat on the GM board for one of his own lieutenants, Jerry York, a former Chrysler executive.

Along with factory cutbacks, Mr Wagoner is planning to sell off a large stake in the company’s profitable finance subsidiary, General Motors Acceptance Corp. Trying to predict his remaining options has become something of a parlour game in Detroit circles. Some are betting that GM will end up with no choice but to file for Chapter 11, now a popular move among American companies saddled with burdensome debts and high labour costs. Others give warning that such a move would simply alienate potential buyers of GM cars, making the situation graver still. Consumers will worry about warranties and the resale value of cars. What is clear is that GM’s options are steadily diminishing and its still sizeable financial resources are being drained away at a frightening rate. At the current pace, it may not have the momentum to reach a safe port.

    That sinking feeling, E, 18.11.2005, http://www.economist.com/agenda/displaystory.cfm?story_id=5175818

New Housing Starts Fall,

as Do Permits for Building

November 17, 2005
The New York Times
By VIKAS BAJAJ

New home construction dropped to its slowest pace in five months and permits for building had their biggest monthly drop in almost six years in October, the government reported today, providing more evidence of a housing slowdown.

Though not yet conclusive, a stream of reports in recent weeks indicates the nation's long housing boom is coming off spectacular peaks and may be headed for far slower growth or even a decline.

A monthly report from the Commerce Department today showed that builders started home construction at an annual pace of 2.01 million in October, down 5.62 percent from September. Local authorities issued 6.67 percent fewer building permits in the month at 2.07 million.

Compared with this time last year, housing starts were down by 1 percent. In October 2004, housing starts rose by 7.85 percent. And housing starts were down 2.32 percent from the same month last year.

The latest data come a day after the National Association of Home Builders reported its monthly index, which measures its members' confidence, fell in November as builders reported seeing fewer would-be buyers. The group cited falling consumer confidence and higher mortgage interest rates, which have risen in the last two months but remain near historical lows.

The group's chief economist, David Seiders, noted that overall builders were still confident but were expecting activity to slow in 2006.

"It's most likely that we're engaged in an orderly cooling process that will lead to somewhat lower home sales and production in the future," he said in a statement. "We're looking for a 5 or 6 percent decline in home sales next year, compared to 2005."

Earlier this month, Toll Brothers, the nation's biggest maker of luxury homes, reduced its sales forecast for the coming months and year, noting that buyers have become more restrained since Hurricane Katrina struck and local governments are making it harder to start new subdivisions.

Consumer confidence, as measured by leading surveys, fell for the first two months after Katrina, but the shopping behavior of Americans appears to provide mixed evidence of that. Retail sales, excluding automobiles and gasoline, have grown briskly in recent months, but real estate agents and others in the industry have reported homes staying on the market longer and prices either slowing or falling in some of the nation's hottest markets.

Reports measuring other forms of economic activity have looked up in recent weeks, as they did today.

The Labor Department reported today that initial claims for unemployment benefits fell to their lowest level in seven weeks in the week ended Nov. 12 - to 303,000, from 328,000 the week before. People displaced by the three hurricanes, Katrina, Rita and Wilma, added about 19,000 claims to those numbers. Altogether the hurricanes have accounted for 561,000 claims since the storms hit.

Also, the Federal Reserve reported today that industrial production rose by 0.9 percent in October as more factories, oil refineries and other plants on the Gulf Coast resumed operations. Production had fallen by a steep 1.5 percent in September because of shutdowns in the region.

These reports may be among the first signs that post-hurricane rebuilding is boosting the economy as is typically the case several months after major disaster strikes.

    New Housing Starts Fall, as Do Permits for Building, NYT, 17.11.2005, http://www.nytimes.com/2005/11/17/business/19cnd-econ.html

Consumer Inflation Rate

Dropped Significantly in October

November 16, 2005
The New York Times
By VIKAS BAJAJ

The consumer inflation rate dropped significantly in October and touched its lowest level since June as surging gasoline prices fell from their peak in September, the government reported today.

The consumer price index rose by 0.2 percent last month, after rising 1.2 percent in September and 0.5 percent in August, the Labor Department reported. The core index, which excludes food and energy, also rose 0.2 percent in the month, compared with last month's 0.1 percent increase.

Compared to October 2004, consumer prices were up 4.3 percent and the core index was up 2.1 percent.

The improved inflation picture was welcome news for workers. Wages of production and non-supervisory workers rose 0.4 percent on an inflation-adjusted basis, only the third month this year that real wages have risen, the Labor Department said in another report. Compared to October 2004, real wages are still down 1.6 percent.

Though the economy appears to have put the worst of the surging gasoline prices behind it, the report indicates that inflation concerns may persist for some time. Natural gas and electricity prices were higher in October and are expected to rise even further as colder weather sets in. Natural gas production has been severely hampered in the Gulf of Mexico because of Hurricanes Katrina and Rita.

The report also indicates that businesses are starting to pass on some of their higher costs of doing business from the yearlong surge in energy prices to consumers. Housing costs were up 0.9 percent last month, driven largely by a 3.5 percent jump in hotel rates. Medical care rose 0.5 percent and food cost 0.3 percent more in October.

Those developments are likely to prompt the Federal Reserve to raise interest rates again at the next meeting of its open market committee on Dec. 13. Policy makers have raised the benchmark short-term interest rate 12 times in a row, to 4 percent. Ben Bernanke, the president's nominee for Federal Reserve chairman, said Tuesday he would seek to pursue the same inflation policies as Alan Greenspan, who will retire as chairman in January.

"We continue to expect the Fed funds target to reach 5 percent in the second quarter of next year, which is where we see the tightening process ending," Joshua Shapiro, chief United States economist for MFR Inc., a research firm, wrote in a note to clients. "Comments from Fed officials suggest that they expect only a temporary hit to growth from higher energy prices, while concern about a drift up in core inflation is increasing."

Some other economists believe the Fed will stop raising interest rates, by quarter point increments, once they hit 4.5 percent.

Separately, the Commerce Department reported today that business inventories rose by 0.5 percent in September as auto dealers and retailers restocked their lots and warehouses.

    Consumer Inflation Rate Dropped Significantly in October, NYT, 16.11.2005, http://www.nytimes.com/2005/11/16/business/16cnd-econ.html

Ben Bernanke takes his seat as he appears before Senate Banking Committe

on his nomination to be Federal Reserve chairman.

Doug Mills/The New York Times        November 15, 2005

Low Inflation and Rising Wages Can Coexist, Fed Nominee Says        NYT        16.11.2005

http://www.nytimes.com/2005/11/16/business/16fed.html 

Low Inflation

and Rising Wages Can Coexist,

Fed Nominee Says

November 16, 2005
The New York Times
By EDMUND L. ANDREWS
.

WASHINGTON, Nov. 15 - Ben S. Bernanke, the nominee to succeed Alan Greenspan as chairman of the Federal Reserve, told lawmakers on Tuesday that it was a "false dichotomy" to assume that low inflation was at odds with rising wages and greater income equality.

"Middle-income living standards, and poverty for that matter, are best addressed through employment growth," Mr. Bernanke said during his confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee. "By maintaining low inflation and low expectations of inflation, you can create new employment."

In his first extended public appearance since President Bush nominated him to lead the Fed, Mr. Bernanke stoutly defended his proposal to base monetary policy on an explicit target for inflation and asserted that he would not weaken the central bank's "dual mandate" of promoting full employment as well as stable prices.

But he said he would proceed cautiously and seek consensus within the Fed before moving toward setting an inflation target, one of the few areas of policy where Mr. Bernanke differs from Mr. Greenspan.

And in describing his approach, he sharply distanced it from those of some central banks that focus almost exclusively on an inflation target and not at all on promoting growth. "I don't agree with that," Mr. Bernanke declared flatly.

Members of the committee made it clear that Mr. Bernanke enjoys overwhelming support in the Senate and is all but certain to be confirmed soon. But they also warned him to maintain independence from the White House, where he was President Bush's chief economic adviser.

"I assure this committee that, if I am confirmed, I will be strictly independent of all political influences," Mr. Bernanke said in his opening statement.

Mr. Bernanke also strongly implied that the Federal Reserve did not necessarily need to raise interest rates in response to soaring energy prices, noting that long-term inflation expectations remain "well anchored."

In so doing, he sought to smooth over the one topic that has made his nomination even slightly controversial: a concern among lawmakers, particularly Democrats, that he would be so fixated on preventing inflation and so wedded to mechanistic formulas that the Fed might arbitrarily choke off job creation.

"I am not proposing any major change in policy or in the way policy is conducted," he declared. He repeatedly asserted a need to preserve the flexibility that became the hallmark of Mr. Greenspan's 18-year tenure. "I do not subscribe to rigid or mechanistic rules in policy making," he said.

Lawmakers appeared reassured. Senator Richard C. Shelby, a Republican from Alabama and the chairman of the committee, said Mr. Bernanke "may well be the finest monetary economist of his generation."

Democrats praised his academic credentials and spent most of their time coaxing assurances from Mr. Bernanke about his support for employment and about his political independence.

But in asserting his flexibility, Mr. Bernanke raised almost as many questions as he answered on how his proposal for a clear inflation objective would increase the Fed's credibility in financial markets.

He said that there would be times when inflation climbed faster than the Fed's long-term goal and yet did not constitute a long-term threat, largely because investors and consumers today expect inflation to remain low in the long run.

Senator Christopher J. Dodd, a Democrat from Connecticut, asked Mr. Bernanke how he would react if natural gas prices rose sharply this winter.

"The contrast between the 1970's and today is very marked," Mr. Bernanke said. "Back then, we had high inflation expectations." He added that the Fed might have waited too long and then overreacted to higher oil prices, helping push the economy into recession.

Today, by contrast, "inflationary expectations remain well anchored" and the Fed could respond gently as long as those expectations remained low, he said.

Mr. Bernanke did not imply that he would stop the Fed's policy of gradually raising short-term interest rates from their low point last year. The Fed has raised overnight rates on loans between banks 12 times since June 2004, to 4 percent from 1 percent, and Mr. Bernanke said nothing to dissuade investors from their view that he would probably nudge rates slightly higher at least once or twice in his first few months in office.

In sharp contrast to Mr. Greenspan, Mr. Bernanke immediately made it clear that he did not want to comment on fiscal policy. Where Mr. Greenspan supported President Bush's tax cuts in 2001, a move that many lawmakers say set the stage for the huge deficits that followed, Mr. Bernanke said he would not comment on any tax or budget proposals.

"I'm going to begin now to avoid making specific recommendations," he said in response to questioning from Senator Dodd.

When confronted with passages from a textbook he had written, in which he asserted that budget deficits tend to push up interest rates and "crowd out" private investments, he conceded that "it's possible" that tax cuts could cause more problems than they solve.

But even as he sought to put some distance between himself and Mr. Greenspan on that issue, he repeatedly stated his respect for Mr. Greenspan and his determination to build on the monetary policies in place.

"One may aspire to succeed Chairman Greenspan," he said, "but it will not be possible to replace him."

Jennifer Bayot contributed reporting from New York for this article.

    Low Inflation and Rising Wages Can Coexist, Fed Nominee Says, NYT, 16.11.2005, http://www.nytimes.com/2005/11/16/business/16fed.html

Wholesale Inflation Slowed in October

November 15, 2005
The New York Times
By VIKAS BAJAJ

Inflation at the wholesale level tapered off in October after surging in the immediate aftermath of the hurricanes, the government reported today, as energy prices fell from their peaks and took other prices down with them.

Separately, another report showed that retail sales fell last month because of another weak month of car and truck sales. Excluding autos, retail sales increased on the strength of building materials and general merchandise.

The Labor Department said the producer price index climbed 0.7 percent in October after a 1.9 percent surge the month before, mainly driven by rising natural gas, heating oil, diesel fuel and electricity prices. Gasoline prices fell by 3.3 percent. Excluding energy and food, the core index fell by 0.3 percent after a 0.3 percent increase the month before. It was the third month this year that the core index has fallen.

Economists said that a 3 percent drop in the price of cars in October may have been responsible for the decrease. Detroit automakers appear to have lowered the prices of new model-year vehicles to increase sales.

The price of goods in the intermediate stage of production rose 3 percent in the month and the price of raw materials rose 6.7 percent.

Producer prices measure the prices received by manufacturers and do not include taxes, subsidies and distribution costs. The consumer price index, which is expected to be reported on Wednesday, includes those elements.

At the consumer level, the latest reports show that American shoppers lived up to their reputations as consummate shoppers in spite of the worries about high energy costs.

Retail sales fell 0.1 percent over all but were 0.9 percent higher in the month excluding auto sales, the Commerce Department reported. Car and truck sales have fallen for the last three months because Detroit automakers have struggled to sell vehicles after a summer of heavy discounting.

