Claims for U.S. jobless benefits dropped last week from a three-month high, pointing to an improvement in the labor market that is slow to develop.
Initial jobless applications fell by 29,000 to 469,000 in the week ended Feb. 27, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance decreased to the lowest level in a year, while those receiving extended benefits climbed.
Some companies are still trimming payrolls to contain costs amid weak sales as the U.S. emerges from the worst recession since the 1930s. An unemployment rate that’s forecast to average 9.8 percent this year may restrain consumer spending, which accounts for about 70 percent of the economy.
“We are in this limbo state where it is not clear if job growth has started yet,” Ethan Harris, head of economics for North America at Bank of America Merrill Lynch Global Research in New York, said in a Bloomberg Television interview. “Many companies say they over-reacted and fired a lot of people, more than they needed to, with the news of the recession. So, we’re expecting broad-based re-hiring.”
Economists forecast weekly claims would fall to 470,000, from a previously estimated 496,000 for the week ended Feb. 20, according to the median of 42 projections in a Bloomberg News survey. Estimates ranged from 440,000 to 515,000.
Stock-index futures rose after the report. Futures on the Standard & Poor’s 500 Index expiring this month increased 0.2 percent to 1,120.4 at 9:03 a.m. in New York.
Productivity Surging
Another Labor Department report today showed the productivity of U.S. workers kept surging in the fourth quarter as companies squeezed more work out of employees to boost earnings.
A measure of employee output per hour rose at a 6.9 percent annual rate, capping the biggest one-year gain since 2002. Labor costs dropped at a 5.9 percent pace, more than anticipated, and fell 1.7 percent for all of 2009, the biggest drop since records began six decades ago.
The four-week moving average of claims, a less volatile measure than the weekly figure, decreased to 470,750 last week from 474,250 the prior week, the report showed freecreditscore.
Continuing claims decreased by 134,000 to 4.5 million in the week ended Feb. 20, the fewest since January 2009. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Extended Benefits
Today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments increased by about 198,000 to 5.87 million in the week ended Feb. 13.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, decreased to 3.5 percent in the week ended Feb. 20 from 3.6 percent the prior week, today’s report showed. Sixteen states and territories had an increase in claims for that same week, while 37 had a decrease.
Unemployment in the U.S. dropped to 9.7 percent in January, while payrolls declined by 20,000, Labor Department figures showed last month. A government report tomorrow is forecast to show the U.S. lost 65,000 jobs in February and the unemployment rate increased to 9.8 percent, according to the survey median.
Some companies continue to cut staff. International Business Machines Corp., the world’s largest computer-services provider, fired about 2,400 workers, mostly in the U.S., according to an employee advocacy group. The cuts this week occurred around the country and across several divisions, said Lee Conrad, national director of Alliance@IBM, which represents some employees.
Recalling Workers
Other businesses are recalling workers. General Motors Co. may fill most of the 5,500 jobs created by its $1.4 billion retooling of 18 U.S. factories with laid-off workers, Diana Tremblay, the automaker’s manufacturing and labor chief, said in an interview Feb. 23.
The company’s 5,000 to 6,000 workers on indefinite layoff have first rights to any openings from the factory upgrades, including a third shift in Lordstown, Ohio, announced last week.
Instant online cash advance with next-day cash direct deposit.
In the near future, TV is going to be available anywhere, on any device, at any time. Just don’t expect it to be free.
That’s because of the big, unanswered question being asked by networks, cable companies, advertisers and technology providers: How do we make money from it?
Viewers are already taking full advantage of online television. Broadcast networks make many of their shows available on Web sites like Hulu and YouTube a day after they air, and many cable stations also put their shows on the Web.
In December, more than 178 million Americans watched TV online, streaming 33 billion shows, according to online data tracker comScore.
But the business model for free Internet television doesn’t work yet. Networks can’t get advertisers to pay the same as they do for broadcast and cable TV, and networks and cable providers are reluctant to lose their mutually beneficial partnerships.
In the traditional TV model, networks get paid tens of billions of dollars by advertisers and billions more in retransmission fees by cable and satellite providers. Satellite and cable providers get paid in subscription fees by customers.
