The outlook for the job market has improved, according to a survey of leading economists released Monday, even as the economic recovery hit a speed bump in the second quarter.
In its second-quarter industry survey, the National Association for Business Economics said employers grew payrolls for a second consecutive quarter this year. The percentage of firms increasing staff levels grew to 31% in the quarter, versus only 6% in the same period a year ago.
At the same time, the percentage of employers cutting jobs continued to move lower.
Looking ahead, the survey showed that 39% of companies expect to add employees over the next six months, the highest level of planned hiring since January 2008.
"The labor market continued to improve, with increases in current hiring and a rise in the percentage of firms planning to add workers over the next six months," William Strauss, an economist at the Federal Reserve Bank of Chicago, said in a statement.
The jobs outlook is encouraging news for American workers. The U.S. unemployment rate stands at 9.5% as of June. The jobless rate has averaged 9.7% over the first half of the year, and many economists expect it to remain elevated into 2011.
But the survey, based on responses from 84 NABE economists who work for private-sector firms and industry trade associations, also indicated that the pace of the economic recovery slowed in the second-quarter.
Industry demand grew at a slower pace in the quarter, the survey said. Corporate profits grew as price and cost pressures remained tame. About one out of four firms increased capital spending versus the previous quarter, and a growing number expect to continue investing over the next 12 months, according to NABE.
While economic activity is expected to remain positive this year, more economists lowered their expectations for 2010 gross domestic product. Only 20% of prognosticators expect GDP will grow more than 3% this year. That’s down from May, when 24% expected such growth.
Still, the majority of economists in the survey expect GDP will top 2% for the year.
In the first quarter, GDP grew at an annual rate of 2.7%, according to government estimates.
Meanwhile, the economists warned that the debt crisis in Europe could hurt U.S. businesses in the months ahead.
Concerns about the fiscal health of several members of the European Union have roiled financial markets this year as countries such as Greece, Spain and Portugal have been hit with downgrades of their sovereign debt ratings. The turmoil has raised concerns that a slowdown of the European economy could hurt the U.S. recovery.
"Credit and debt issues in Europe will likely negatively impact just over a third of the surveyed firms over the next three months," said Strauss.
A recent spate of dour reports on the job market, weakness in housing and consumer spending have stoked worries that the U.S. economy could sip back into recession later this year. Some economists have expressed concerns that the U.S. could be in for a prolonged period of slow economic growth.
Last week, the Federal Reserve released minutes from its June policy meeting that showed the central bank has developed a more pessimistic view for economic growth. The Fed expects GDP to grow between 3% and 3.5% this year, down from its earlier expectation of growth as high as 3.7%.
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Oshkosh Corp.'s defense division said Thursday that it has begun delivering to the U.S. Army the first of its Family of Medium Tactical Vehicles ahead of schedule.
The vehicles being delivered are part of the estimated $3 billion contract that Oshkosh-based Oshkosh Defense retained after a challenge by competing suppliers resulted in a re-evaluation of the award process. The five-year FMTV contract is for the production of an estimated 23,000 vehicles and trailers, as well as for support services and training.
Oshkosh (NYSE: OSK) said the first deliveries, originally slated to begin in October, left the company's Oshkosh campus Wednesday.
Production deliveries under existing orders run through December 2011. To date, Oshkosh has received orders to deliver 5,209 FMTV trucks and trailers.
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The mayor of Morgantown, W.Va., who like Durham Mayor Bill Bell, is trying to convince Google that his city should become Google’s ultra-wired community, has endorsed the Bull City in its quest.
But he’s doing so reluctantly.
Bell and Mayor Bill Byrne of Morgantown, where West Virginia University is located, placed one of those “friendly wagers” on the NCAA men’s Final Four semifinal in which Duke University clobbered the Mountaineers. The bet: The mayor of the losing city would endorse the winner’s city’s application for the Google project.
Bell has received a copy of the letter of endorsement sent to Google CEO Eric Schmidt supporting Durham’s application. The letter cites Byrne’s “…enthusiastic endorsement of Durham’s Google application guaranteed pay day loans.” Byrne goes on to write, “Having made a pact with the Devils themselves, I willingly express this sentiment.”