Sales were even higher when purchases at gasoline stations are excluded, those sales were inflated in September by the high prices of fuel charged in much of the nation after Hurricane Katrina and Rita disrupted supplies.

"Despite universal signals from major sentiment surveys that consumers were rather grumpy in October, the decline in gasoline prices and delayed seasonal purchasing sent consumers out on a shopping spree in the month of October," Brian Bethune, an economist at Global Insight, a research firm, wrote in a note to clients.

    Wholesale Inflation Slowed in October, NYT, 15.11.2005, http://www.nytimes.com/2005/11/15/business/15cnd-econ.html

U.S. Trade Deficit Hits $66 Billion,

Another Record

November 10, 2005
The New York Times
By VIKAS BAJAJ

The trade deficit widened by 11 percent and set another record in September, the government reported this morning, as exports of airplanes plummeted and imports of natural gas and petroleum products surged in the weeks after Hurricane Katrina struck the Gulf Coast. The deficit with China also hit a record.

America imported $66.1 billion more in goods and services than it exported in the month, breaking the previous record set in February when the economy registered a $60.4 billion deficit, the Commerce Department reported. The trade deficit in the first nine months of the year totaled $529.8 billion, about 18 percent higher than at this time in 2004.

Economists had been expecting the trade balance to widen to $61.5 billion in October, according to a survey by Bloomberg News.

In the aftermath of Katrina, which hit New Orleans at the end of August, gasoline and natural gas imports spiked because much of the domestic production and refining in the Gulf Coast was shut down. Natural gas imports surged 30 percent, to $3.7 billion, and petroleum products and fuel oil jumped 22.8 percent, to $6.8 billion.

Crude oil imports, however, fell by $350 million, reflecting the shutdown of refineries in the Gulf Coast because of damage from Katrina and later from Hurricane Rita.

"The rise in oil prices was always likely to hit these numbers with a vengeance, and the petroleum deficit duly rose by $1.4 billion," Ian Shepherdson, chief United States economist at High Frequency Economics, wrote in a note to clients.

In an indication that the surge in energy imports has already eased, the Labor Department reported today that the price of petroleum-based imports fell 4.4 percent in October after surging 8 percent in September. The price of all imports dropped 0.3 percent, only the second month this year that it has fallen, after rising 2.3 percent in September. Excluding petroleum products, import prices rose by 0.8 percent in October.

The trade balance with China, an increasingly sensitive political topic, rose 8.8 percent, to $20.1 billion. Exports to the country fell 17 percent as imports rose by 4 percent.

The Chinese government reported today that its October trade surplus with the rest of the world jumped to a record $12 billion in October. So far this year, the booming country has amassed a surplus of $80.4 billion, up from $32 billion at this time last year.

All told, exports to all countries fell by $2.8 billion, virtually all of it because of falling airplane sales. That may be due in large part to a machinists' strike at Boeing, which forced delays of the shipment of 30 planes worth $1.5 billion, according to the company.

Exports of food fell $296 million, reflecting transportation delays caused by the shutdown of the Port of New Orleans, from which many agricultural products are shipped.

Imports rose $4 billion, most of it from industrial supplies and materials, a broad category that includes energy products. Imports of consumer goods, food and capital goods rose slightly, but the country brought fewer cars and car parts from overseas in September.

Separately, the Labor Department reported that claims for unemployment benefits rose by about 2,000, to 326,000 last week. Compared to the same week last year, claims were down by about 5,000.

And the University of Michigan reported that its consumer confidence index rose after falling for three straight months, edging up to 79,9 this month, up from 76.5 in October.

    U.S. Trade Deficit Hits $66 Billion, Another Record, NYT, 10.11.2005,
    http://www.nytimes.com/2005/11/10/business/10cnd-econ.html

Job Growth Slows Sharply,

Weighed Down by Energy Costs

November 4, 2005
The New York Times
By DAVID LEONHARDT

Job growth has slowed sharply, the Labor Department reported today, in a sign that high energy prices are hurting the economy.

Still, wages last month rose at their fastest clip in more than two years, leaving open the possibility that the hiring slowdown will turn out to be temporary.

Employers added only 56,000 jobs in October, well below the 150,000 or so that are needed to keep pace with population growth. The Labor Department also said that 36,000 fewer jobs had been added in August and September than previously estimated.

"Job growth has kind of stalled out," Bill Cheney, chief economist of John Hancock Financial Services in Boston, said.

Hiring over the last three months has fallen to its lowest level since the summer of 2003, when the economy finally began to emerge from a three-and-a-half year hiring slump.

Kathleen P. Utgoff, commissioner of the Bureau of Labor Statistics, told Congress today that job creation had been weak across much of the country last month; in September, when employment fell by 8,000 jobs, the cuts were concentrated in the Gulf Coast.

Stocks had a muted reaction, with the Standard & Poor's 500-stock index down slightly.

As poor as the October hiring number was, the government's monthly employment report offered a number of other reasons for optimism.

The jobless rate fell slightly, to 5 percent from 5.1 percent. It is calculated from a survey of households, which economists consider less reliable than the survey of businesses that produces the job-growth numbers.

But the household survey sometimes captures hiring by small companies before the business survey does and in recent months has offered a rosier picture of the economy. Last month, for instance, the number of workers holding part-time jobs because they could not find full-time work dropped to its lowest point since 2002.

The business survey showed that the average wage for rank-and-file workers rose 8 cents, to $16.27 an hour.

"There is an increased level of business caution," said Drew T. Matus, a senior economist at Lehman Brothers. "But these kind of wage gains don't make sense in light of the low level of hiring unless business just decided to pause for the month."

Still, wage growth has risen less than 3 percent in the last year, while inflation has been running close to 4 percent, effectively cutting many workers' pay.

The spike in inflation, caused largely by oil prices, seems to have soured many Americans on the economy, despite its continued growth. In a recent poll by the University of Michigan, 60 percent of people said that they expected the next five years to bring periods of widespread unemployment.

That is up from about 40 percent in the middle of last year and now at its highest level since 1992.

In October, car dealers, hotels, restaurants and movie and music studios all cut jobs. Department stores added fewer jobs than they typically do during October; that shows up as a loss in the Labor Department report, because the government adjusts its numbers to account for normal seasonal variations.

Across the economy, in fact, employment rose by 702,000 jobs last month. But the government reported a seasonally adjusted gain of only 56,000 because most of the new jobs were part of the usual October jump in employment.

John E. Silvia, chief economist of the Wachovia Corporation, noted that many of the sectors cutting jobs depended on consumers. Their pullback suggests that executives might be growing worried that the surges in oil and gas prices will eventually hurt consumer spending, even if they have yet to do so.

On Thursday, retailers reported surprisingly good sales numbers for October.

"It's hard to put this all together," Mr. Cheney of John Hancock said. "It's a puzzle."

Job gains last month came from manufacturers - especially makers of transportation equipment - as well as banks, hospitals, doctors' offices, residential contractors and computer-systems companies.

The gain in manufacturing employment was the first in five months.

Economists still expected the Federal Reserve to keep raising its benchmark short-term interest rate in coming months in an effort to tame inflation. Alan Greenspan, the Fed chairman, testified to Congress on Thursday that he viewed inflation as a bigger threat than weak economic growth.

The Fed has increased its benchmark rate, now at 4 percent, during each of its last 12 policy-setting meetings. It seems poised to do so again at the two remaining meetings before Mr. Greenspan's retirement early next year.

Investors are predicting that the Fed will increase the rate at one of the first two meetings headed by Mr. Greenspan's successor, Ben S. Bernanke, but not at both, based on the price of a futures contract tied to Fed policy.

The recent growth income inequality appeared to continue last month. Wage gains for workers at financial, information and professional-services companies - who tend to be highly paid - all received big raises in October. Employees at factories, warehouses, tourism companies, schools and health providers received smaller pay increases.

In his testimony this week, Mr. Greenspan said the country was going through "a very marked changed in the distribution of income."

He added: "We have clearly observed a major increase in the need for skilled workers to basically staff our ever increasingly complex technological capital stock."

The dropout rate in high schools and colleges was too high for the economy to be fully staffed with qualified workers, Mr. Greenspan said.

    Job Growth Slows Sharply, Weighed Down by Energy Costs, NYT, 4.11.2005, http://www.nytimes.com/2005/11/04/business/04cnd-econ.html

U.S. Productivity Rises

Despite Predictions of a Slowdown

November 3, 2005
The New York Times
By VIKAS BAJAJ

Productivity rose sharply in the third quarter, the government reported today, as workers churned out more without working very many more hours and businesses' labor costs fell.

In a report that economists will likely read as a sign that the economy is performing better than expected, the Labor Department said productivity rose at a 4.1 percent annual pace from July to September. That compares to 2.1 percent in the second quarter and defies the descriptions by some analysts and policy makers of a productivity slowdown. Hours worked rose 0.1 percent in the quarter.

Productivity is a measure of the total output of the economy divided by the number of hours of work needed to produce it. Sharp increases indicate that workers and businesses are becoming more efficient through the use of technology or better work practices.

From 2000 to 2004, productivity has averaged 3.28 percent, compared to an average of 2.08 percent from 1995 to 1999 and 2.28 percent from 1948 to 2004.

Unit labor costs, the cost of labor divided by output, fell 0.5 percent in the quarter after increasing 1.8 percent in the second quarter. Hourly compensation was up 3.6 percent but adjusted for inflation it was down 1.4 percent.

Unit costs can fall even as hourly compensation rises, because the increased wages, salaries and benefits costs are divided by a larger output, which was up 4.2 percent in the third quarter.

The growth was even stronger when farm sector is included in the calculation. Productivity rose 4.8 percent and unit labor costs fell 0.6 percent when agriculture is included. Economists tend to monitor the non-farm business numbers more closely, because agricultural productivity can vary significantly from quarter to quarter because of weather and other short-term factors.

In another report, the Labor Department said initial claims for unemployment insurance fell by 8,000 to 323,000 last week. There were 335,000 claims in the comparable week a year ago. Claims continued to fall in Louisiana, down 10,315 in the week after dropping 8,410 the week before, as fewer people displaced by the hurricanes filed for benefits.

On Friday, the Labor Department will provide its monthly employment report for October, which is expected to provide a far broader and better view of how the American economy and labor market is doing two months after Hurricane Katrina struck the Gulf Coast.

    U.S. Productivity Rises Despite Predictions of a Slowdown, NYT, 3.11.2005,
    http://www.nytimes.com/2005/11/03/business/03cnd-econ.html

Growth picks up despite storms

Fri Oct 28, 2005
11:02 AM ET
Reuters
By Glenn Somerville

WASHINGTON (Reuters) - The U.S. economy shook off headwinds from hurricanes Katrina and Rita to grow at a faster-than-expected 3.8 percent annual rate in the third quarter, a Commerce Department report showed on Friday.

Strong spending by consumers and by the government helped power the expansion as growth in gross domestic product -- the measure of all goods and services produced within U.S. borders -- accelerated from the second quarter's 3.3 percent rate.

The GDP report, along with a separate one on employment costs from the Labor Department, pointed to underlying economic strength and muted price pressures, which analysts said meant the Federal Reserve can stay on a course of small, measured interest-rate rises.

But a nongovernment report showed rising interest rates and energy costs may be taking a toll on consumers' moods at a crucial time -- just ahead of the vital holiday shopping season between Thanksgiving and Christmas.

In its first snapshot of third-quarter growth, the Commerce Department said it could not give an overall tally of how the twin hurricanes that struck the U.S. Gulf Coast in late August and September affected the economy, but it said about $40 billion were lost in wages and rents.

Wall Street economists had forecast GDP would advance at a 3.6 percent rate in the July-to-September quarter. The economy has now expanded at rates exceeding 3 percent for 10 straight quarters.

ECONOMY HAS MOMENTUM

"This is a very positive, strong report and encouraging because it included Katrina and a spike in oil prices and we still just seem to have a lot of momentum going into the fourth quarter," said economist Kurt Karl of Swiss Re in New York, adding that he expected another Fed rate rise on Tuesday.

Despite surging prices at the gasoline pumps, the report showed that so-called core inflation, which exempts food and energy from its calculation, declined in the third quarter.

A price gauge favored by Federal Reserve Chairman Alan Greenspan -- personal consumption expenditures excluding food and energy -- increased at a 1.3 percent annual rate compared with 1.7 percent in the second quarter. That marks the mildest rate of core price rises since the second quarter of 2003.

Fed policy-makers have pushed U.S. short-term interest rates up 11 times since mid-2004 to keep a rein on prices. Its policy-setting Federal Open Market Committee is scheduled to meet again on Tuesday and is once again widely expected to nudge rates up a quarter percentage point.

