With California's cash dwindling and legislators still debating a new budget, Gov. Arnold Schwarzenegger eliminated thousands of part-time and temporary state positions Thursday and ordered that 200,000 state workers receive the federal minimum wage.Legal Showdown?
"Today I am exercising my executive authority to avoid a full-blown crisis and keep our state moving forward," Schwarzenegger said. "This is not an action I take lightly."
Democratic and Republican lawmakers remain divided over how to close a $15.2 billion deficit, with Democrats favoring $8.2 billion in new taxes on corporations and the state's wealthiest residents. Republicans want a spending cap and oppose tax increases.
Schwarzenegger's finance team said of that total, just 10,300 would receive pink slips immediately.
Schwarzenegger also cited a 2003 California Supreme Court ruling allowing him to slash the pay of regular full-time employees when the state lacks a budget. By law, those workers must be paid at least the federal minimum wage of $6.55 an hour and will be reimbursed once a budget is approved.
The first paycheck to be affected by the minimum wage order would be the one state employees receive in early September, but state Controller John Chiang, a Democrat, sent a letter to Schwarzenegger on Thursday saying he will defy the order and issue employees their regular paychecks.
He said the governor's executive order was based on "faulty legal and factual premises." Chiang said the 2003 Supreme Court ruling did not specify the actual amount of the salary his office could pay state employees during a budget impasse.
The controller and the Republican administration also differ over the state's financial condition. Chiang maintains that California has enough money to meet all its expenses through September.
(new from Wacom!) Economy for everyone.
Seasonally Adjusted DataCalculated Risk has some interesting charts in Weekly Claims Hit 5 Year High.
In the week ending July 26, the advance figure for seasonally adjusted initial claims was 448,000, an increase of 44,000 from the previous week's revised figure of 404,000. The 4-week moving average was 393,000, an increase of 11,000 from the previous week's revised average of 382,000.
The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending July 19, an increase of 0.2 percentage point from the prior week's unrevised rate of 2.3 percent.
The U.S. economy may have slipped into a recession in the last three months of 2007 as consumer spending slowed more than previously estimated and the housing slump worsened, revised government figures indicated.Pollyannas Need To Change Their Tune
The world's largest economy contracted at a 0.2 percent annual pace in the fourth quarter of last year compared with a previously reported 0.6 percent gain, the Commerce Department said today in Washington. Growth for the period from 2005 through 2007 was also trimmed.
"We're in a recession," Allen Sinai, chief economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. "It's going to widen, it's going to deepen."
Nine of the 13 quarters under review were revised down, three increased and one was unchanged.
The largest downward revision was for the last three months of 2007, as the previously reported 2.3 percent gain in consumer spending was reduced by more than half, to 1 percent. Americans cut back on the use of electricity and gas as fuel bills soared.
"While everyone focuses on GDP, keep in mind that it is not the only barometer of economic activity," David Rosenberg, chief North American economist at Merrill Lynch & Co. in New York, said in a July 28 note to clients. Growth "is subject to huge historical revisions."
The four other factors that the NBER takes into account, Rosenberg said, peaked between October 2007 and February 2008. The NBER usually declares a recession has started between six to 18 months after it's begun, according to its Web site.
Nonfarm private employment increased 9,000 from June to July 2008 on a seasonally adjusted basis, according to the ADP National Employment Report�. The estimated change in employment from May to June was revised up from a decrease of 79,000 to a decrease of 77,000.Small Business Report
This month�s employment gain was driven by growth in the service-providing sector which advanced 74,000. July employment in the goods-producing sector declined 65,000, while manufacturing employment declined 49,000, marking their twentieth and twenty-third consecutive monthly declines, respectively.
Two sectors of the economy hit hardest by recent problems in mortgage markets have been residential construction and financial activities related to home sales and mortgage lending. Today�s report suggests some lessening of the recent strain on employment in these industries.