The Morgantown mayor couldn’t resist some subliminal pitches for his own city, alluding to the “substantial creative planks” of Morgantown’s application and a sly promise that when the Mountaineers win against Duke in next year’s championship, the game ball would land in the hands of Google.
Google plans to pick one or more locations across the country, promising Internet service that’s more than 100 times faster than what most Americans currently have. Google will announce its decision by year’s end.
Colorado's construction industry joined the Denver Metro Chamber of Commerce and other business groups in pleading with legislative leaders to kill a handful of proposed new laws they believe will hamper job growth and stifle economic development.
Declaring that their industry faces perhaps the worst unemployment in history, representatives of a dozen organizations involved with construction and building sent a letter to state House and Senate Democratic and Republican leaders Sunday urging them to kill several measures that change regulatory control, modify business tax exemptions or change workers' compensation in Colorado.
The industry leaders said they were writing "to express our dismay over the partisan politics that seem to be dominating the agenda of this legislative session."
"As business leaders, we urge and challenge you to put aside partisan differences and take the necessary steps to ensure that [these bills] do not move forward," the letter says.
The first six of those bills also were targeted in the letter to lawmakers sent Tuesday by the Denver Metro Chamber, Colorado Concern and the Colorado Competitive Council.
Those bills are:
• Senate Bill 185, sponsored by Senate President Brandon Shaffer, D-Longmont, which modifies rental law to make it easier for tenants to claim a breach of contract requiring residences to be habitable.
• House Bill 1012, sponsored by Rep. Sal Pace, D-Pueblo, which limits workers’ compensation insurers’ ability to do surveillance on benefit applicants.
• House Bill 1017, sponsored by Rep. Daniel Kagan, D-Denver, which permits voluntary rent-control agreements between local governments and private properties. The bill already has passed the House.
• House Bill 1107, sponsored by Rep quick pay day loan. Randy Fischer, D-Fort Collins, which bars the inclusion of agricultural land in urban renewal zones, a tactic that has become more commonly used as an incentive to attract manufacturing plants.
• House Bill 1263, sponsored by Rep. Jack Pommer, D-Boulder, which caps at $250,000 the amount of each employee’s salary that a business can be count as an operating expense against its corporate income tax.
• House Bill 1269, sponsored by Rep. Claire Levy, which increases the damages that can be awarded in employment discrimination lawsuits.
The new construction-industry letter adds one bill to that list: House Bill 1356, which requires state workers' compensation insurer Pinnacol Assurance to distribute surplus funds in excess of 800 percent of its risk-based capital to its policyholders.
Click here to download a copy of the letter.
Groups signing the letter are the Colorado Association of Mechanical & Plumbing Contractors, the Colorado Association of Home Builders, the Associated General Contractors of Colorado, the Colorado Contractors Association, Hispanic Contractors of Colorado, the Heating Air-Conditioning Refrigeration Professionals of Colorado, and the state or regional chapters of the American Council of Engineering Companies, the Associated Builders and Contractors, the National Association of Industrial and Office Properties, the National Electrical Contractors, the Independent Electrical Contractors Association and the Sheet Metal Air-Conditioning Contractors National Association.
Treasurys were mixed late Wednesday following the government’s $21 billion offering of 10-year notes and after the Federal Reserve said economic activity is weak but recovering.
What prices are doing: The benchmark 10-year note was down less than 1/32 at 96-19/32, and the yield rose to 3.78% from 3.72% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond was up less than 1/32 to 94-20/32 and its yield was 4.72%. The 2-year note was flat at 100-2/32 and yielded 0.96%.
What’s moving prices: Investors submitted bids totaling $63 billion at Wednesday’s auction of reopened 10-year notes. The bid-to-cover ratio, a measure of demand, was 3. That compares with 2.62 at the last 10-year sale in December.
It was the second of three auctions this week aimed at selling $84 billion worth of U.S. debt. On Tuesday the government received solid demand at its sale of 3-year notes. On Thursday, it will auction $13 billion worth of reopened 30-year bonds.
Meanwhile, the Fed’s reading on the economy, known as the Beige Book, said that while the economy remains weak, conditions are improving.
Separately, the Treasury posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier need a personal loan with bad credit.