CONSUMERS WORRIED

The University of Michigan's index of consumer sentiment dropped to a final reading of 74.2 from September's 76.9 and from a preliminary reading of 75.4 in early October, according to sources who saw the subscription-only report.

"This holiday spending season will be softer," predicted economist Anthony Chan of J.P. Morgan Asset Management in Columbus, Ohio, who added that rising energy costs were making people nervous. "Sales will take a bit of a hit."

The Labor Department reported that its Employment Cost Index rose 0.8 percent in the third quarter, slightly ahead of the second quarter's 0.7 percent.

WORKERS FACE SQUEEZE

But in the past 12 months, overall employment costs have risen only 3.1 percent -- the smallest rise in six years -- and wage costs alone have advanced only 2.3 percent for the smallest gain on record.

"The third-quarter Employment Cost Index is ... reassuring in the sense that labor costs as measured on this index remain very contained, in contrast to some other labor cost indexes," said economist Pierre Ellis of Decision Economics in New York.

Bond markets initially fell on the GDP data but recovered on the report showing soft wage gains, apparently on the belief that workers who are receiving scant pay raises are unlikely to stoke inflationary price gains.

At mid-morning, stock prices were moderately higher on the signs of steady economic growth, though traders said the possibility that some White House officials face indictments arising from an investigation into the leaking of a CIA operative's identity was making investors edgy.

Businesses reduced inventories for a second straight quarter. Stocks of unsold goods dropped at a $16.6 billion annual rate in the third quarter after declining at a $1.7-billion rate in the second quarter.

The third-quarter inventory drop was the largest since the fourth quarter of 2001 -- after the attacks in New York and on the Pentagon -- when they fell at an $86.7-billion rate, a department official said.

Lean inventories can imply that companies have room to ratchet production up quickly if they are confident consumer spending will remain brisk -- something that analysts have cautioned is questionable as costly energy takes a rising toll on household budgets with the winter heating season approaching.

However, personal spending, which accounts for about two-thirds of national economic activity, grew at a 3.9 percent annual rate in the third quarter, exceeding the second quarter's 3.4 percent.

(Additional reporting by Tim Ahmann)

    Growth picks up despite storms, R, 28.10.2005, http://today.reuters.com/news/newsArticle.aspx?type=topNews&storyID=2005-10-28T150234Z_01_ROB846654_RTRUKOC_0_US-ECONOMY.xml

U.S. Trade Deficit

Rose to $59 Billion in August

October 13, 2005
The New York Times
By VIKAS BAJAJ

The nation's trade deficit worsened in August, all but erasing a brief improvement in July, and import prices surged last month as the cost of oil, natural gas and other energy sources jumped after the hurricanes in the Gulf Coast, the government reported today.

Americans imported $59 billion in goods and services more than they exported in August, up 1.8 percent from July, largely driven by bigger and more expensive imports of energy commodities, according to the Commerce Department. Exports also increased, particularly of big-ticket items like airplanes, but they did not rise enough to keep up with imports.

A separate report from the Labor Department showed that import prices jumped 2.3 percent in September, their biggest monthly jump since October 1990. Much of that was due to a 7.3 percent surge in petroleum import prices, though even non-petroleum product costs rose 1.2 percent after posting far more modest gains earlier in the year.

Compared to September 2004, import prices were 9.9 percent higher last month, and petroleum import prices were 48.9 percent higher.

Hurricanes Katrina and Rita severely disrupted the country's ability to produce and process oil and natural gas in the Gulf Coast, driving energy costs up to new records in September. Imports of those commodities rose in the aftermath of the devastation to make up for the shortfall of domestic production, which indicates that the trade deficit may have grown even further, and perhaps to a new record, last month.

Though exports have continued to rise steadily and sometimes at a faster pace than imports for much of the year, economists note that they are growing from a far smaller base than imports. So far this year, the trade deficit has averaged $57.9 billion a month, 16.7 percent higher than the $49.6 billion monthly average at this time in 2004.

"Core exports are trending up at about 10 percent year over year, not enough to prevent a widening of the deficit," Ian Shepherdson, chief United States economist at High Frequency Economics, wrote in a note to clients. He also noted that airplane exports, which can vary dramatically month to month, would drop significantly in September because Boeing exported only two planes in the month.

The much-watched trade deficit with China expanded 4.6 percent, to $18.5 billion in August, while the gap with Japan was little changed at $6.6 billion. Trade surpluses with Australia and Hong Kong nudged up a little.

    U.S. Trade Deficit Rose to $59 Billion in August, NYT, 13.10.2005, http://www.nytimes.com/2005/10/13/business/13cnd-econ.html

La forte croissance américaine persiste,

les doutes demeurent

Le Monde
NEW YORK de notre correspondant
Article paru dans l'édition du 17.08.05

La vigueur de l'économie américaine et sa résistance à l'envolée des prix du pétrole surprennent les experts. Le moteur de l'activité, le consommateur, ne faiblit pas. En juillet, les ventes de détail ont encore augmenté de 1,8 %. "En dépit des prix élevés de l'énergie, l'ensemble des dépenses s'est renforcé depuis l'hiver dernier ", constate le comité de politique monétaire de la Réserve fédérale (Fed) dans son communiqué du 9 août.

La santé du marché du travail explique pour beaucoup cette vigueur. Le mois dernier, les créations d'emplois (207 000) ont été supérieures aux prévisions. Plus de trois millions de postes ont vu le jour en moins de deux ans. Le taux de chômage se trouve à 5 %, son plus bas niveau depuis septembre 2001. Si la hausse des prix à la pompe n'a pas affaibli, pour le moment, la demande et le pouvoir d'achat, c'est que les salaires augmentent. Toujours en juillet, la rémunération moyenne de l'heure de travail a progressé de 0,4 %.

Contrairement aux années 2002, 2003 et aux premiers mois de 2004, l'activité est aujourd'hui alimentée non par les baisses d'impôts et de taux, mais par la progression du pouvoir d'achat, de 5 % en un an, conséquence des embauches et de l'augmentation des rémunérations.

Au deuxième trimestre, le coût du travail dans les services et l'industrie était en hausse de 4,3 % par rapport à la même période de 2004, la progression la plus rapide depuis cinq ans. Le partage de la valeur ajoutée est aujourd'hui plus favorable aux ménages. Jusqu'en 2004, les profits augmentaient plus vite que les salaires. Ce n'est plus le cas.

La croissance semble aussi à nouveau s'accélérer. Elle a atteint 3,8 % en rythme annuel au premier trimestre et 3,4 % au deuxième. Selon un sondage réalisé par le Wall Street Journal , les économistes, en moyenne, ont révisé à la hausse leurs prévisions à 4,2 % pour le troisième trimestre et 3,6 % au quatrième.

GAINS DE PRODUCTIVITÉ

Les entreprises, prudentes depuis le début de l'année, sont contraintes d'augmenter la production pour reconstituer leurs stocks. Elles le font d'autant plus facilement que les profits sont au rendez-vous.

Pour les 455 entreprises entrant dans la composition de l'indice boursier Standard & Poor's 500 et ayant publié leurs résultats du deuxième trimestre, la hausse moyenne des bénéfices est de 13 %. Un chiffre près de deux fois supérieur aux 7,4 % attendus par les analystes il y a encore deux mois.

Cela fait maintenant treize trimestres consécutifs que les sociétés du S & P 500 annoncent des augmentations de résultats à deux chiffres. Et cela devrait continuer puisque les prévisions sont de 16 % de croissance des profits pour le trimestre en cours et de 13,6 % pour les trois derniers mois de l'année.

Si les entreprises sont capables à la fois d'augmenter les salaires et les bénéfices, elles le doivent aux gains de productivité. Ils étaient au premier trimestre, selon le Bureau des statistiques du travail, de 5,4 % par rapport à 2004.

Mais en dépit de cette succession de bonnes nouvelles, l'économie américaine reste vulnérable. Pour que les prévisions de croissance se vérifient, il faut que les créations d'emplois et les hausses de salaires restent suffisantes pour contrebalancer la ponction sur les ménages d'un baril de pétrole maintenant à plus de 65 dollars (52,66 euros).

La bonne tenue de la consommation en juillet est trompeuse. Elle tient essentiellement au boom des ventes d'automobiles lié aux rabais exceptionnels des constructeurs américains. Les acquisitions de véhicules ont augmenté de 6,7 % en juillet et les autres dépenses de 0,3 %. Et encore, ce dernier chiffre tient surtout à la progression de 2,4 % des achats dans les stations-service. Sans cela, les ventes de détail ont augmenté de seulement 0,1 %.

"Cela peut être la conséquence de l'envolée des prix à la pompe ou seulement signifier que les dépenses ont été temporairement consacrées à l'auto mobile", estime Ian Shepherdson, économiste de High Frequency Economics.

Les problèmes structurels n'ont pas disparu. En ramenant le loyer de l'argent au plus bas depuis 1959, la Fed a encouragé les ménages à consommer et à emprunter, mais les a dissuadés d'épargner et a mis le feu au marché de l'immobilier.

BULLE IMMOBILIÈRE

L'activité est soutenue, mais ce sont les capitaux étrangers qui la financent. Le taux d'épargne des ménages ­ il mesure ce qui reste des revenus quand ont été payés les dépenses de consommation et les impôts ­ est tombé à 0 % en juin. Au deuxième trimestre, il a été en moyenne de 0,2 %, la statistique la plus faible depuis qu'elle a commencé à être calculée, il y a quarante-six ans.

Cette aberration est notamment rendue possible par la poursuite de la hausse des prix des logements. Elle se traduit pour les ménages américains, propriétaires à près de 70 % de leur résidence principale, par un effet de richesse. La valeur de leur patrimoine augmente sans qu'ils aient besoin d'épargner. Mais cette évolution signifie que la conjoncture est étroitement liée à la santé du marché de l'immobilier, qui s'apparente à une bulle.

L'autre crainte tient aux déséquilibres financiers. Le déficit budgétaire semble aujourd'hui maîtrisé. Il a fortement baissé à la suite de rentrées fiscales supérieures aux prévisions. Selon les estimations du Congrès, publiées lundi 15 août, il devrait s'élever, lors de l'année fiscale en cours qui se termine le 31 septembre, à 331 milliards de dollars contre 427 milliards attendus en janvier. En revanche, le déficit commercial semble hors de contrôle. Il a atteint 58,8 milliards de dollars en juin, avec des importations records de 165,65 milliards et des achats de pétrole de 14,58 milliards, un niveau aussi sans précédent.

Un tel déficit signifie que les Etats-Unis vivent à crédit, empruntant de l'argent à l'étranger pour y acheter de l'énergie et des produits manufacturés japonais et chinois. Ce système fonctionne tant que les investisseurs étrangers, notamment asiatiques, achètent avec leurs excédents des actifs en dollars.

Ashraf Laidi, responsable des études de MG Financial Group, signale des premiers signes de lassitude : "Les données du département du Trésor sur les flux de capitaux étrangers montrent une moyenne mensuelle de 49 milliards de dollars par mois entre mars et mai, à comparer à 80 milliards entre décembre et février."

Si pour attirer les indispensables capitaux étrangers, les taux d'intérêt obligataires aux Etats-Unis doivent remonter, cela représente un grand danger pour le pouvoir d'achat des ménages, le marché de l'immobilier et la croissance.

    La forte croissance américaine persiste, les doutes demeurent, Eric Leser, Le Monde, Article paru dans l'édition du 17.8.2005, http://www.lemonde.fr/web/article/0,1-0@2-3234,36-680430@51-679080,0.html

Des profits souvent élevés pour les entreprises

Le Monde
Encadré paru dans l'édition du 17.08.05

Voici le chiffre d'affaires et le résultat
au deuxième trimestre de grandes entreprises américaines (en dollars).

Coca-Cola : 6,31 milliards, 1,72 milliard.

McDonald's : 5,09 milliards, 530,4 millions.

GE : 41,56 milliards, 4,65 milliards.

Exxon Mobil : 88,57 milliards, 7,64 milliards.

Chevron Texaco : 48,34 milliards, 3,68 milliards.

General Motors : 48,51 milliards, une perte de 286 millions.

Ford : 44,55 milliards, 946 millions.

Time Warner : 10,74 milliards,
une perte de 321 millions à la suite de provisions exceptionnelles

de 3 milliards.

Apple : 3,52 milliards, 320 millions.

Yahoo! : 1,25 milliard, 755 millions.

eBay : 1,09 milliard, 291,6 millions.

Dell : 13,43 milliards, 1,02 milliard.

IBM : 22,27 milliards, 1,83 milliard.

Microsoft : 10,16 milliards, 2,99 milliards.