In July, construction employment dropped 16,000. Though this was the twentieth consecutive monthly decline, and brings the total decline in construction jobs since the peak in August of 2006 to 350,000, it was one of the smallest declines in recent months. In addition, employment in financial activities rose 4,000 during the month.
� Total employment: +9,000July Is A Revision Month For BLS
� Small businesses: +50,000
� Medium businesses: -9,000
� Large businesses: -32,000
� Goods-producing sector: -65,000
� Service-providing sector: +74,000
� Manufacturing industry: -49,000
Small businesses represent payrolls with 1-49 employees
Medium businesses represent payrolls with 50-499 employees
Large businesses represent payrolls with more than 499 employees
Bannkrupt home furnishings retailer Linens 'n Things' disclosure this week that it plans to dispose of 120 locations is the latest burst in the retail sector's growing flood of store closings this year that has the industry's real estate disposition firms scrambling.On top of that report Starbucks recently announced it will cut 600 stores. Looking ahead, note that Bennigan's Is Bankrupt, Faces Chapter 7 Liquidation.
Home Depot recently said it would shut 15 existing stores this year and reduce the number of new store openings by almost half to 55. Then the Hilco Organization and Gordon Brothers Group, new owners of Sharper Image, announced that they will close all 86 of the chain�s remaining stores. And, Gap Inc. plans to close an unspecified number of stores while downsizing many of its remaining locations.
�You are going to see a lot more closings; we are not even close to the end,� says Graiser. �There are a few thousand more stores� coming on the market.
MGM Mirage and Dubai World are late in raising as much as $3.5 billion for their $11.2 billion CityCenter project in Las Vegas because banks saddled with debt to casinos and hotels are wary of making new loans.Title Companies Complain "Banks Deprived Us Of Cash"
Deutsche Bank AG and Credit Suisse Group, the Zurich-based bank that advised Dubai World last year when it invested $5.1 billion in MGM, are among the holdouts, bankers with knowledge of the matter said. Funding was supposed to be completed by the end of June, MGM Chief Financial Officer Daniel D'Arrigo told analysts in May. President James Murren said Frankfurt-based Deutsche Bank has been part of every MGM loan since 1998.
"Wall Street firms are scrutinizing their extension of credit, particularly to the gaming industry, where the sentiment is pretty weak," said Michael Paladino, an analyst at Fitch Ratings in New York.
Building the 76-acre "city-within-a-city," designed by architects, including Norman Foster and Daniel Liebeskind, is costing Las Vegas-based MGM and Dubai about $100 million each per month, D'Arrigo said in May. MGM and Dubai World will raise at least $3 billion and may increase that to $3.5 billion to fund construction, MGM's Murren said on July 14.
Murren, 46, declined to comment on which banks have signed on for the deal or on its terms.
United Title of Texas has closed all its offices around the state, including six in the Houston area, because of financial troubles related to its Colorado-based parent company.Earlier today I noted Financial Title Shuts Down. Here is the key snip:
"This decision was precipitated by an unexpected, and in our opinion, unwarranted and unjustified act by our syndicate of banks, which deprived us of the cash we needed to sustain and to continue those operations," the Colorado company said in a memo to employees today.
United Title is a subsidiary of Mercury Cos., which owns title agencies in California, Colorado, Texas, Oregon, Nevada and Arizona. Mercury stopped funding operations in Arizona and California, as well.
"We have a lot of closings that are supposed to occur," Hilbun said. "If people miss closing dates, they can lose their loans. The ones today could be in jeopardy."
"Financial Title Co., the largest real-estate title agent in Silicon Valley, has shut its doors as part of a closure of multiple offices and title companies by its parent, Mercury Cos. of Colorado. The decision follows a move by Mercury's lenders to pull their line of credit after Mercury failed to meet loan requirements."We�re Saying No To Almost Everybody
Japan's factory output dropped 2 percent from May, surpassing a decline of 1.7 percent in a Bloomberg News survey of economists and the jobless rate climbed to 4.1 percent.Mervyn's Seeks Bankruptcy
The economy probably contracted an annualized 0.4 percent last quarter ended June 30, economists estimate a report to show next month. Japan's biggest export markets have been hit by the credit crunch stemming from the U.S. housing recession, while higher prices at home have made consumers reluctant to spend.