The free Internet TV model cuts out the middle man: Networks post their content directly online and advertisers pay for the right to place their ads on the Web site and within the video. Satellite and cable providers aren’t part of the equation, and networks lose out on their licensing fees.
Advertisers hesitant to join in
The loss of revenue from cable and satellite companies isn’t the only reason why free Internet TV isn’t working yet. Advertisers remain coy: Broadcast and cable TV advertising is a $70 billion a year business, but Internet TV advertising has yet to crack $1 billion, according to Matt Wasserlauf, chief executive of online advertising network BBE.
Many advertisers are wary of sponsoring online TV, primarily because the measures of those ads’ effectiveness and reach are still up in the air, say media analysts.
"Advertisers aren’t going to pay for the right to sponsor content unless they know how many people are watching it," said Todd Dagres, general partner at Spark Capital. "The technology is available, but it is still in the process of being implemented."
The online video ad world is also a different ball game than the TV commercial sphere. Internet TV ads are interactive, unlike traditional TV ads, and effective Internet TV ads require a whole new level of creativity. Advertisers are still trying to determine the best way to reach potential customers online.
"The way people approach online ads is qualitatively different from the way they approach TV ads," said Shishir Mehrotra, director of video monetization at Google (GOOG, Fortune 500). "The biggest blockers to advertisers from making the jump to the Internet from TV are creative ones."
The lack of live TV online — and the big advertising bucks that come with it — is another huge factor preventing online TV from being successful. Though some networks have begun to air some live content online, notably CBS’s online coverage of the NCAA basketball tournament, live Internet TV is far from pervasive.
Live sporting events like the Super Bowl and live shows like American Idol command the biggest advertising dollars fast cash without a hassle. But separate licensing fees, bandwidth limitations and a low return on investment have held networks back from putting more live content online thus far.
With the business model still shaky, media company CEOs have suggested that free online TV is coming to an end.
How the online TV business can work
With free heading out the door soon, subscription services are the likely replacement.
Media CEOs like News Corp’s (NWS, Fortune 500) Rupert Murdoch, Disney’s Bob Iger and NBC’s Jeff Zucker, who co-own Hulu, have all hinted at making Hulu a subscription-based service. They just haven’t said how much users will have to pay.
Netflix (NFLX) has been operating a successful subscription-based streaming service for quite some time, and on Monday, Walmart (WMT, Fortune 500) announced that it had purchased Netflix’s online streaming video competitor Vudu. In December, Apple said it had negotiated deals with CBS (CBS, Fortune 500) and Disney (DIS, Fortune 500) to launch a streaming subscription-based service for Apple TV.
Cable companies have gotten in on the action as well. CNNMoney.com parent company Time Warner (TWX, Fortune 500) partnered with Comcast (CMCSA, Fortune 500) last summer to test its subscription-based "TV Everywhere," which made Time Warner content available online to Comcast subscribers for no additional charge. Comcast deemed the project a success, and has continued the TV Everywhere partnership on its Fancast Web site.
Subscription services generally bring more content to the Web than free services, including some cable shows that have been exclusively available on TV or for purchase on iTunes.
There’s something in it for the cable companies too: As technology improves and consumers begin watching more online, on-demand content directly on their television sets, cable and satellite providers could have a role in bringing that content to consumers by providing customer service for Internet TV like they do for "regular" TV.
"If consumers want high-quality content with a high-quality experience and high-quality service, there’s a place and a role for companies that have cables piped into your house," said David Wertheimer, executive director of the Entertainment Technology Center at the University of Southern California.
In the end, experts say that the free, advertising-supported model may exist for some content, but the subscription model will have to at least run along side it.
Experts say commoditized programming like news, cooking programs and how-to shows will stay free, because there will always be another site offering the same content for free. But your favorite shows that can’t be duplicated and cost millions of dollars to produce are something you will have to pay for.
"Every piece of content that is commoditized by nature has to be free," said Ran Harnevo, chief executive of 5min Media, an independent digital media group. "On the other hand, if everything were free, you would lose the production value of good shows. So people will have to pay for content that’s not commoditized."