Goldman Sachs : 4,81 milliards, 865 millions.

Citigroup : 18,47 milliards, 5,07 milliards.

Boeing : 15,03 milliards, 566 millions.

Lockheed Martin : 9,29 milliards, 461 millions.

Kodak : 3,69 milliards, une perte de 146 millions.

Northwest Airlines : 3,2 milliards, une perte de 217 millions.

    Encadré de : La forte croissance américaine persiste, les doutes demeurent, Eric Leser, Le Monde, Article paru dans l'édition du 17.8.2005, http://www.lemonde.fr/web/article/0,1-0@2-3234,36-680430@51-679080,0.html

The economy

By the numbers

The economy's prospects

look rather good.

George Bush's don't yet

Aug 11th 2005
WASHINGTON, DC
From The Economist print edition

ALL presidents, whatever their confession or denomination, are closet numerologists. Numbers are how they read the mood and track the progress of the nation they govern. For George Bush, the numbers—rising casualty rates in Iraq, falling approval ratings at home—have not been good of late. Hence he is turning with some enthusiasm to a happier set of figures: those tracking the American economy's resilience and resurgence.

This week, he summoned his economic team to a meeting at his ranch in Crawford, Texas. Under a painting of a rodeo, they discussed an economy that is kicking strongly, but not bucking out of control. Output grew at an annual rate of 3.4% in the second quarter, a little slower than in the first. This was largely because firms chose to run down their inventories (subtracting 2.3 percentage points from growth) rather than making new stuff. With their shelves now depleted, companies are expected to restock in the coming months and output is expected to rebound. Some analysts now forecast growth of 5% this quarter.

Momentum is gathering. Cars left the showrooms at a near-record rate in July (20.8m a year), and existing home sales reached all-time highs the month before (7.3m a year). Factories reported faster activity and fuller order books, especially for capital goods (up by 3.9% in June) that presage stronger investment. Even the federal government is doing well. So far this fiscal year, it has collected about $210 billion more in taxes than it had by this time last year.

Best of all, hiring is steady and sure. Employers added 207,000 workers to their payrolls in July, and 42,000 more than previously thought in May and June. They have hired about 200,000 workers a month on average since the end of January—not spectacular by the standards of the 1990s, but a marked improvement on Mr Bush's first term.

The Federal Reserve has digested the same numbers as Mr Bush and reached a similar conclusion. There is much to welcome and little to fear in the economy's current progress. This week, as widely expected, it raised interest rates by a quarter-point. It has now made ten such “measured” steps since June 2004. Judging by the statement accompanying its decision, it looks set to make more such steps.

Unlike central bankers and presidents, the public at large sets little store by numbers. Only a fifth of those polled recently by CBS News thought the country's economic fortunes were improving, whatever the statisticians might tell them. More than half disapproved of Mr Bush's handling of the economy.

What explains their scepticism? In Mr Bush's first term, he was dogged by the question: Where are the jobs? Now the question is: Where are the pay rises? Workers' total compensation grew strongly for the three quarters that began in July of last year (see chart)—strongly enough to alarm some of the inflation hawks at the Fed. But these gains were probably not very widespread, confined to those lucky employees who collected juicy bonuses or cashed in their stock options. Last quarter, according to figures released on August 9th, compensation actually fell, in real terms. This will reassure the Fed for now. But Mr Bush may be less pleased: better paid workers are happier voters.

Indeed, the picture is worse for workers than these figures imply. Not all of an employee's compensation ends up in his pay packet. Much of it goes in the form of benefits, such as employer contributions to health insurance or pensions. According to the Bureau of Labour Statistics, the cost of such benefits accounted for almost 60% of the gains in compensation enjoyed by private-sector workers in the first quarter of the year, and nearly 35% of the gains in the second. By the bureau's reckoning, wages and salaries proper grew by only 2.4% in the year to June, slower than the rate of inflation.

Despite these meagre pay gains, households are eager to spend whatever they get. In June, they earned just over $9 trillion (at an annual rate) in disposable income. They duly disposed of all but $1.9 billion (0.02%) of it. Only in the month after September 11th, when shopping was deemed a patriotic duty, has the household saving-rate been lower. Households save so little of what they earn because they gain so much from what they already own. In the 12 months to March the value of their houses rose by $2.3 trillion, according to the Fed. Home prices rose by almost 15% in the year to June, the fastest in decades.

Can these gains continue? Judging by the minutes of its recent meetings, the Fed is agnostic about the existence of a bubble in the housing market. One simply cannot know for sure, it says. Even if a bubble does exist, the Fed believes it should do little about it. America's central bank is making the opposite of Pascal's wager: one cannot know whether an almighty bubble exists, so one should act as if it doesn't.

As for Mr Bush, he began his second term with the bold idea of reviving thrift in America. By reforming taxes and entitlements, he would encourage industry and frugality. Those ambitions are currently entombed in Congress and his own weakness. If it had stuck to its original schedule, his commission on fundamental tax reform would have reported by now. Instead, Mr Bush postponed its report to give himself time to sell his Social Security reform. Unfortunately, if he continues to wait for that sale to be made, the commission may never report at all.

Mr Bush's economic team now has more modest yardsticks for success. It is proud of the 217 votes it wrung out of the House of Representatives last month to secure passage of the Central American Free Trade Agreement. It is also pleased with China's small revaluation of its currency, which has bought some respite from the protectionists in Congress. Even the $286-billion transport bill—which Mr Bush once threatened to veto, but this week seemed happy to sign—is being hailed as a legislative success. Roads and bridges, not the “third rail of politics” (as Social Security is known), are about the summit of his current ambitions.

Mr Bush still has more than three years to achieve his grander goals of reforming taxes and overhauling entitlements. But before he can hope to transform the American economy, he must hope the economy's good numbers transform his own flagging ones.

    By the numbers: The economy's prospects look rather good. George Bush's don't yet, E, 11.8.2005, http://www.economist.com/world/na/displayStory.cfm?story_id=4275114

Le marché de l'emploi américain

progresse encore

5.8.2005
Le Monde.fr

Le marché américain du travail a continué de s'améliorer en juillet, avec 207 000 créations d'emplois qui viennent conforter la bonne santé de l'économie et les perspectives de hausse des taux d'intérêt. C'est une bonne nouvelle pour les analystes, qui tablaient sur 180 000 créations d'emplois seulement, et ce d'autant plus que les chiffres des mois précédents ont été révisés en nette hausse (166 000 en juin). De son côté, le taux de chômage est resté inchangé à 5 % de la population active, conformément aux attentes des économistes. L'amélioration est là aussi notable, car il était encore de 5,5 %, il y a un an.

"Nous avons là un très bon rapport qui traduit une forte croissance de l'emploi et des revenus. Il nous dit que l'économie reste en grande forme", résume l'économiste indépendant Joel Naroff. En effet, ce rapport est le dernier d'une longue série attestant du dynamisme de l'économie américaine : croissance toujours soutenue, dépenses des ménages vigoureuses...

"Les entreprises sont très rentables en ce moment et elles peuvent se permettre d'embaucher", souligne de son côté Ethan Harris, chef économiste pour les Etats-Unis chez Lehman Brothers. De fait, c'est surtout dans le tertiaire que les entreprises ont embauché le mois dernier. Le dynamisme a été notable dans le commerce de détail, surtout chez les vendeurs de vêtements à l'heure des soldes et les concessionnaires automobiles, où les rabais massifs ont fortement augmenté le volume des ventes. Les services aux professionnels et le secteur des loisirs, tirés par la restauration, ont eux créé 33 000 emplois chacun.

LA FED VA RELEVER SES TAUX

Le gouvernement s'est immédiatement félicité de la nouvelle, jugeant par la voix du secrétaire au Trésor, John Snow, que "les fondamentaux sont forts et nous progressons sur la voie de la croissance et de la prospérité". Pour les analystes, deux conclusions s'imposent. D'abord que la croissance sera sans doute plus forte que prévu cette année. Lehman Brothers aainsi révisé ses prévisions pour le second semestre à 4,25 % contre 3,5 % auparavant (en rythme annuel).

La seconde conclusion, c'est que la Réserve fédérale (FED) a toutes les chances de continuer à relever ses taux, aujourd'hui fixés à 3,25 %. Avec une économie qui tourne au-dessus de son potentiel de croissance, "la saine progression de l'emploi renforce les perspectives de resserrement monétaire", assure Stephen Gallagher de la Société générale.

L'idée est que l'économie continue à se porter comme un charme malgré les tours de vis monétaires successifs – il y en a eu neuf en un peu plus d'un an – et "cela donne le feu vert à la FED pour continuer sur cette voie", assure M. Harris. L'économiste table sur des augmentations du loyer de l'argent jusqu'en février prochain, et des taux directeurs à 4,5 % d'ici là.

Il y a une autre raison plaidant dans le même sens : les inquiétudes de la Banque centrale sur le coût du travail. En effet, le salaire horaire moyen a augmenté de 6 % en juillet, et cela va dans le sens des propos du président de la FED, Alan Greenspan, qui voit dans le coût du travail l'une des trois grandes inconnues de l'économie américaine."Ces coûts commencent à devenir la grande menace pour l'inflation. On n'est pas encore au point d'alarmer la FED, mais c'est une raison de plus pour qu'ils continuent à relever leurs taux", souligne M. Harris. La prochaine réunion de la FED est prévue mardi.

    Le marché de l'emploi américain progresse encore, lemonde.fr (avec AFP), 5.8.2005, http://www.lemonde.fr/web/article/0,1-0@2-3222,36-678069@51-630352,0.html

When F. Scott Fitzgerald pronounced

that the very rich

"are different from you and me,"

Ernest Hemingway's

famously dismissive response was:

"Yes, they have more money."

Today he might well add:

much, much, much more money.

5.6.2005
The New York Times
By DAVID CAY JOHNSTON

The people at the top of America's money pyramid have so prospered in recent years that they have pulled far ahead of the rest of the population, an analysis of tax records and other government data by The New York Times shows. They have even left behind people making hundreds of thousands of dollars a year.

Call them the hyper-rich.

They are not just a few Croesus-like rarities. Draw a line under the top 0.1 percent of income earners - the top one-thousandth. Above that line are about 145,000 taxpayers, each with at least $1.6 million in income and often much more.

The average income for the top 0.1 percent was $3 million in 2002, the latest year for which averages are available. That number is two and a half times the $1.2 million, adjusted for inflation, that group reported in 1980. No other income group rose nearly as fast.

The share of the nation's income earned by those in this uppermost category has more than doubled since 1980, to 7.4 percent in 2002. The share of income earned by the rest of the top 10 percent rose far less, and the share earned by the bottom 90 percent fell.

Next, examine the net worth of American households. The group with homes, investments and other assets worth more than $10 million comprised 338,400 households in 2001, the last year for which data are available. The number has grown more than 400 percent since 1980, after adjusting for inflation, while the total number of households has grown only 27 percent.

The Bush administration tax cuts stand to widen the gap between the hyper-rich and the rest of America. The merely rich, making hundreds of thousands of dollars a year, will shoulder a disproportionate share of the tax burden.

President Bush said during the third election debate last October that most of the tax cuts went to low- and middle-income Americans. In fact, most - 53 percent - will go to people with incomes in the top 10 percent over the first 15 years of the cuts, which began in 2001 and would have to be reauthorized in 2010. And more than 15 percent will go just to the top 0.1 percent, those 145,000 taxpayers.

The Times set out to create a financial portrait of the very richest Americans, how their incomes have changed over the decades and how the tax cuts will affect them. It is no secret that the gap between the rich and the poor has grown, but the extent to which the richest are leaving everyone else behind is not widely known.

The Treasury Department uses a computer model to examine the effects of tax cuts on various income groups but does not look in detail fine enough to differentiate among those within the top 1 percent. To determine those differences, The Times relied on a computer model based on the Treasury's. Experts at organizations representing a range of views, including the Heritage Foundation, the Cato Institute and Citizens for Tax Justice, reviewed the projections and said they were reasonable, and the Treasury Department said through a spokesman that the model was reliable.

The analysis also found the following:

¶Under the Bush tax cuts, the 400 taxpayers with the highest incomes - a minimum of $87 million in 2000, the last year for which the government will release such data - now pay income, Medicare and Social Security taxes amounting to virtually the same percentage of their incomes as people making $50,000 to $75,000.

¶Those earning more than $10 million a year now pay a lesser share of their income in these taxes than those making $100,000 to $200,000.

¶The alternative minimum tax, created 36 years ago to make sure the very richest paid taxes, takes back a growing share of the tax cuts over time from the majority of families earning $75,000 to $1 million - thousands and even tens of thousands of dollars annually. Far fewer of the very wealthiest will be affected by this tax.

