Unemployment Rises To 9.6%

September 3rd, 2010

Wall Street Journal

By: Tom Barkley and Victoria McGrane

Job losses continued to mount in the U.S. economy last month, though at a more modest pace than expected, putting further pressure on policy makers to take action to spur growth and employment.

A separate report indicated the U.S. nonmanufacturing sector expanded at a much slower pace last month.

Nonfarm payrolls fell by 54,000 last month, matching the level of revised losses recorded the previous month, the U.S. Labor Department said Friday. The revision in July layoffs to 54,000 followed an original estimate of a 131,000 drop in payrolls.

The U.S. economy has shed jobs for three straight months, though the losses in August were about half the 110,000 predicted by economists in a Dow Jones Newswires survey.

The unemployment rate, calculated using a separate household survey, edged up to 9.6%, as expected, after holding at 9.5% for previous two months.

The report is likely to cause renewed debate during the long Labor Day weekend over what new steps the Federal Reserve and Congress should consider to jump-start the job market.

Last month, the Fed moved to stop any premature contraction in its balance sheet, effectively taking its foot off the brake pedal by reinvesting proceeds from any maturing mortgage securities into Treasurys.

While the central bank has held off on stepping on the gas–either by resuming asset purchases or other unconventional measures–Fed officials expressed concern during the Aug. 10 meeting about the sluggish labor market and debated potential causes.

Fed Chairman Ben Bernanke declared his readiness a week ago to pursue further moves if “unexpected developments” derail the economic expansion. The “painfully slow recovery” in the jobs market was a central policy concern, he said, given the risks it poses to consumer confidence and the broader economy.

President Barack Obama, who has pushed Congress to support more job-creating measures, plans to speak Monday at the Milwaukee Laborfest. In addition to a small business bill languishing on the Hill, the administration is coming up with new ideas to promote job growth.

The report Friday showed that private sector hiring wasn’t enough to offset cutbacks in job losses in the government, which continued to let go temporary workers hired for the 2010 census.

Private-sector companies added 67,000 jobs, following an upwardly revised 107,000 gain in July.

Manufacturers shed 27,000 jobs, after adding 34,000 the previous month.

Professional and business services payrolls rose 20,000. Construction, a sector of the economy that has struggled, added 19,000 jobs, as well.

Total government employment, which includes state and local jobs, fell 121,000. The declines were a result not just of the letting go of 114,000 census workers, but also job cuts by state governments facing budget pressures.

In a positive sign, the report showed 42% of unemployed Americans were out of work for more than six months in August, down from 45% in July. It becomes harder to find a job as time goes by, as skills are lost and employers may view long periods of unemployment with suspicion.

An indication of slack in the market, and thus potential inflation pressures, moved slightly higher. Average hourly earnings of all employees increased by $0.06 to $22.66 in August. The average workweek was unchanged at 34.2 hours.

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Fanny-Freddie Bailout Could Cost Taxpayers $1 Trillion

June 29, 2010

CNBC

By: Steve Liesman

For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg.

According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, the cost to the taxpayer could hit as much as $1 trillion.

Two things are clear: Taxpayers don’t want to foot the bill, and Fannie and Freddie, taken over by the government in 2008 to stanch the financial bloodletting, need a major overhaul.

“Some of us who don’t even own homes are paying to support others and their home ownership, and they ask ‘why?’ said Robert J. Shiller, a Yale University economics professor and co-creator of the S&P/Case-Shiller Home Price Indices.

The indices measure the US residential housing market by tracking changes in the value of residential real estate both nationally and in 20 metropolitan regions.

Shiller added that the mission of Fannie and Freddie should be severely cut back “so that they’re not helping middle-class homeowners, [but] they’re helping poor people get into the housing market.”

At the crux of the financial crisis, the government took over Fannie and Freddie to avert possible massive losses for banks, money-market funds and, perhaps, most importantly, foreign institutions that purchased billions of Fannie and Freddie debt because of its implied government guarantee.

The Chinese, for example, had invested heavily, and the US decided it didn’t want them to take a loss on their investment.

One possible scenario for the entities is to turn them into utilities, said Sean Dobson, CEO and chair of Amherst Securities.

“Freddie and Fannie could be used to standardize the mortgage product,” Dobson said, “to completely describe what the risks are and then act as a conduit for the capital markets to take the risk.”

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Unlicensed Natural Health Remedies Removed from Canadian Pharmacies

February 9, 2010

NationalPost.com

By Tom Blackwell

Makers of natural-health products say they are bracing for widespread layoffs and millions of dollars in losses after Canada’s pharmacy regulators issued a surprise directive recently urging druggists to stop selling unlicensed natural remedies.

The order affects thousands of herbal treatments, multi-vitamins and other products, most of them waiting for approval from Health Canada under a backlogged, five-year-old program to regulate natural-health goods.