Wall Street surged Monday, starting off the new year on a positive note, after a report showed manufacturing activity is picking up and the weak dollar propelled commodity prices and stocks.
The Dow Jones industrial average (INDU) rallied 156 points, or 1.5%. The S&P 500 index (SPX) rose 18 points, or 1.6%. The Nasdaq composite (COMP) gained 39 points, or 1.7%. All three major gauges closed at 15-month highs.
"The fact that stocks are up so much today is an encouraging sign, but we need to see a few days of follow through," said Will Hepburn, chief investment officer at Hepburn Capital Management.
He said the first few trading sessions of a new year are typically positive and that he wants to see several more days of gains on strong trading volume before he’s willing to say that the rally has recharged.
Stocks fell Thursday in a thinly traded session on the last day of 2009. All financial markets were closed Friday in observance of New Year’s Day.
The last month of 2009 saw stocks churning in a narrow range, managing modest gains, but not really charging ahead like in earlier months.
The market lost some momentum in November and December, Hepburn said. That slowdown coincided with the dollar beginning to firm up and investors opting to close the books early after a difficult year.
A tumultuous 2009 ended with substantial gains. The S&P 500 gained 23.4%, the Dow industrials gained 18.8% and the Nasdaq composite gained 44%.
Stocks are up even more substantially since bottoming in March at the height of the financial market crisis. After closing at a 12-year low on March 9, the Dow gained 59% and the S&P 500 gained 65% through year end. After closing at a 6-year low on the same date, the Nasdaq gained 79%.
Tuesday brings reports on factory orders, pending home sales and auto and truck sales.
Economy: The Institute for Supply Management’s manufacturing index rose to 55.9 in December from 53.6 in November, signifying a wider expansion in the sector. Economists surveyed by Briefing.com thought it would rise to 54.3. Stronger reports were also released in Asia, adding to bets that the global manufacturing sector is recovering.
A separate report from the U.S. government showed that construction spending fell 0.6% in November versus forecasts for a drop of 0.5%. Spending fell 0.5% in October.
On the move: Gains were broad based, with 27 of 30 Dow issues rallying, led by Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), IBM (IBM, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500) business cards.
In other news, Swiss drugmaker Novartis AG plans to take control of Alcon (ACL) by paying $38.5 billion to buy the 77% of the eye care products maker it doesn’t already own. The deal involved Novartis buying out Nestle SA’s 52% stake in Alcon for $28 billion in cash and then merging with Alcon to access the remaining 23% held by minority shareholders.
Alcon shares fell nearly 6%.
Bernanke defends Fed policy: The Federal Reserve chairman said Sunday that the central bank’s decision to keep interest rates very low between 2002 and 2006 was appropriate and not the cause of the housing market bubble.
He said regulation would have been a better way to avert the collapse that ensued when home prices crumbled, leading to massive foreclosures, billions in losses for banks and the worst financial crisis since the Great Depression.
The Senate is currently considering Bernanke’s nomination by President Obama for another term as Fed chairman. The Senate Banking Committee already gave its approval last month. His current term ends on Jan. 31.
World markets: Asian markets gained, with the exception of the Hong Kong Hang Seng. In Europe, London’s FTSE 100 rose 1.6%, France’s CAC 40 added 2% and the German DAX rallied 1.5%.
Commodities and the dollar: The dollar tumbled versus other major currencies.
The weaker dollar gave a lift to dollar-traded commodities.
COMEX gold for February delivery settled up $22.10 to $1,118.30 an ounce. Gold closed at an all-time high of $1,218.30 an ounce earlier this month.
U.S. light crude oil for February delivery gained $2.15 to settle at $81.51 a barrel on the New York Mercantile Exchange, the highest close since October 2008.
Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.81% from 3.84% late Thursday. Treasury prices and yields move in opposite directions.
Market breadth was positive. On the New York Stock Exchange, winners beat losers four to one on volume of 1.02 billion shares. On the Nasdaq, advancers topped decliners by over three to one on volume of 1.92 billion shares.
The U.S. manufacturing sector grew in November for the fourth consecutive month, but at a slower pace than anticipated, according to an industry report released on Tuesday.