The analysis examined only income reported on tax returns. The Treasury Department says that the very wealthiest find ways, legal and illegal, to shelter a lot of income from taxes. So the gap between the very richest and everyone else is almost certainly much larger.

The hyper-rich have emerged in the last three decades as the biggest winners in a remarkable transformation of the American economy characterized by, among other things, the creation of a more global marketplace, new technology and investment spurred partly by tax cuts. The stock market soared; so did pay in the highest ranks of business.

One way to understand the growing gap is to compare earnings increases over time by the vast majority of taxpayers - say, everyone in the lower 90 percent - with those at the top, say, in the uppermost 0.01 percent (now about 14,000 households, each with $5.5 million or more in income last year).

From 1950 to 1970, for example, for every additional dollar earned by the bottom 90 percent, those in the top 0.01 percent earned an additional $162, according to the Times analysis. From 1990 to 2002, for every extra dollar earned by those in the bottom 90 percent, each taxpayer at the top brought in an extra $18,000.

When F. Scott Fitzgerald pronounced that the very rich "are different from you and me,"... NYT, 5.6.2005,

http://www.nytimes.com/2005/06/05/national/class/HYPER-FINAL.html

President Ronald Reagan signed tax bills that benefited the wealthiest Americans and also gave tax breaks to the working poor. President Bill Clinton raised income taxes for the wealthiest, cut taxes on investment gains, and expanded breaks for the working poor. Mr. Bush eliminated income taxes for families making under $40,000, but his tax cuts have also benefited the wealthiest Americans far more than his predecessors' did.

The Bush administration says that the tax cuts have actually made the income tax system more progressive, shifting the burden slightly more to those with higher incomes. Still, an Internal Revenue Service study found that the only taxpayers whose share of taxes declined in 2001 and 2002 were those in the top 0.1 percent.

But a Treasury spokesman, Taylor Griffin, said the income tax system is more progressive if the measurement is the share borne by the top 40 percent of Americans rather than the top 0.1 percent.

The Times analysis also shows that over the next decade, the tax cuts Mr. Bush wants to extend indefinitely would shift the burden further from the richest Americans. With incomes of more than $1 million or so, they would get the biggest share of the breaks, in total amounts and in the drop in their share of federal taxes paid.

One reason the merely rich will fare much less well than the very richest is the alternative minimum tax. This tax, the successor to one enacted in 1969 to make sure the wealthiest Americans could not use legal loopholes to live tax-free, has never been adjusted for inflation. As a result, it stings Americans whose incomes have crept above $75,000.

The Times analysis shows that by 2010 the tax will affect more than four-fifths of the people making $100,000 to $500,000 and will take away from them nearly one-half to more than two-thirds of the recent tax cuts. For example, the group making $200,000 to $500,000 a year will lose 70 percent of their tax cut to the alternative minimum tax in 2010, an average of $9,177 for those affected.

But because of the way it is devised, the tax affects far fewer of the very richest: about a third of the taxpayers reporting more than $1 million in income. One big reason is that dividends and investment gains, which go mostly to the richest, are not subject to the tax.

Another reason that the wealthiest will fare much better is that the tax cuts over the past decade have sharply lowered rates on income from investments.

While most economists recognize that the richest are pulling away, they disagree on what this means. Those who contend that the extraordinary accumulation of wealth is a good thing say that while the rich are indeed getting richer, so are most people who work hard and save. They say that the tax cuts encourage the investment and the innovation that will make everyone better off.

When F. Scott Fitzgerald pronounced that the very rich "are different from you and me,"...

NYT, 5.6.2005,

http://www.nytimes.com/2005/06/05/national/class/HYPER-FINAL.html

"In this income data I see a snapshot of a very innovative society," said Tim Kane, an economist at the Heritage Foundation. "Lower taxes and lower marginal tax rates are leading to more growth. There's an explosion of wealth. We are so wealthy in a world that is profoundly poor."

But some of the wealthiest Americans, including Warren E. Buffett, George Soros and Ted Turner, have warned that such a concentration of wealth can turn a meritocracy into an aristocracy and ultimately stifle economic growth by putting too much of the nation's capital in the hands of inheritors rather than strivers and innovators. Speaking of the increasing concentration of incomes, Alan Greenspan, the Federal Reserve chairman, warned in Congressional testimony a year ago: "For the democratic society, that is not a very desirable thing to allow it to happen."

Others say most Americans have no problem with this trend. The central question is mobility, said Bruce R. Bartlett, an advocate of lower taxes who served in the Reagan and George H. W. Bush administrations. "As long as people think they have a chance of getting to the top, they just don't care how rich the rich are."

But in fact, economic mobility - moving from one income group to another over a lifetime - has actually stopped rising in the United States, researchers say. Some recent studies suggest it has even declined over the last generation.

    When F. Scott Fitzgerald pronounced that the very rich "are different from you and me," Ernest Hemingway's famously dismissive response was: "Yes, they have more money." Today he might well add: much, much, much more money, NYT, 5.6.2005, http://www.nytimes.com/2005/06/05/national/class/HYPER-FINAL.html

George Bush

nomme un farouche adepte du libéralisme

à la tête de la SEC

4.6.2005
Le Monde
Eric Leser

Au lendemain de l'annonce de la démission de William Donaldson (Le Monde du 3 juin), le président de la Securities and Exchange Commission (SEC), l'autorité américaine des marchés, George Bush a présenté jeudi 2 juin son successeur : Christopher Cox, 52 ans, un parlementaire républicain de Californie, que le président américain a présenté comme "un champion de la liberté d'entreprise au Congrès qui sait qu'une économie libre se construit sur la confiance" .

M. Cox est, entre autres, un spécialiste de la fiscalité et un partisan de la suppression des impôts sur les plus-values et sur les dividendes. Ses compétences embrassent la politique étrangère, l'économie et la sécurité intérieure.

Il a été président de la commission de la sécurité nationale de la Chambre basse américaine et a appartenu longtemps à la commission des finances. A ce titre, en 1995, il a participé à la rédaction d'une loi rendant plus difficiles les poursuites menées par les investisseurs contre les sociétés. Autrefois avocat d'affaires, il siège à la Chambre des représentants depuis seize ans. Il a travaillé comme conseiller juridique pendant plusieurs années à la Maison Blanche, sous la présidence de Ronald Reagan.

M. Bush, qui cède à la pression d'organisations comme le Business Roundtable, regroupant les patrons des plus grandes entreprises américaines et des puissantes chambres de commerce, a tout de même rendu hommage à M. Donaldson. "Il a accompli un travail exceptionnel et a pris son poste à un moment où notre économie faisait face à une crise d'investissement" , a-t-il reconnu.

Sous l'impulsion de M. Donaldson, arrivé en 2003 après les scandales d'Enron et de WorldCom, la SEC a pris des décisions impopulaires à Wall Street mais qui ont rétabli la confiance. Il a notamment lancé 1 700 enquêtes, qui ont rapporté plus de 7 milliards de dollars d'amendes.

M. Bush a assuré que, "dans les années à venir, Chris -Cox- va vigoureusement mettre en oeuvre les règles et les lois qui garantissent l'honnêteté et la transparence de nos marchés et de nos conseils d'administration" . Soulignant que les Etats-Unis sont "de plus en plus une nation d'actionnaires" , il a ajouté : "Maintenant plus que jamais nous devons être sûrs que les Américains peuvent compter sur l'intégrité de nos marchés."

M. Bush a demandé au Sénat de confirmer la nomination de M. Cox "le plus rapidement possible" . Le choix de M. Cox a été qualifié d'"excellent" par le patron de l'association américaine des maisons de courtage (SIA) Marc Lackritz et par le député républicain Tom DeLay (Texas). Pour ce dernier, M. Cox "est un solide allié de tous ceux qui plaident en faveur de moins de régulation et d'un gouvernement limité" .

    George Bush nomme un farouche adepte du libéralisme à la tête de la SEC, Eric Leser, Le Monde, 4.6.2005, http://www.lemonde.fr/web/imprimer_element/0,40-0@2-3222,50-657921,0.html

Des chiffres décevants

pour la création d'emplois aux Etats-Unis

3.6.2005
Le Monde, avec AFP et Reuters

Seulement 78 000 emplois ont été créés en mai aux Etats-Unis, après 274 000 en avril, soit le plus faible niveau en près de deux ans, a annoncé le ministère du travail, vendredi 3 juin. Un chiffre qui constitue une grosse déception, les analystes attendant une progression de 175 000, et représente le plus faible niveau d'emplois enregistré depuis août 2003.

Dans le même temps, le taux de chômage a légèrement reculé à 5,1 % de la population active contre 5,2 % en avril. C'est le plus bas niveau depuis septembre 2001. Mais les experts considèrent les créations d'emplois comme plus représentatives de la santé de l'économie américaine que le taux de chômage. Ils estiment qu'il faut environ 150 000 emplois nouveaux chaque mois pour absorber la hausse naturelle de la population active.

Le résultat de mai pèse donc lourd, surtout dans un contexte où les doutes sur la santé de l'économie américaine commençaient à se dissiper après les craintes d'un passage à vide en début d'année : la croissance a été récemment révisée en hausse pour le premier trimestre, la confiance des consommateurs s'est raffermie. La progression en dents de scie du marché du travail qui durait depuis quelques mois semble donc se poursuivre : un bon rapport est démenti par des chiffres décevants, le mois suivant.

MEILLEURS CHIFFRES POUR L'ÉDUCATION, LA SANTÉ ET LA CONSTRUCTION

Les créations d'emplois en mai ont été essentiellement tirées par deux secteurs : l'éducation/santé (+ 40 000) et la construction (+ 20 000). Ailleurs, les chiffres sont très faibles : 11 000 créations d'emplois pour le commerce de détail, 5 000 dans la fonction publique.

Plusieurs secteurs ont même enregistré des pertes d'emplois : 7 000 dans l'industrie, 6 000 dans le secteur des loisirs et 1 000 pour les services aux professionnels.

Le salaire horaire moyen a de nouveau augmenté en mai, progressant de 3 cents pour arriver à 16,03 dollars. Il avait déjà gagné 5 cents en avril. La durée de la semaine de travail est, pour sa part, restée inchangée, à 33,8 heures.

    Des chiffres décevants pour la création d'emplois aux Etats-Unis, Le Monde, avec AFP et Reuters, 3.6.2005, http://www.lemonde.fr/web/article/0,1-0@2-3222,36-658146@51-630352,0.html

M. Greenspan accusé

d'être trop proche de la Maison Blanche

21.5.2005
Le Monde
Eric Leser

S'il est souvent reproché à la Banque centrale européenne (BCE) son indifférence aux problèmes et aux souhaits des gouvernements européens, la Réserve fédérale américaine (Fed) et son président depuis dix-sept ans, Alan Greenspan, sont a contrario accusés de complaisance envers l'administration Bush. La Maison Blanche est si satisfaite de M. Greenspan et craint tant le vide après sa succession qu'elle souhaite, malgré son âge (79 ans), le maintenir en place encore quelques mois après l'arrivée à échéance de son poste d'administrateur, le 31 janvier 2006.

S'il reste à la tête de la Fed jusqu'au 11 mai 2006, M. Greenspan deviendra alors le président au plus long mandat de l'histoire. Pourtant, cette perspective est critiquée. D'abord, elle prolonge encore l'incertitude sur le nom de son successeur. Ensuite, cela peut être perçu "comme un nouveau signe de l'érosion des barrières qui existent entre la banque centrale et le gouvernement", estime Thomas Schlesinger, directeur de Financial Markets Center.

Le rôle politique de la Fed et de son président tient pour une part aux missions même de la banque centrale américaine. Celle-ci ne doit pas seulement assurer ­ comme la BCE ­ la stabilité des prix mais aussi soutenir l'activité. Elle est responsable devant le Congrès, où M. Greenspan vient tous les six mois se justifier. La coordination entre les politiques du gouvernement et de la Fed est permanente ­ et d'autant plus aisément que M. Greenspan et le vice-président Dick Cheney sont des proches depuis longtemps.

La Fed a joué ainsi un rôle décisif pour permettre au pays de surmonter les chocs des dernières années, de l'éclatement de la bulle Internet à la récession de 2001, en passant par les attaques terroristes, deux guerres et les scandales comptables à Wall Street. Elle a ramené le loyer de l'argent au jour le jour à 1 % ­ cela n'était pas arrivé depuis 1958 ­ et l'a maintenu à ce taux pendant un an jusqu'en juin 2004, en dépit d'une croissance de 5 %, de l'envolée des prix du pétrole, de tensions inflationnistes et du gonflement de la bulle immobilière. Mais la Fed entendait s'assurer que le marché de l'emploi était reparti, facilitant au passage la réélection de George Bush, selon ses détracteurs.