Toyota Motor Corp. and Honda Motor Co., the nation's two largest automakers, this month cut sales forecasts for 2008 as global demand cools.
Mervyn's LLC, the 59-year-old department-store chain, joined more than a dozen U.S. retailers that have filed for bankruptcy this year as consumers cut spending in the face of the credit crunch and higher oil prices.One Hell Of String For Sun Capital
It's the sixth bankruptcy in the past 12 months by a company owned by Sun Capital Partners Inc., a Florida-based investment firm.
Retailers that have sought court protection over the past year include Steve & Barry's LLC, Sharper Image Corp., Shoe Pavilion Inc., Levitz Furniture Inc. and Linens 'n Things Inc. Declining home values, tightening credit and rising energy costs have left U.S. consumers "tapped out," said Martin Bienenstock, a bankruptcy lawyer with Dewey & LeBoeuf in New York.
Sun Capital was part of a private-equity group that bought Mervyn's from Minneapolis-based Target for $1.65 billion in 2004. The Sun Capital holdings that have sought bankruptcy protection are Lillian Vernon Corp., Powermate Corp., Crafts Retail Holding Corp., Wickes Furniture Co. and Jevic Transportation Inc.
McGraw-Hill Cos., the owner of Standard & Poor's, said second-quarter profit fell 23 percent as a slump in demand for new debt ratings overshadowed revenue gains in the education and investment services units.In similar news Moody's Profit Falls Less Than Estimates on Job Cuts.
Moody's Corp.'s second-quarter profit fell less than analysts' estimated after the world's second- largest credit-rating company reduced the workforce and cut compensation to overcome a drop in demand for bond rankings.Credit Crunch Reaches Critical Mass
Moody's Chief Executive Officer Raymond McDaniel sliced expenses 10 percent by eliminating more than 7.5 percent of the workforce and reducing compensation. Moody's and larger rival Standard & Poor's are finding ways to cut costs as the yearlong credit crunch stifles demand for credit ratings.
"The debt capital market, which is really our core business segment, is going through a very, very difficult time," said Mark Almeida, president of Moody's Analytics, on a management conference call today. "We have a number of customers who are exiting segments of the business and we have had some very large customers go completely out of business."
"Smarties" student dormitory at Utrecht University in Utrecht, Netherlands by Architectenbureau Marles Rohmer (2008).
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New York, July 29, 2008 � Data through May 2008, released today by Standard & Poor�s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show annual declines in the prices of existing single family homes across the United States generally continued to worsen in May 2008.
For the second straight month, all 20 MSAs posted annual declines, nine of which are posting record lows and 10 of which are in double-digits. Both the 10-City Composite and the 20-City Composite are reporting record low annual declines.
Financial Title Co., the largest real-estate title agent in Silicon Valley, has shut its doors as part of a closure of multiple offices and title companies by its parent, Mercury Cos. of Colorado.Escrow Funds
The decision follows a move by Mercury's lenders to pull their line of credit after Mercury failed to meet loan requirements, according to an e-mail from Jim Hilbun, president of United Title of Texas, which is also owned by Mercury.
"Mercury is closing all of its companies outside of Colorado, which includes Arizona, California, Oregon and Nevada," Hilbun told employees.
Workers were removing items before dawn on Wednesday from Financial Title's Pruneyard office in Campbell. A sign posted on the door said the office was closing and referred inquiries to First American, Financial's title policy underwriter, and to Mercury.