Bond prices were also pressured by comments from a key Federal Reserve official.
Charles Plosser, president of the Philadelphia Federal Reserve, said late Tuesday that the Fed should raise interest rates before unemployment reaches an "acceptable" level.
Plosser also said the central bank should not deviate from its plan to stop buying mortgage-backed securities this quarter.
What analysts are saying: Bill Larkin, a portfolio manager at Cabot Money Management, said Treasurys have been trading in a range since last week’s dour jobs report damped enthusiasm for more risky assets.
Government data showed Friday that employers cut 85,000 jobs in December after adding 4,000 jobs the month before. The nation’s unemployment remains at 10%.
Larkin said the market is also focused on the corporate sector as the quarterly reporting period gets into full swing.
"If earnings are mixed, we’ll probably stay where we are," he said. "If we get more strength in earnings, we could break out to higher yields."
Continuing a Thanksgiving tradition, every year I ask our staff what they’re thankful for, excluding family, friends and good health — none of which we ever should take for granted, but too often do.
Here’s what they said this year, with a few items from me thrown in for good measure.
• Mentors. Each year I try to learn from people. It could be co-workers, business relationships, friends or family. Having a mentor has helped me be a better salesperson and has helped me in personal and business relationships.
• Mistakes. You can learn from other people’s mistakes and your own. Making mistakes in life is natural and makes people even stronger if they learn from them.
• People who admit their mistakes. This is mine, and I’ll give you an example. In last week’s column, I misspelled the name of Rebecca Kenyon, a local woman who tried out for and made a pro football team here. No excuses. Stupid mistake.
• Is it too corny to say I am thankful for my job? I think of all those people at the Tribune who will be facing some tough times this holiday season. I really am thankful to be a part of a well-respected publication — my home away from home.
• I am thankful that it looks like a buyer may have been found for the Tribune after all, hopefully saving at least some of those jobs.
• For all the trials and tribulations that have come my way. It has caused me to learn that we all have two choices: We either pull ourselves up by the bootstraps and make it through and become much stronger people, or we sit and wallow in self-pity and ask “Why me?” When we choose to push through whatever may happen in our lives, it gives us a better perspective of what life is really all about and how we need to focus on the present moment.
• Giving back and having compassion for people less fortunate. Whether it be monetary or hands-on support. Working with and seeing businesses and people who help the less fortunate has made me more aware that I need to give back more. Giving back to our community is something we all should be doing — not only during the holidays, but during the entire year.
• For the medical industry — particularly the nursing profession. … Health care workers are in the trenches every day taking care of people we love, and they truly are the unsung heroes of our community.
• The things I am grateful for this year are things in previous years I have taken for granted, probably along with many others. Seeing that this economy is so bad and a lot of people are losing their homes and jobs, I am extremely grateful for my job, for having a roof over my head and food on the table every night for my family and me.
• And all of us here at the Business Journal are thankful for you, our readers. We appreciate your continued support and feedback. We all have lots of things to be thankful for, and may we remember to think about them a lot more often in the year ahead.
Don Henninger can be reached at dhenninger@bizjournals.com.
Treasury Secretary Timothy Geithner defended the Obama administration’s economic record and dismissed a call for his resignation from the senior House Republican on the Joint Economic Committee.
Geithner blamed the policies of the Republican party and President George W. Bush for the financial crisis that pushed the nation into the deepest recession since the 1930s.
Republicans “gave this president an economy falling off the cliff,” Geithner told Representative Kevin Brady of Texas as the two men interrupted each other during a hearing today. “I can’t take responsibility for the legacy of crises you bequeathed the country.”
Gearing up for next year’s elections, Republicans are training their sights on Geithner, an architect of the Wall Street bailout as Treasury secretary and in his previous job as president of the Federal Reserve Bank of New York. A report issued earlier this week critical of Geithner’s handling of the rescue of insurer American International Group Inc. has also prompted calls for him to quit.
Today, the Treasury chief fired back, saying that by “any measure” of consumer or investor confidence, the economy is “substantially stronger today than when the president took office” in January.
The “worst financial crisis in generations” happened after “almost a decade, certainly eight years, of basic neglect of basic public goods, in health care, in education, in public infrastructure, in how we use energy,” Geithner said.