The Institute for Supply Management said its index of national factory activity decelerated to 53.6 in November from 55.7 in October. The median forecast of 70 economists surveyed by Reuters was for a reading of 55.0 in November.
Readings above 50 indicate expansion in the manufacturing sector, while numbers below 50 show contraction.
The ISM report was “a bit less-than-expected but overall still a strong number when added to the previous monthly levels that were greater than 50,” said Tom Sowanick, chief investment officer with the Omnivest Group in Princeton, New Jersey.
“Note that China ISM was also up last night which confirms that we are in a global recovery,” Sowanick added.
The ISM report also said its employment index for the manufacturing industry slipped to 50.8 in November from 53.1 in October, which had been the strongest showing since April 2006.
The U.S. dollar trimmed gains against the yen after the manufacturing report.
Prices paid slipped to 55.0 in November from 65.0 in October.
New orders rose to 60.3 in November from a 58.5 reading in October.
Some economists warn that although the brisk rebound of new orders hints that capital spending will recover, because industrial output is so depressed, companies may not ramp up spending much, if at all.
(Reporting by John Parry; Editing by Chizu Nomiyama)
Midland States Bank hired Jason M. Ramthun as vice president for commercial relationship management at its Chesterfield office.
He is responsible for overseeing the office’s commercial banking business, establishing long-term partnerships and providing financial advice to the bank and its commercial customers.
Ramthun joined Midland States Bank from First Bank, where he was a vice president for commercial lending.
He also has been a bank examiner for the Federal Reserve Bank of Chicago advance payday loans.
He is on the finance committee of Voices for Children and is a member of the St. Louis Sports Commission Associates, a group of local young professionals who volunteer to help the commission.
First Banks Inc., parent of First Bank and the eighth largest bank in St. Louis, lost another $91 million in the third quarter as bad loans kept piling up.
The quarterly loss brought losses for the year to date to $274 million, following a $287 million loss for 2008.
As of September, 8.8 percent of the bank’s loans had gone sour, up from 5.1 percent at the beginning of the year. The September bad-loan percentage was roughly double the number at banks that regulators consider First Bank’s peers.
The Clayton-based bank continued to suffer from its foray into the financing of housing development in California. The bank reported $402 million in troubled loans and foreclosed property in California and $109 million in Chicago. By contrast, bad loans in St. Louis were only $47 million.
St. Louis’ comparatively good record may be short-lived. The bank listed $198 million in "potential" problem loans in St. Louis, higher than its other regions. The count included two real estate construction loans worth $60 million, along with general business loans and real estate loans.
In phone interview, CEO Terrance McCarthy said there are a "couple of quarters to go" before the bank can stop putting aside large amounts of money to cover loans that won’t be repaid payday loan companies. The bank put aside $107 million to cover bad loans in the latest quarter. Such money comes directly from profits.
Losses continued to eat into capital. The parent company’s capital slipped below the level that regulators deem "well capitalized" into the "adequately capitalized" bracket. The First Bank subsidiary remained "well capitalized," but just barely.
First Banks raised more than $400 million in new capital as its troubles mounted last year and in January. That included $295 million from the federal government’s bank bailout fund and more than $100 million from the bank’s owner, Jim Dierberg and family.
The bank has been trying to shrink its way to greater soundness, selling off its banks in Chicago and Texas, the Adrian N. Baker & Co. insurance firm, and bank branches in Lawrenceville and Springfield, Ill. It has generally made a profit on those sales, which boosts capital.
Capital is measured as a percentage of a bank’s assets. By selling off assets, the bank improves its capital ratio, the key measure of soundness.
First Banks has $10.6 billion in assets.
More than half of U.S. retail chains posted October sales that fell short of Wall Street’s heightened expectations, raising doubts about a widespread recovery for the holiday season.
Department store chains and teen retailers in particular disappointed investor expectations, while such disparate companies as apparel retailer Gap and luxury store chain Saks Inc performed better than hoped as consumers return to spending selectively.
“October results are not going to give investors the overall warm and fuzzy that we’re on track for a strong Christmas,” said Brean Murray, Carret & Co analyst Eric Beder, “It looks like we’re on track for kind of a mediocre season right now based upon October.”