En fait, M. Greenspan privilégie depuis toujours la croissance à la rigueur monétariste, ce qui lui vaut le reproche de laisser se développer les bulles. En janvier 2004, il le reconnaissait implicitement : "Notre stratégie consiste à s'occuper des conséquences de l'apparition des bulles plutôt que des bulles elles-mêmes." Il a toujours choisi de soutenir la conjoncture, quitte à colmater ensuite les brèches créées par le trop-plein de liquidités.

Contrairement à ce que ses discours ambigus pourraient laisser croire, M. Greenspan est tout sauf un dirigeant de banque centrale orthodoxe. Républicain, nommé en août 1989 par Ronald Reagan, il a travaillé en harmonie avec l'administration démocrate Clinton pendant huit ans et vantait sa discipline fiscale. Mais il a subitement changé d'avis après la première élection de George Bush en 2000. Le patron de la Fed a alors donné son aval à une première baisse massive d'impôt. "Avec le soutien de Greenspan, les dernières objections se sont évaporées", écrivait alors Bruce Bartlett, un économiste conservateur.

Quand M. Bush a voulu de nouvelles fortes baisses d'impôts en 2003, le budget était déjà lourdement déficitaire. Mais le président de la Fed ne les a pas vraiment contestées.

Aujourd'hui, le même M. Greenspan estime qu'il sera presque impossible de réduire le déficit budgétaire après 2008 quand la génération du "baby boom" commencera à prendre sa retraite. Devant le Congrès, il a qualifié le déficit attendu cette année (427 milliards de dollars, environ 4 % du produit intérieur de brut) d'"insoutenable". Il s'inquiète d'une politique budgétaire qu'il n'a cessé de soutenir depuis quatre ans ­ ce qui lui vaut des remarques acerbes des parlementaires démocrates. Car le déficit est lié avant tout à la faiblesse des recettes fiscales.

Celles-ci ont représenté en 2004 16,3 % du PIB américain, leur niveau le plus faible depuis 1959, à comparer à 21 % en 2000 quand le budget dégageait un excédent. Selon une étude du Center on Budget and Policy Priorities (Centre sur le budget et les priorités politiques), une organisation non partisane, les baisses d'impôts ont contribué pour 48 % au trou budgétaire et les dépenses supplémentaires pour la sécurité et la défense pour 37 %.

    M. Greenspan accusé d'être trop proche de la Maison Blanche, Eric Leser, Le Monde,21.5.2005, http://www.lemonde.fr/web/article/0,1-0@2-3234,36-652169@51-646094,0.html

Running out of puff?

At the World Bank/IMF spring meetings this weekend,
officials will spend most of their time fretting about high oil prices.

But the size and growth of global imbalances
—particularly America’s twin deficits—
are the real reason to worry

Apr 14th 2005
From The Economist print edition

SPRING in Washington means the arrival of cherry blossom and, less colourfully, the world’s central bankers and finance ministers, for meetings of the World Bank and the International Monetary Fund. As the officials gather this weekend, their mood might not match the season. Top of their list of worries is the thought that high oil prices might be pushing the world economy into trouble.

Although oil prices took a tumble this week, back towards $50 a barrel, the policymakers’ concern is understandable. Oil prices are still 70% higher in real terms than they were two years ago. Granted, that pales against the great leaps of 1974, when prices jumped by 185% in real terms, and 1978-79, when they rose by 158%; but it is quite some climb nonetheless.

Lately, official worries have been publicly vented. On April 7th economists at the IMF caused a stir when they suggested the world needed to get used to a “permanent oil shock”. Thanks to strong demand and tight supply, they argued, oil prices would be substantially higher in future than they had been in the 1990s. Jean-Claude Trichet, president of the European Central Bank, recently pointed to the rise in oil prices as an “unwelcome” risk to global economic growth. In a comment reminiscent of the 1970s, he urged consumers to become “good energy savers”.

His remark is not surprising, given that the economies in Europe are stumbling. Unemployment in the euro area is 8.9%; in Germany, France and Spain it is in double digits. Manufacturing in the single-currency zone has stalled. In its latest World Economic Outlook, published this week, the IMF, like other forecasters before it, slashed its forecast for euro-area GDP growth this year, to 1.6%. The world economy’s other weak link, Japan, faltered half-way through 2004 and despite the odd spark has not yet sputtered into life again. Rising oil prices have helped neither of these giant weaklings.

Even in America, where the strength of the expansion has consistently surprised economists, there are nascent signs of slowdown and worries about oil. With job growth scarcely topping 100,000, the March employment report was much weaker than expected. Retail sales grew by only 0.3% (month-on-month) in March, less than half of what analysts had expected, suggesting that record petrol prices were wearing holes in consumers’ pockets.

No wonder that oil will be high on the agenda in Washington this weekend. In the World Economic Outlook, the IMF reckons that global growth in 2005 will be 0.8 percentage points lower than last year. It ascribes around a third of the reduction to higher oil prices. Even that forecast was based on prices slightly lower than they are now. More worrying, economists think that oil prices do not have a linear impact on output. Beyond some point (trouble is, no one knows what) they begin to hit harder.

So far, however, it is perhaps remarkable how little impact rising oil prices have had. Last year, after all, global GDP grew by 5.1%, the fastest rate in a generation. There are several reasons for this. The world economy is much less oil-intensive than it used to be. In contrast to the supply shocks of the 1970s, much of the recent run-up in prices has been caused by rapidly rising demand: oil is dear in part because some economies, especially America’s and China’s, have been growing vigorously. Central banks’ strong reputations for fighting inflation have stopped the translation of higher oil prices into wage-price spirals. These fortuitous conditions may not last, but for now they are good reasons not to be too pessimistic.

High oil prices do, however, exacerbate the real weakness in the world economy: the imbalanced nature of global growth. Behind the robust overall performance lies a stark dichotomy between the robust (America and China, in particular) and the wheezing (Japan and continental Europe). Even though all these countries are oil importers, they have reacted very differently to higher prices. America and China have, so far, shrugged them off, while weaker economies have seen domestic demand shrivel further. This has exaggerated already gaping external imbalances, particularly America’s soaring trade and current-account deficits.

According to statistics released on April 12th, America’s monthly trade deficit reached a record $61 billion in February (see chart). The climb in oil prices may mean another record in March—although much of February’s increase reflected sharp growth in non-oil imports, which were 16% higher than in February 2004.

Brad Setser, a former Treasury official who is now at Roubini Global Economics, an economic-analysis firm, reckons that if non-oil import growth continues at its recent pace and the oil price stays over $50 a barrel, America’s annual trade deficit would reach nearly $800 billion by the end of the year. That said, the figure may not get that high, because $50 oil ought to dampen American consumer demand and hence import growth.

Running out of puff?, E, 16.4.2005

Be happy, it’s spring

It is possible to be sanguine about America’s ever more colossal deficits, just as it is about oil. Certainly, the doomsday scenarios of a dollar crash or a hard landing for the American economy are not in sight. America has had little trouble attracting the necessary capital to fund its soaring deficits. Though Asia’s central banks are still big purchasers, they are not the only ones. Thanks to soaring prices, oil exporters have been building up their surpluses. Russia’s foreign-exchange reserves, for instance, are now over $130 billion. Many of these oil exporters are choosing dollar assets. The dollar has strengthened since the beginning of 2005 and long-term interest rates remain remarkably low.

This calm may explain why the world’s finance ministers have done so little to wean themselves off their addiction to American-led growth and why they will spend most of their time in Washington fretting about oil. That is a pity, for while the oil price seems to be the most imminent risk, the size and rate of growth of the global imbalances are the real reason to worry. If the world economy continues on autopilot, those imbalances are set to increase. And you do not need to be a Cassandra to predict that, eventually, they will create a nasty problem.

    Running out of puff?: At the World Bank/IMF spring meetings this weekend, officials will spend most of their time fretting about high oil prices. But the size and growth of global imbalances—particularly America’s twin deficits—are the real reason to worry, E, Apr 14th 2005, From The Economist print edition, http://www.economist.com/agenda/displayStory.cfm?story_id=3868421

Ryan Donnell for The New York Times

Dover Downs, with a harness racetrack, slot machines and Nascar track,

put $102 million from slot machines alone

into Delaware's budget last year.

Now the state faces competition from Maryland and Pennsylvania.

As Gambling Grows, States Depend on Their Cut

March 31, 2005        By FOX BUTTERFIELD        The New York Times

http://www.nytimes.com/2005/03/31/national/31gamble.html

As Gambling Grows,

States Depend on Their Cut

March 31, 2005

The New York Times

By FOX BUTTERFIELD

DOVER, Del. - Gambling revenues, once a mere trickle, have become a critical stream of income in a number of states, in some cases surpassing traditional sources like the corporate income tax and helping states lower personal income or property taxes.

The sums are so alluring that some officials are concerned that their states are becoming as addicted as problem gamblers. "We're drunk on gambling revenue," said Representative Wayne A. Smith, the Republican who is House majority leader in the Delaware Legislature. "Gambling revenues are like free money."

In Rhode Island, South Dakota, Louisiana, Oregon and, most of all, Nevada, taxes from casinos, slot machines at racetracks and lotteries make up more than 10 percent of overall revenues, according to a new report. In Delaware, West Virginia, Indiana, Iowa and Mississippi, gambling revenues are fast approaching 10 percent.

So vital has the money become that in Rhode Island, gambling revenue has surpassed the corporate income tax to become the state's third largest source of income, after the personal income and sales tax. It has enabled the state to avoid raising its income tax for 10 years.

Because of gambling, South Dakota officials were able to push through a 20 percent reduction in property taxes a decade ago by increasing to 50 percent the state's share of gambling revenue from video lottery terminals, up from 37 percent.

A property tax reduction was also the main argument in Pennsylvania for legalizing gambling when the Legislature last year authorized slot machines at racetracks and casinos after years of intense opposition.

Here in Delaware, where video slot machines were legalized in 1994 as a way to revive ailing horse racing and horse farming industries, racetracks are thriving, horse farms have been preserved and the legislature, unexpectedly, has been able to cut the top personal income tax rate over several years during the late 1990's to 5.9 percent, from 8.4 percent, a reduction of nearly one-third.

The scenes that fuel Delaware's success take place every night. On a recent cold, rainy weeknight, many of the 2,500 video slot machines at Dover Downs here were clinking steadily, as customers from as far as Baltimore, Washington and Richmond, Va., pressed the play button every three seconds, as fast as the electronic terminals can spin. That was good news for the state, since Dover Downs, a combination harness racetrack, Las Vegas-style hotel, slot machine emporium and Nascar track, pumped $102 million from its slot machines alone into the budget last year. Delaware over all got $222 million from gambling - 8.1 percent of its $2.72 billion in state revenues.

But Delaware, like most states that rely on gambling revenue, now faces a danger - competition from nearby states for the same dollars.

Some 70 percent of gambling losses in Delaware's three "racinos," racetracks with video slot machines, come from visitors from Pennsylvania and Maryland, according to the Delaware Department of Finance. But Pennsylvania legalized slot machines last year and the Maryland Legislature is debating a bill to legalize gambling there.

If Pennsylvania and Maryland install all the slot machines they are considering, Delaware could lose $120 million annually, almost 5 percent of state revenues, said Tom Cook, a spokesman for the Department of Finance.

In Dover, the looming battle with Pennsylvania and Maryland has touched off a debate pitting the governor, Ruth Ann Minner, against many legislators.

"We have legislators every day who propose opening new venues, like a big casino on the waterfront in Wilmington or a floating barge in the Delaware River," said Governor Minner, a Democrat. "But there are only so many dollars that are going to be spent on gambling, and I don't want to build that into the base of my budget and then find Pennsylvania and Maryland leaving a $120 million hole in it."

So Governor Minner has decided, in her words, "to draw a line in the sand." She has allowed longer hours at the state's three racinos and encouraged them to modernize to attract out-of-state bettors. But she is saying no to stand-alone casinos or other proposed new forms of gambling like blackjack tables and sports betting.

Similar dilemmas are cropping up around the country now that 48 states, with the exception of Utah and Hawaii, have legalized some form of gambling.

Like Delaware, South Dakota first legalized gambling for a limited purpose - allowing casinos in the decaying frontier town of Deadwood to try to preserve it.

But South Dakota now gets $112.8 million a year from gambling, most of it from video slot machines in bars all over the state operated by the state lottery. Gambling accounts for 13.2 percent of South Dakota's revenue, according to state figures.

David Knudson, a Republican state senator from Sioux Falls, concedes that gambling has brought some benefits. In 1995 he was chief of staff to then Gov. Bill Janklow when South Dakota was able to push through the 20 percent property tax reduction because of gambling revenue.