Sources who have spoken to Financial Title employees said the title company began closing its doors in Santa Clara County Tuesday night. Those sources said all employees have lost their jobs, and Financial's underwriter, First American Title Co., has been collecting open escrow files at the closed offices. They also say Financial Chief Executive Officer Ivy Anderson has resigned.
The abrupt move mirrors that of Financial's former sister company, Alliance Title Co., which also closed with almost no notice late last year. Former employees and landlords of Alliance have filed multiple lawsuits alleging they were not paid. Alliance declared Chapter 7 bankruptcy in Northern California federal court June 5.
Examiners representing the California Department of Insurance, which regulates and polices title-policy underwriters and agents, were on hand at all 57 Financial Title offices in the state Wednesday to ensure that escrow funds were properly handled and not stolen or lost, said Darrel Ng, press secretary for the agency.
Ng said the state has examiners at each of Financial Title's 57 branches. Escrow files have been transferred to First American Title, and "it is our understanding that all escrow funds are intact," he said.Mike "Mish" Shedlock
He said homebuyers might "experience a slight delay" in closing purchases and might have to sign additional paperwork because of the transition to First American. Purchasers can call First American at (925) 249-2819.
Employees were directed to call Mercury's Denver headquarters at (303) 572-9090.
Officials at Mercury Companies and Financial Title couldn't be reached for comment today. But, in a memo to employees, an executive with a Mercury subsidiary based in Texas said Mercury is closing all of its operations outside of Colorado because it's "running out of capital to support their operations."
Hope that helps, my two cents.
EU Trade Commissioner Peter Mandelson said he would not block compromise proposals on the EU's controversial banana import tariffs. He warned that if others did, then they would "assume a grave responsibility for the failure of the Doha Round".That anyone would risk a global trade agreement over bananas is pretty absurd in and of itself. However, having banana tariffs in the first place is also absurd. Consumers pay higher prices for bananas and literally no one wins except of course the subsidized banana grower.
The WTO has repeatedly ruled in favour of Latin American banana exporters in a long-running dispute with the EU. They argue that the EU's preferential trade accords with poor African, Caribbean and Pacific (ACP) countries are discriminatory.
"There are still potential potholes in the road...But we are closer to a deal than we have been at any point in the last seven years," Peter Mandelson, EU trade commissioner, said. "What is emerging is a deal that is not perfect, not beautiful, but is good for the global economy and good for development."Snake Eyes
The proposed settlement, brokered by Mr Lamy, calls for cutting limits of European farm subsidies by 80% and US payments by 70% to about $14.5bn.
"This is the last throw of the dice" said Peter Mandelson, EU trade commissioner.
Marathon talks in Geneva aimed at liberalising global trade have collapsed, the head of the World Trade Organisation has said. The main stumbling block was farm import rules, which allow countries to protect poor farmers by imposing a tariff on certain goods in the event of a drop in prices or a surge in imports.The acrimony this year seems worse than ever. Repeatedly every country wants complete open access to exports while wanting some tariffs or restrictions on imports. There is plenty of blame that can be placed, especially on US and EU where farm tariffs, agricultural subsidies, and ethanol tariffs drive up costs and result in massive inefficiencies. However, when there was near agreement to end 70%-80% of the tariffs only to see talks collapse, everyone is a loser and everyone is to blame.
"There's no use beating around the bush, this meeting has collapsed," Mr Lamy said.
Analysts have said that the collapse of the Doha talks could symbolise an end to multilateral trade agreements. Instead, nations may pursue dual agreements with partner nations, preferring to focus on their own requirements rather than a more common negotiating goal.
Trade officials had struck an optimistic tone on Friday, but this evaporated over the weekend amid acrimonious exchanges with the US accusing India and China of blocking progress.
The US said they were being overly protective towards their own farmers and are failing to do enough to open their markets, with US trade representative Susan Schwab calling the stance "blatant protectionism".
"In the face of the global food price crisis, it is ironic that the debate came down to how much and how fast could nations raise their barriers to imports of food," she said.