Retail shares reflected the mixed results. Teen retailers Aeropostale and American Eagle Outfitters fell 13.6 percent and 12 percent, respectively. Mid-priced department store J.C. Penney fell 6.5 percent, and Kohl’s shed 2.9 percent, while Saks gained 1.8 percent.
Industry forecasts for the holiday season range from a slight decline for retail sales to a slight increase, and many insiders say it is difficult to reach a firm prediction.
In the most bullish of forecasts to date, the International Council of Shopping Centers said on Thursday it expects retail same-store sales to rise 5 percent to 8 percent in November. It has forecast holiday same-store sales to rise 1 percent.
However America’s Research Group founder Britt Beemer says total retail sales will most likely fall 2.9 percent during the season as a whole, according to a forecast issued on Thursday payday loans for bad credit.
“I don’t see anything out there that says October was an exciting month even with retailers advertising 60 percent off,” he said.
2008 A HORRIBLE BENCHMARK
Sales were expected to improve from last year, when consumers all but stopped spending in the face of a financial crisis. Analysts had steadily raised their estimates for the month, buoyed by bullish forecasts from retailers like J Crew Group and Amazon.com.
Total October same-store sales rose 1.8 percent, below an estimate for a 2 percent gain, according to Thomson Reuters data. Fifty-two percent of retailers came in below expectations while 44 percent beat forecasts.
But it marked the strongest showing since June 2008, when sales rose 1.9 percent. Last October, same-store sales plunged 4.1 percent.
“If you show a 2 percent increase over a bad performance, it’s still a bad performance,” said Brian Girouard, global leader of Capgemini’s consumer products and retail practice. “There’s good news, but remember the benchmark was horrible.”
While sales may be disappointing, analysts said retailers have slashed inventory to help protect profits.
“The holiday season will be profitable for the retailers, but the sales might not be significantly different from last year,” Girouard said.
Switzerland’s Adecco, the world’s largest staffing company, said on Tuesday it would acquire U.S. rival MPS Group Inc for $1.3 billion in a cash transaction.
Adecco will pay $13.80 per MPS share, a premium of 24 percent to the Florida-based company’s closing price on Monday.
The Swiss company said the deal would enhance its position in the professional staffing business in North America and Britain and add to adjusted earnings in the first year.
MPS said in a separate statement its board unanimously approved the deal.
Shares of MPS closed at $11.14 Monday on the New York Stock Exchange, while Adecco’s shares closed at 54.60 sfr on Monday.
(Reporting by Ajay Kamalakaran in Bangalore; Editing by Jon Loades-Carter)
One steady bit of good economic news: Inflation remains near zero. So who would want to pay extra these days to add a dose of inflation protection in their portfolio?
Plenty of people. It turns out sales are hot for Treasury Inflation-Protected Securities, a common hedge against rising prices known by their acronym TIPS.
New money from investors and market gains have boosted total assets in mutual funds investing in TIPS nearly 36 percent so far this year, according to Morningstar Inc.
It’s part of a broader shift by many investors who have been scared away by stocks, despite the market’s hefty rebound from its March low. They’ve been piling into the greater safety of bonds, and TIPS — while not without risk — are about as safe as you can get.
The value of the underlying investment in TIPS rises with inflation, providing an additional layer of protection beyond what Treasury bonds offer.
Hardly anyone expects inflation to re-emerge as a big threat anytime soon, so TIPS aren’t necessarily the best short-term investment. But historically low interest rates and the federal government’s growing deficit are expected to drive prices higher, especially once the economy truly gets back on its feet and spending rebounds.
Here are some common questions and answers about TIPS:
How do TIPS work?
Introduced by the government in 1997, TIPS are a type of Treasury bond — investments that are super-safe, provided you believe the government will continue to make good on its credit obligations.
TIPS adjust their yield based on changes in the Consumer Price Index. The principal in TIPS adjusts every six months. The so-called "coupon" rises when inflation grows, and decreases in the less-likely instance of deflation. When the bond matures, you’re paid the adjusted principal or the original principal, whichever is greater. TIPS are sold in maturities of five, 10 and 20 years.