"But that only increased our dependence on gambling," Mr. Knudson said. He noted that gambling opponents often cite the danger of addiction for individual gamblers, and said, "But the biggest addict turns out to be the state government that becomes dependent on it."

In 2000, worried about an increase in divorces, crime and suicide among problem gamblers, Mr. Knudson supported a ballot issue to repeal the law legalizing the state lottery video slot machines. But many members of the Legislature argued that the state would have to come up with alternative sources of money, Senator Knudson said, and the measure was defeated.

Iowa, which pioneered modern riverboat gambling in 1989 when it legalized gambling as long as the boats were cruising on a river, is continually striving to keep ahead of neighboring states. When Illinois and Missouri soon passed similar laws, the Iowa Legislature voted to add slot machines at racetracks. It also negotiated with local Indian tribes for tribal casinos.

Last year, facing a $140 million budget gap that threatened education programs, Iowa added table gambling at racetracks, dropped a moratorium on new gambling licenses and allowed gambling on the riverboats when they were tied ashore.

Iowa derives 6.65 percent of its state revenue from gambling, according to a new study by William N. Thompson, a professor of public administration at the University of Nevada, Las Vegas, and a colleague at the university, Christopher Stream.

The analysis, which Mr. Thompson says is the first to measure the percentage of state revenue from gambling, was done for the Wisconsin Policy Research Institute, a business-sponsored organization and based on 2003 data.

Nevada, not surprisingly, gets by far the largest proportion of its revenue from gambling, 42.6 percent, Professor Thompson found. South Dakota is second, with 13.2 percent.

Rhode Island is another state that legalized video slot machines for a limited purpose - to help its aging horse and dog racing tracks. When the slots were introduced in 1992, the income was small, but the amount has almost doubled every year since, said Joseph A. Montalbano, the president of the Rhode Island Senate, and has reached $281 million a year, including the state's conventional lottery.

Not only has gambling revenue surpassed the corporate income tax in Rhode Island and enabled the state to avoid raising its income tax, gambling also helps teach children, pay for medical care for the poor and repair roads.

But Rhode Island, too, faces competition. There is concern that Massachusetts, the source of many customers at Rhode Island's racinos, will legalize slot machines at its own racetracks, and within an hour's drive of Providence, the large Indian-owned casinos in Connecticut are expanding.

"We're in a Catch-22 situation, with our third-largest revenue source being surrounded by these other gambling facilities," said Senator Montalbano, a Democrat.

So Senator Montalbano proposed legislation last week that would allow the new owner of Lincoln Park, Rhode Island's largest racetrack, to increase its 2,543 video slot machines by 1,750 in exchange for a $125 million investment to upgrade the aging track.

Here in Dover, Denis McGlynn, president and chief executive of Dover Downs Gaming and Entertainment Inc., also sees the need to expand, perhaps by allowing his slots to stay open 24 hours a day instead of closing at 4 a.m.

"Sometimes you play the cards you're dealt," said Mr. McGlynn, whose company has prospered with the legalization of gambling in Delaware and is now a publicly owned corporation. "Delaware is small. It's not Silicon Valley. People are not pouring in to build new industries from the ground up. But people are willing to come here and gamble and contribute to the state's revenues."

    As Gambling Grows, States Depend on Their Cut, NYT, 31.3.2005, http://www.nytimes.com/2005/03/31/national/31gamble.html?hp&ex=1112331600&en=fd3ad7cb838ab4b5&ei=5094&partner=homepage

Etats-Unis :

deuxième plus gros déficit commercial

de leur histoire en janvier

Le déficit commercial américain
a atteint 58,3 milliards de dollars.

Ce chiffre inquiète les politiques,
les analystes et les partenaires des Etats-Unis.

Lemonde.fr

11.03.05

58,3 milliards de dollars de déficit commercial. Le chiffre peut faire tourner la tête des Américains, qui affichent le deuxième déficit commercial le plus élevé de leur histoire. La raison ? L'achat en masse de voitures et de biens de consommation, a expliqué, vendredi, le département du commerce

Cette mauvaise nouvelle a déçu les politiques comme les analystes, qui tablaient sur un déficit de l'ordre de 56,8 milliards de dollars. Il marque une nette aggravation (+ 4,7 %) par rapport au mois de décembre, qui avait affiché un déficit de 55,7 milliards de dollars.

Les Etats-Unis sont ainsi à une encablure du record absolu accusé par leur balance commerciale en novembre dernier (59,4 milliards de dollars). Ils commencent 2005 sur la lancée de 2004, marquée par des aggravations successives du déficit commercial, et qui s'était soldée par un déficit record de 618 milliards de dollars sur l'ensemble de l'année.

LE DÉFICIT SE CREUSE

Ce déficit inquiète les partenaires des Etats-Unis, qui voient le pays vivre au-dessus de ses moyens et dépendre de plus en plus des capitaux étrangers.

Le creusement du déficit en janvier a des raisons récurrentes : les exportations ont augmenté (+ 0,4 %, à 100,8 milliards de dollars), mais dans le même temps les importations ont encore plus progressé (+ 1,9 %, à 159,1 milliards de dollars).

Du côté des importations, les achats par les Américains de biens de consommation, dont les voitures, ont atteints des niveaux records. Signe de la reprise des investissements dans les entreprises, les importations de biens d'équipement ont affiché leur plus haut niveau depuis septembre 2000.

Le pétrole, en revanche, a moins pesé sur la balance, avec une baisse des achats : le prix moyen d'importation a en effet fortement baissé, à 35,35 dollars, revenant au plus bas depuis juillet 2004.

    Etats-Unis : deuxième plus gros déficit commercial de leur histoire en janvier, Lemonde.fr (avec AFP), 11.3.2005, http://www.lemonde.fr/web/article/0,1-0@2-3222,36-401285,0.html

La croissance américaine

provoque une forte hausse

des créations d'emploi

5.3.2005

Le Monde

New york de notre correspondant

L'économie américaine a créé 262 000 emplois en février, sa meilleure performance depuis quatre mois, selon les chiffres publiés vendredi 4 mars par le département du travail. Elle est supérieure aux prévisions des analystes, qui attendaient 225 000 embauches nettes. Dans le même temps, le taux de chômage a augmenté à 5,4 % de la population active, contre 5,2 % en janvier, mais il s'agit aussi paradoxalement d'une bonne nouvelle. Elle montre que des Américains découragés, qui avaient renoncé à trouver du travail, ont à nouveau l'espoir d'en obtenir un. La population active des Etats-Unis atteint maintenant 148,1 millions de personnes, dont 8 millions à la recherche d'un emploi.

Le décalage entre une activité soutenue et la relative faiblesse des créations d'emplois a été tout au long de l'année dernière et de la campagne présidentielle un sujet de polémique. Mais la crainte d'une "croissance sans emplois", conséquence des délocalisations, des gains de productivité et de la prudence des chefs d'entreprise, s'est estompée. Les Etats-Unis ont créé 2,4 millions de postes l'an dernier et près de 400 000 lors des deux premiers mois de 2005.

La santé du marché du travail a d'autant plus d'importance pour l'économie américaine qu'elle a un impact direct sur le moral des ménages et donc sur la consommation, qui représente près de 70 % du produit intérieur brut (PIB). L'optimisme du consommateur américain a permis de surmonter la récession de 2001, le choc des attentats du 11-Septembre, l'impact des scandales à Wall Street et celui des guerres d'Afghanistan et d'Irak.

Les ménages très endettés ont été soutenus depuis 2001 par les baisses massives de taux d'intérêt et d'impôts. Deux stimulants qui ont cessé d'agir aujourd'hui. Les taux remontent depuis juin 2004 et les derniers chèques de remboursement du Trésor ont été versés l'été dernier. Pour que les Américains, dont le pouvoir d'achat a été affecté par l'envolée des prix du pétrole, continuent à consommer, il faut que les salaires augmentent ou que des emplois soient créés en nombre. Les rémunérations stagnent, mais les embauches sont là et dopent Wall Street. L'indice Dow Jones de la Bourse de New York a fini, vendredi, en hausse de 1 % et a dépassé le seuil des 10 900 points pour la première fois depuis juin 2001. "Nous avons la confirmation que l'expansion se poursuit à un bon rythme, pas trop faible, ce qui pèserait sur l'emploi, et pas trop fort, ce qui créerait de l'inflation", estime Hans Olsen, du groupe d'investissement Bingham Legg Advisers.

Les dernières statistiques confirment le dynamisme de l'activité après un passage à vide durant l'été 2004. La consommation a été supérieure aux attentes en février. Les ventes de détail ont augmenté de 4,4 %, en rythme annuel, selon les chiffres préliminaires provenant de 52 chaînes de magasins.

DÉFICIT "INSOUTENABLE"

D'après les derniers calculs de l'établissement financier Merrill Lynch, les bénéfices des entreprises américaines entrant dans la composition de l'indice SP 500 ont augmenté en moyenne de 24,3 % en 2004, la meilleure performance depuis dix ans.

Les prévisions de croissance pour 2005 sont régulièrement révisées à la hausse à plus de 3,7 % en moyenne. "Compte tenu d'une dynamique plus forte qu'attendu, nous avons revu à la fois nos estimations de croissance et de profits des entreprises pour cette année. Au premier trimestre, le PIB devrait augmenter de 4,3 % en rythme annuel, au lieu de 3,2 % initialement attendu, et au deuxième trimestre de 3,5 % au lieu de 3 %", explique David Rosenberg, économiste en chef de Merrill Lynch.

Ces chiffres illustrent les paradoxes de l'économie américaine. Son dynamisme est impressionnant et la croissance est alimentée aujourd'hui de façon relativement saine, par la demande, la production et les embauches, et non par les baisses de taux et d'impôts. Mais, dans le même temps, les déséquilibres ne cessent de prendre de l'ampleur. Les déficits budgétaires et commerciaux ont atteint des niveaux sans précédent et représentent un risque considérable. Mercredi devant le Congrès, Alan Greenspan, le président de la Réserve fédérale (la banque centrale américaine), a mis les parlementaires américains en garde contre un déficit budgétaire (427 milliards de dollars prévus en 2005) qualifié "d'insoutenable".

    La croissance américaine provoque une forte hausse des créations d'emploi, Eric Leser, Le Monde, article paru dans l'édition deu 6.3.2005, http://www.lemonde.fr/web/imprimer_article/0,1-0@2-3210,36-400421,0.html

Trade gap hits record in 2004

Deficit jumps 24% to $618 billion

as import growth outstrips exports;

falling dollar not much help.

February 10, 2005: 1:42 PM EST

By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - The U.S. trade deficit jumped 24 percent to a record high last year, the government said Thursday, though the nation's trade picture showed slight improvement at the end of the year.

The Commerce Department reported that while the trade deficit narrowed slightly in December from November's monthly record, the deficit for the full year grew to $617.7 billion, up $121 billion from 2003, the previous annual record.

For December, the gap between imports and exports fell to $56.4 billion from $59.3 billion for November, which was revised slightly lower. Analysts had forecast a gap of about $57 billion for December.

Much of the decline in December came as the value of oil imports fell $2.2 billion due to an 11 percent decline in average import prices from November and a 5 percent drop in imports.

The growth in the annual deficit came despite strong U.S. exports.

December saw exports of goods and services cross the $100 billion mark in a single month for the first time, as the weaker dollar made U.S.-produced goods more competitive in many other countries. Increased exports of capital goods, industrial supplies and materials and consumer products fueled the increase.

"The good news is that we're moving, albeit slowly, in the right direction and there are signs of further improvement on the horizon," said Oscar Gonzalez, economist with John Hancock Financial.

"There is evidence that the weakening dollar also is beginning to have a positive effect. This is a good sign both for the future of our exports and for our hope to narrow the trade gap."

A weaker dollar makes U.S. exports more competitive in other countries.

While service exports were little changed in December, services is where the United States has the greatest strength in trade. The nation exported $48.5 billion more in services than it imported last year.

Overall, exports of goods and services grew 12 percent to $1.14 trillion last year, but imports jumped 16 percent to $1.76 trillion.

As important as trade is to the nation's economy, a report on December activity in early February is considered somewhat old news by investors and thus prompted little reaction in financial markets.

The dollar rose against the yen but slipped against the euro following the report.

"The number itself wasn't very surprising," said Lehman Brothers Chief Economist Ethan Harris. "(Federal Reserve Chairman Alan) Greenspan's comments last week that the trade gap might start getting smaller raised attention and some hopes. But I didn't agree with him about that."

Harris estimated that the trade gap will continue to rise, topping $700 billion in 2005. But he said that overall he thinks the economy can absorb these rising imports.