The National Association of Pharmacy Regulatory Authorities (NAPRA) says pharmacists cannot be assured the products are safe until they are granted a government licence, and should not sell them in those circumstances. “Pharmacists are obliged to hold the health and safety of the public or patient as their first and foremost consideration,” said the association’s recently issued position statement.

Representatives of the natural health industry, however, have reacted angrily to the directive issued last month, predicting it will have little impact on patient safety, while triggering an economic “crisis” for their members.

“We are talking about job loss, we are talking about a lot of income loss, we are talking about product stuck in warehouses that cannot be sold,” Jean-Yves Dionne, a spokesman for the Canadian Health Food Association, said in an interview.

A statement issued by the association calls the directive self-serving and contrary to federal government policy.

“It has taken a sledge hammer to a finishing nail,” the group said. “It will create confusion for consumers. It is the wrong thing to do.”

NAPRA is comprised of representatives of the provincial colleges of pharmacy that regulate the profession. It is now up to the individual provinces to implement the statement. The Ontario and Quebec colleges have already done so, with Ontario pressing pharmacists to not buy or order any more of the affected products, and its neighbour pushing for druggists to also remove unlicensed product already on their shelves, Mr. Dionne said.

Pharmacies, as surprised by the directive as anyone, are caught in the middle, said Jeff Poston of the Canadian Pharmacists Association.

“One of the questions that everybody is asking in the pharmacy world is, ‘Why now?’ As far as people can determine, nothing has significantly changed.”

A spokesman for NAPRA was not available for comment.

The controversy revolves around Health Canada’s natural-health products regime, launched in 2004 to vet treatments that had been virtually unregulated before, in a new system some critics said was still too lax. As it ploughed through tens of thousands of applications for licences, the department said manufacturers could continue selling their products, so long as they had at least applied for approval.

The department has issued about 18,000 natural-health licences, while at least 10,000 products are still waiting for certification, industry representatives said. The whole process was supposed to be done by this January.

The natural-food association argues that it makes no sense for the pharmacy regulators to try to block sales of products awaiting licences, when Health Canada itself has said they can be sold pending an approval decision.

The industry is worth an estimated $1.5-billion to $2-billion a year, but many producers are small operations with sales of $1-million to $2-million annually and could be decimated by the directive, Mr. Dionne said. He cited a call he got last week from a manufacturer in Nova Scotia who sells two products — a homeopathic remedy for diabetes-related pain and a vitamin-based pill — that are waiting for approval and could be forced off the shelves.

“They are really panicking out there,” he said.

Some manufacturers could sell their products in health-food stores instead, but others rely exclusively on pharmacies, said Mr. Dionne.

Gerry Harrington of Consumer Health Products Canada, another industry group that represents natural-health producers, said his members strongly support the regulations. NAPRA may be targeting others, though, who are trying to evade any government oversight, he said.

“There is a sub-set of companies out there who have no intention of complying with the regulations, who have taken advantage of the interim approach to essentially ignore the regulations,” Mr. Harrington said. “Some companies have chosen … to lobby politically for an essentially unregulated or minimally regulated industry.”

Meanwhile, Mr. Poston said pharmacists are pressing for the regulators to lessen the disruption by phasing in the policy.

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Taxpayers Face Heavy Losses on Auto Bailout

September 9, 2009

My Way News

By Christopher S. Rugaber

Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

“I think they drove a very hard bargain,” said Elizabeth Warren, the panel’s chairwoman and a law professor at Harvard University, referring to the Obama administration’s Treasury Department. “But it may not be enough.”

The prospect of recovering the government’s assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM’s case by next year.

The shares “will have to appreciate sharply” for taxpayers to get their money back, the report said.

For example, GM’s market value would have to reach $67.6 billion, the report said, a “highly optimistic” estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is “highly unlikely” to ever be repaid, the panel said.

Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost. But Meg Reilly, a department spokeswoman, said there is a “reasonably high probability of the return of most or all of the government funding” that was provided to assist GM and Chrysler with their restructurings.

Administration officials have previously said they want to maximize taxpayers’ return on the investment but want to dispose of the government’s ownership interests as soon as practicable.

“We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out,” Steve Rattner, who led the administration’s auto task force, said before his departure in July. “We do want to do well for the taxpayers but the most important thing is to get the government out of the car business.”

Greg Martin, a spokesman for the new GM, said the company is “confident that we will repay our nation’s support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today’s market realities.”

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The panel’s report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any “conflicts of interest.”

The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn’t allow for such funding.

The panel’s members include Rep. Jeb Hensarling, a Texas Republican, who dissented from the report. Hensarling said the auto companies should never have received funding and criticized the government for picking “winners and losers.”

Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid.

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