Investors in "nominal" Treasury bonds get a fixed rate of return if they hold the bonds until they mature. For example, 10-year Treasury notes are now yielding about 3.32 percent per year.
On the other hand, 10-year TIPS are yielding 1.55 percent, which doesn’t seem so good, until you consider what havoc inflation might wreak online payday loans. The difference — or "break-even rate" — between those two numbers is 1.77 percentage points. That suggests investors are expecting inflation will average 1.77 percent per year over the next 10 years. So if inflation exceeds that amount and erodes Treasuries’ current 3.32 percent yield, TIPS investors will be glad they paid for the protection.
Inflation had historically averaged 2 to 3 percent until falling to near zero when the market tanked last fall and deflation fears set in.
How have TIPS’ values held up lately?
Inflation and interest rate expectations are constantly changing, which is reflected in the prices traders are willing to pay for TIPS. Lately, TIPS have generally been seen as a good deal. Mutual funds investing in TIPS have returned an average of 8.63 percent so far this year, according to Morningstar. That puts TIPS in the middle of the performance pack among fixed-income fund categories.
How can I buy TIPS?
TIPS are available for purchase from the Treasury at http://www.treasurydirect.gov to avoid brokerage fees. If you’re not sure you can keep the bond until maturity and are nervous about managing your investment over time, you can buy into a mutual fund that focuses on TIPS, or an exchange-traded fund. Like TIPS mutual funds, TIPS ETFs hold baskets of TIPS with varying maturities but can be traded like a stock.
TIPS appear to carry little risk. Is that the case?
Any bond is subject to risk from rising interest rates, and TIPS are no exception. If the Fed boosts interest rates faster than inflation grows, or before inflation sets in, TIPS’ values will erode.
They also can be hit in a falling market, as happened last fall. Many institutional investors had to come up with cash to meet clients’ orders to pull out their money, forcing them to sell their most liquid investments. TIPS often fit the bill, and massive TIPs sales reduced prices. But as seen this year, they’ve bounced back.
Financier Danny Pang, who died last weekend while facing U.S. Securities and Exchange Commission charges that he ran a massive Ponzi scheme, likely committed suicide, police said on Friday.
A spokesman for Pang’s family called it “improper and premature” to suggest that he killed himself.
“It appears to be suicide,” Newport Beach Police Sgt. Evan Sailor told Reuters, although he cautioned that the death of Pang, 42, would not be officially classified as such until a formal coroner’s finding.
Coroner’s officials in Orange County, where Pang was pronounced dead at Hoag Hospital in Newport Beach on Saturday after being found unconscious at his home, have said that results from an autopsy were awaiting results of toxicology tests, which would take two to three more months.
An Orange County coroner’s spokesman has said there was no evidence of foul play in the case.
“This was self-ingested, it appears to be most likely some kind of medication,” Sailor said of Pang’s death. “This wasn’t a gunshot or a hanging or anything like that.”
Sailor declined to discuss the circumstances surrounding Pang’s death that led police to that conclusion or disclose whether a suicide note was found.
“Until the coroner actually classifies the death and they clear the case, we’re not going to release any information,” Sailor said.
Pang family spokesman Charles Sipkins said the financier had been taken to the hospital the night before his death because he was not feeling well.
“We will not speculate on the cause of his death,” Sipkins said. “And the speculation that he committed suicide is improper and premature. We look forward to working with, and hearing from, the Orange County Coroner’s Office when they complete their investigation.”
The Wall Street Journal, citing a person close to the investigation, reported in a story on its website that Pang had barbiturates and THC, the active ingredient of marijuana, in his system when he was rushed to the hospital.
Pang was accused by the SEC of operating a massive Ponzi scheme on mainly Taiwanese investors through his Private Equity Management Group LLC and Private Equity Management Group Inc, or PEMGroup.
He was charged in April with trying to hide about $300,000 in U.S. bank transactions from government currency reporting requirements and was free on $1 million bail.
Some of Pang’s personal assets had been frozen and his Irvine-based companies were being run by a court-appointed receiver as the result of an SEC civil lawsuit.
Pang’s trial date was recently pushed back until August 2010. He faced up to 10 years in prison in the criminal case.
(Editing by Bill Trott)
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