History > 2005 > USA >
Left : Federal Reserve Board Chairman Alan
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
Wed Feb 16, 2005 01:34 PM ET
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
Photo by Larry Downing/Reuters
'Ownership' Key Soc. Sec. Goal -Greenspan
Thu Feb 17, 2005 05:56 PM ET
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
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
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
"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
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
The companies are shareowners "in an illegal enterprise," Mr. Rose said.
"Therefore they are liable." Potential penalties could range from small fines to
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
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
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."
St. Bets on Gambling on the Web, NYT, 25.12.2005,
Government Finds Seesaw View of Housing
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
Government Finds Seesaw View of Housing Market, NYT, 23.12.2005,
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
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
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
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
America keep it up?, E, 14.12.2005,
Consumer Prices Fell by Largest Amount
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,
Trade gap widens unexpectedly, hits record
Wed Dec 14, 2005 9:10 AM ET
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
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
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
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
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)
gap widens unexpectedly, hits record, R, 14.12.2005,
Newly Bankrupt Raking In Piles of Credit
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
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
"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
"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
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."
Bankrupt Raking In Piles of Credit Offers, NYT, 11.12.2005,
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,
Jobs Surged Last Month in Rebound From
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
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
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
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
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
That rate was 47 percent in November compared with 13 percent for whites who
have not gone back.
Surged Last Month in Rebound From Storm, NYT, 3.12.2005,
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
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
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
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,
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
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,
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
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.
Climb at Retailers on Internet, NYT, 30.11.2005,
November 29, 2005
Upbeat Signs Hold Cautions for the Future
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
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
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
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
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
Economists expect 220,000 new jobs will be created, according to a survey by
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,
$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
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
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
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."
a Square Foot, for Air? Only in New York Real Estate, NYT, 30.11.2005,
Sales of New Homes Stay Strong in October,
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
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
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
of New Homes Stay Strong in October, Setting Record, NYT, 29.11.2005,
Housing Market Showing Signs of Slowdown,
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
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
"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
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,
Electronics win in Black Friday sales
Mon Nov 28, 2005 12:23 PM ET
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
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
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
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,
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
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."
Wanted: Academic Economists, Pro-Bush, NYT, 27.11.2005,
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
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
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
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
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
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
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
Luke Kummer contributed research for this article.
in the Corner Office?, NYT, 27.11.2005,
Pension Officers Putting Billions Into
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
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
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
"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
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
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
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
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
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
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,
Initial Reports Are Mixed for Retail's
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
Visa USA, on the other hand, reported that use of its credit cards had risen
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,
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
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
Saks joined in the price-cutting, but at
least one customer looked shopped out.
Fred R. Conrad/The New York Times
Initial Reports Are Mixed for Retail's
Busiest Day NYT
Dawn Rush Hints at Strong Start to Holiday
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
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
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.
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.
Rush Hints at Strong Start to Holiday Sales, NYT, 26.11.2005,
States' Coffers Swelling Again After
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 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
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
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
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.
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
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?hp&ex=1132894800&en=12370cd0f6ba3e18&ei=5094&partner=homepage
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
Shares of G.M. were up 10 cents, to $24.15, on the New York Stock Exchange
"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
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
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
Micheline Maynard reported from Detroit for this
article, and Vikas Bajaj from New York.
to Cut 30,000 Jobs and Close 12 Facilities in 3 Years, NYT, 21.11.2005,
G.M. to Cut
30,000 Jobs and Close 12 Facilities in 3 Years
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
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,
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.
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
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
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
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
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.
sinking feeling, E, 18.11.2005,
New Housing Starts Fall, as Do Permits for
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
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
Housing Starts Fall, as Do Permits for Building, NYT, 17.11.2005,
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
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
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,
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
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
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
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
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.
Inflation and Rising Wages Can Coexist, Fed Nominee Says, NYT, 16.11.2005,
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
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
Wholesale Inflation Slowed in October, NYT, 15.11.2005,
U.S. Trade Deficit Hits $66 Billion,
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
"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
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.
Trade Deficit Hits $66 Billion, Another Record, NYT, 10.11.2005,
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
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
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
"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
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
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
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'
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
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
The dropout rate in high schools and colleges was too high for the economy to be
fully staffed with qualified workers, Mr. Greenspan said.
Growth Slows Sharply, Weighed Down by Energy Costs, NYT, 4.11.2005,
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.
Productivity Rises Despite Predictions of a Slowdown, NYT, 3.11.2005,
Growth picks up despite storms
Fri Oct 28, 2005 11:02 AM ET
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
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.
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
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,
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.
Trade Deficit Rose to $59 Billion in August, NYT, 13.10.2005,
La forte croissance américaine persiste,
les doutes demeurent
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
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
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.
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.
forte croissance américaine persiste, les doutes demeurent, Eric Leser, Le
Monde, Article paru dans l'édition du 17.8.2005,
Des profits souvent élevés pour les
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
General Motors : 48,51 milliards, une perte de
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
Kodak : 3,69 milliards, une perte de 146
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,
By the numbers
The economy's prospects look rather good.
George Bush's don't yet
Aug 11th 2005
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
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
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
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
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
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.
the numbers: The economy's prospects look rather good. George Bush's don't yet,
Le marché de l'emploi américain progresse
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.
marché de l'emploi américain progresse encore, lemonde.fr (avec AFP), 5.8.2005,
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.
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
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
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
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,
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
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,
"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
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
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.
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,
George Bush nomme un farouche adepte du
libéralisme à la tête de la SEC
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
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" .
Bush nomme un farouche adepte du libéralisme à la tête de la SEC, Eric Leser, Le
Des chiffres décevants pour la création
d'emplois aux Etats-Unis
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
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,
M. Greenspan accusé d'être trop proche de
la Maison Blanche
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
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
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
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 %.
Greenspan accusé d'être trop proche de la Maison Blanche, Eric Leser, Le
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
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,
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
As Gambling Grows, States Depend on Their
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
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
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
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
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
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
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
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
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
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
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
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."
Gambling Grows, States Depend on Their Cut, NYT, 31.3.2005,
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.
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
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,
La croissance américaine
provoque une forte hausse des créations
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
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
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
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.
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
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
croissance américaine provoque une forte hausse des créations d'emploi, Eric
Leser, Le Monde, article paru dans l'édition deu 6.3.2005,
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
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
"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
"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.
USA trade deficit
War cost drives record
[ federal budget ]
By Andrea Stone, USA TODAY
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,
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.
Le déficit commercial américain atteint un
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.
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
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
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
Source : Le Monde, avec AFP, 10.2.2005,
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
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
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.
: Le Monde / Avec AFP, 7.9.2004,
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
USA > Gross Domestic Product
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.
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United States > Ten economic indicators
from 2000 to 2003
Source : The Economist, 26.5.2004,
U.S. Department of Commerce
Bureau of Economic Analysis
U.S. Department of Labor > Bureau of Labor
Budget of the United States
Government: Browse Fiscal Year 2005
United States Gross
Domestic Product (GDP)
United States > Energy
Encyclopédie > Economie
Encyclopédie > Pauvres / Riches
Histoire > Royaume-Uni >
Riches / pauvres