"I'm not a big fan of describing trade as costing jobs," he said. He said the current trade situation has prompted the administration and the Fed to do more to stimulate the U.S. economy, leaving the nation's economy growing at a solid pace, even with rising imports.

Harris said his worry now is the sale of U.S. Treasury bonds to Asian banks that in effect acts as loans to the United States, where consumers then buy merchandise produced in Asia and elsewhere.

"To me the basic problem is we're handing over too much control of the economy to the fickle fate of foreign capital inflows," he said. "While everyone says it's a ticking time bomb, it's difficult to say how short the fuse is. As long as everything is quiet and there's no political problem, it's not a big deal."

But some economists believe the nation's trade policies are coming at the expense of growth and jobs at home.

"It's lowering growth by one to one-and-a-half percentage points," said University of Maryland professor Peter Morici. "If we cut the deficit in half, we'd pick up 5 million jobs in three years and the unemployment rate would fall to 4 percent."

Morici said the intervention of the Chinese government in currency markets, keeping the Chinese yuan basically pegged to the dollar, is responsible for much of the U.S. trade woes.

Without that peg, the Chinese currency would probably rise, cutting much of the competitive advantage Chinese manufacturers have versus their U.S. counterparts.

The gap in merchandise trade with China jumped nearly 31 percent to nearly $162 billion for all of 2004 -- by far the biggest gap with any single partner.

The 25 nations in or coming into the European Union together had a trade surplus of $110 billion with the United States last year, up 12.4 percent.

The U.S. trade gap with OPEC members was only $71.9 billion during the year, even as it soared 40 percent due largely to higher oil prices.

    CNN, 10.2.2005, http://money.cnn.com/2005/02/10/news/economy/trade/

USA trade deficit        CNN        10.2.2005
http://money.cnn.com/2005/02/10/news/economy/trade/ 

War cost drives

record [ federal budget ] deficit

By Andrea Stone, USA TODAY

25.1.2005

WASHINGTON — The Bush administration said Tuesday it will need at least $80 billion more to pay for the wars in Iraq and Afghanistan and other foreign policy priorities, pushing the total military and reconstruction tab beyond $300 billion. The new spending would make this year's federal budget deficit the largest in history.

New estimates from the White House and Congress, made public two weeks before President Bush is to unveil details of his 2006 budget, alarmed Republicans and angered Democrats:

•The White House Office of Management and Budget said the $80 billion will be needed for troops, equipment, training Iraqi forces and other operations. The funds come on top of $228 billion provided by Congress for the wars and rebuilding costs. (Related story: Bush wants $80B more for wars)

Ahead of Sunday's elections in Iraq, Bush said the funding "makes clear to terrorists that our resolve is firm, and we will complete our mission."

•The Congressional Budget Office said this year's deficit will be $368 billion before war costs are added in. Last year's $412 billion deficit [ 2004's ] was the largest in history. The White House, based on its estimates, said the 2005 budget deficit will be $427 billion with the war costs included. That would be the largest ever in dollars; as a percentage of the economy, the deficit was larger in 1983 under President Reagan.

The White House request doesn't include at least $350 million in emergency aid that the administration pledged for relief efforts after last month's tsunami in southern Asia. It also omits two of Bush's domestic priorities: adding private investment accounts to Social Security and extending tax cuts, which could add several trillion dollars to the long-term deficit.

Taken together, the new estimates appear to make Bush's goal of halving the deficit by 2009 more difficult. They also put renewed pressure on the White House and Congress to address rising red ink.

"If we do nothing, our kids and grandkids will be overwhelmed by the costs of our inaction," said Senate Budget Committee Chairman Judd Gregg, R-N.H.

"It seems that the president's solution to every problem he faces is to borrow more money," said Sen. Kent Conrad, D-N.D., top Democrat on the panel.

But White House spokesman Scott McClellan defended Bush's economic policies. "The president has a deficit reduction plan," he said. "It's based on strong economic growth and spending restraint."

The funding request includes money to help the new Afghan government fight a thriving drug trade; $1.5 billion to build a U.S. embassy in Baghdad; assistance for the new Palestinian government; and humanitarian aid in war-torn Darfur, Sudan.

The administration said the Iraq war is costing $4.3 billion a month and Afghanistan $800 million a month.

"The real question is how the administration will be able to accomplish its many priorities — the war on terror, Social Security reform, tax reform — while ... cutting the budget deficit in half," said Maya MacGuineas of the Committee for a Responsible Federal Budget.

    USA Today, 25.1.2005, http://www.usatoday.com/news/washington/2005-01-25-budget-deficits_x.htm

USA Today        25.1.2005
http://www.usatoday.com/news/washington
/2005-01-25-budget-deficits_x.ht

Le déficit commercial américain

atteint un niveau record

10.02.2005

LEMONDE.FR

Le déficit de la balance commerciale des Etats-Unis a atteint un nouveau record pour l'année 2004, à 617,7 milliards de dollars (483,45 milliards d'euros), selon les chiffres du département du commerce publiés jeudi 10 février. Les raisons principales sont les prix élevés du pétrole, et un appétit marqué pour les produits étrangers en dépit du faible dollar. Les principaux partenaires demeurent inquiets de l'ampleur du déficit.

Ce déficit représente une aggravation de 24,4 % par rapport à l'année 2003, qui s'était soldée par un déséquilibre de 496,5 milliards de dollars (388,59 milliards d'euros) de la balance commerciale. Il marque le troisième record consécutif pour le déficit commercial américain.

Pour le mois de décembre 2004, le déficit s'est réduit de 4,9 % à 56,4 milliards de dollars (54,14 milliards d'euros). Il est un peu moins élevé que les 57 milliards de dollars (soit 44,61 milliards d'euros) attendus par les analystes. La réduction de décembre a eu lieu grâce à la hausse des exportations (+3,2 %, à 100,2 milliards de dollars), un record porté par les fournitures industrielles, les automobiles et les biens de consommation. Malgré cette réduction, le déficit américain a suivi une tendance à l'emballement depuis le début de l'année, où il s'établissait encore autour de 46 milliards de dollars (36 milliards d'euros).

Dans le même temps, les importations ont très peu progressé en décembre (+ 0,1 %, à 156,6 milliards de dollars, 122,56 milliards d'euros), en raison notamment de la baisse des prix d'importation du pétrole (la plus forte depuis février 1991) et d'un petit recul des importations de biens de consommation.

En outre, le département du commerce a un peu révisé à la baisse le déficit de novembre à 59,3 milliards de dollars (46,41 milliards d'euros), contre les 60,3 milliards de dollars estimés initialement, notamment en raison d'une erreur de calcul des douanes canadiennes.

IMPORTATIONS RECORD

Il reflète sur l'ensemble de 2004 un niveau d'importations record (+ 17,9 %, à 1 764 milliards de dollars), que les exportations ne parviennent pas à compenser en dépit de leur niveau lui aussi record (+ 13 %, à 1 146 milliards de dollars).

Il semble donc que la baisse du dollar ne soit pas encore parvenue à donner aux entreprises américaines le coup de pouce décisif pour doper leurs ventes hors des Etats-Unis, ni à handicaper vraiment leurs concurrents étrangers sur le marché américain.

Le président de la Réserve fédérale (Fed), Alan Greenspan, avait expliqué ce phénomène la semaine dernière par une compression maximale des marges des entreprises étrangères désireuses de préserver leurs parts de marché, tout en soulignant qu'elles ne pourraient continuer indéfiniment ce processus. Il s'était montré optimiste sur le déficit commercial américain, jugeant que les pressions des marchés devaient le "stabiliser, voire diminuer à long terme", et que "certaines forces de l'économie américaine semblent aller dans la même direction".

PARTENAIRES INQUIETS

Le billet vert a perdu 30 % environ face à l'euro entre 2002 et 2004. Ce déficit inquiète pourtant les partenaires des Etats-Unis, qui voient le pays vivre au-dessus de ses moyens et dépendre de plus en plus des capitaux étrangers.

Le déséquilibre des comptes américains en 2004 s'explique notamment par l'alourdissement de la facture pétrolière, qui a creusé un déficit record de 164 milliards de dollars (soit 128,36 milliards d'euros) à elle seule, contre 120 milliards de dollars en 2003. Le prix moyen du baril à l'importation était, l'an dernier, au plus haut depuis 1981.

Au-delà du pétrole, les Américains ont continué d'importer à un rythme record des produits alimentaires (62,2 milliards de dollars), des fournitures industrielles (412 milliards), des voitures (228 milliards) et des biens de consommation (373 milliards).

Cet appétit de produits étrangers s'est traduit par une ribambelle de déficits records : avec le Canada (66 milliards de dollars US), l'Union européenne (110 milliards de dollars, soit 86,09 milliards de dollars), les pays de l'OPEP (72 milliards de dollars) et bien sûr la Chine, qui représente à elle seule plus du quart du déficit américain à 162 milliards de dollars, soit 126,79 milliards d'euros.

    Source : Le Monde, avec AFP, 10.2.2005, http://www.lemonde.fr/web/article/0,1-0@2-3210,36-397652,0.html

Déficit américain record

de 422 milliards de dollars pour 2004

Cette somme, jamais atteinte jusqu'à aujourd'hui,
est cependant moins importante que prévu.

Le déficit budgétaire américain devrait [ voir plus haut les chiffres définitifs ] atteindre un record de 422 milliards de dollars pour l'exercice fiscal 2004, selon les derniers chiffres publiés, mardi 7 septembre, par le Bureau du budget du Congrès (CBO), soit moins que les 445 milliards de dollars prévus par la Maison Blanche.

Ce chiffre de 422 milliards de dollars de déficit pour l'année fiscale 2004 - close le 30 septembre prochain - constitue un record jamais atteint aux Etats-Unis, selon le CBO. Ce montant record en dollars représente ainsi 3,6 % du produit intérieur brut (PIB).

Pour 2005, le déficit américain devrait être ramené à 348 milliards de dollars, selon les prévisions du CBO, soit 2,8 % du PIB. En 2003, le déficit avait atteint les 375 milliards de dollars.

    Source : Le Monde / Avec AFP, 7.9.2004, http://www.lemonde.fr/web/article/0,1-0@2-3222,36-378208,0.html

Etats-Unis :

un budget de la défense record

de 422 milliards de dollars

Le projet budgétaire requiert que l'Armée de terre et le corps des Marines accroissent leurs effectifs de 30 000 hommes au cours des trois prochaines années.

La Chambre américaine des représentants, à majorité républicaine, a adopté, jeudi 20 mai, par 391 voix contre 34 un projet de budget de la défense record de 422 milliards de dollars pour l'année fiscale 2005.

Cette enveloppe, en hausse de 5,2 % sur celle de 2004 et qui doit encore être votée par le Sénat, comprend une rallonge de 25 milliards de dollars requise par le président George W. Bush.

    21.5.2004, Le Monde / avec AFP,  http://www.lemonde.fr/web/article/0,1-0@2-3222,36-365644,0.html

USA > Gross Domestic Product        1940-2000

 

The gross domestic product (GDP)

measures the value of all goods and services produced in a country.

The GDP is calculated by adding personal spending,

government spending, investment, and net exports (exports minus imports).

This chart shows the GDP of the United States from 1940 to 2000.

Figures for each year are calculated using the value of a dollar in 1996

to neutralize the distorting effects of inflation.

© Microsoft Corporation. All Rights Reserved.
http://encarta.msn.com/media_461520374_761580660_-1_1/Gross_Domestic_Product_United_States.html
copié 17.2.2005
 

United States

Ten economic indicators from 2000 to 2003

26.5.2004

The Economist

Source : The Economist, 26.5.2004, http://www.economist.com/countries/USA/profile.cfm?folder=Profile%2DEconomic%20Data

Lire aussi http://www.economist.com/countries/USA/profile.cfm?folder=Profile-Economic%20Structure

U.S. Department of Commerce
Bureau of Economic Analysis
http://bea.gov/beahome.html

U.S. Department of Labor > Bureau of Labor Statistics
http://www.bls.gov/

Budget of the United States Government: Browse Fiscal Year 2005
http://www.gpoaccess.gov/usbudget/fy05/browse.html

United States Gross Domestic Product (GDP)
http://www.cia.gov/cia/publications/factbook/geos/us.html
http://www.eia.doe.gov/emeu/international/other.html#IntlGDP
http://www.bsu.edu/web/bbr/IBB/US/qtable.htm
http://en.wikipedia.org/wiki/Gross_domestic_product

United States > Energy
http://www.eia.doe.gov/emeu/cabs/usa.html

Reuters
http://www.reuters.com/

Bloomberg
http://www.bloomberg.com/

Related > Anglonautes

Cartoons > Rich and Poor