Economic Management
Brady told Geithner that a growing number of liberal Democrats as well as conservative Republicans think that he is handling the economy poorly.
“For the sake of our jobs, will you step down from your post?” Brady asked. “The public has lost all confidence in your ability to the do the job, and it is reflecting on your president.”
Another Republican on the panel, Representative Michael Burgess of Texas, told Geithner that he disagreed with Brady.
“I don’t think you should be fired,” Burgess told Geithner. “I thought you should have never been hired.”
Democrats on the panel defended Geithner .
“It just amazes me how there are some people here who are trying to pretend, and I think consciously and intentionally pretending, that the economic circumstances that we’re confronting, all of them, mysteriously materialized over the course of the last nine months or so, which is totally, completely false,” said Representative Maurice Hinchey, a New York Democrat.
White House Comment
The White House stepped in to defend the Treasury chief later in the day. “Secretary Geithner has helped steer the American economy back from the brink, and is now leading the effort on financial reform,” White House spokeswoman Jennifer Psaki said in an e-mailed statement. “His focus today — and ours — is on economic recovery and addressing the challenges the American people face every day.”
Earlier this week, former Republican congressman Rob Simmons, seeking a U.S. Senate seat from Connecticut, called on Geithner to resign over his role in the AIG bailout.
Simmons, who is bidding to challenge Democratic incumbent Christopher Dodd in the 2010 election, cited the report issued Nov. 16 by the watchdog of the $700 billion Troubled Asset Relief Program that faulted the New York Fed — with Geithner at its helm — for making “limited efforts” to protect taxpayer funds during last year’s rescue of AIG.
Dodd chairs the Senate Banking Committee, which is considering legislation to toughen oversight of the U.S. financial system.
In today’s hearing, Geithner also told lawmakers that the Treasury wants to end the TARP as soon as possible.
“We are working to put TARP out of its misery,” he said.
The Obama administration is moving “aggressively” to shut down “the programs that defined TARP at the beginning of the crisis,” he said.
The department has already completed its guarantee for money-market mutual funds and it has ceased making capital injections into large banks.
Industrial conglomerate Tyco International Ltd said it expects its revenue to continue to slide until late in its 2010 fiscal year, sending its shares down 3 percent on Tuesday.
The maker of security and fire-control systems expects demand to remain soft through the first half of its current fiscal year — which began in late September — and set revenue and profit targets that allowed for the possibility of declines.
“We have assumed that the current environment continues well into the year… with some modest — and I emphasize modest — pickup in the second half of the year,” Chief Executive Ed Breen told investors on a conference call.
The company looks for sales to fall at a low-double-digit percentage rate through the first half of the fiscal year, with the rate of decline slowing in the third quarter and growth perhaps returning by the fourth quarter, Breen said. Recent cost-cutting measures could help boost Tyco’s bottom-line performance when revenue starts to pick up, he added.
Analysts noted the company tends to be cautious in its forecasts — pointing out that news came on a day that Tyco reported fourth fiscal quarter results that topped Wall Street’s expectations.
“Their outlook is conservative,” said Buckingham Research analyst Edward Wheeler. “They have been exceeding their expectations as they’ve gone along so I think it’s all in line with the history of conservative guidance that they’ve had for the last year.”
Tyco shares have risen some 64 percent so far this year, sharply outpacing the 7 percent rise of the Dow Jones U Payday Loan for Bad Credit.S. diversified industrials index .DJUSID.
SETS 2010 OUTLOOK
Tyco expects first-quarter profit from continuing operations of 48 cents to 50 cents per share on a drop in organic revenue of 11 percent to 13 percent. Analysts, on average, had looked for profit of 56 cents per share excluding one-time items, according to Thomson Reuters I/B/E/S.
For the year, the company expects a profit of $2.30 to $2.50 per share, excluding one-time charges, on $17 billion in revenue. Wall Street had looked for profit of $2.45 per share on revenue of $17.14 billion.
Tyco shares fell 98 cents to $34.41 in early trading on the New York Stock Exchange, reversing pre-market gains.
Tyco this year moved its incorporation to Switzerland from Bermuda, a move that cost it its spot in the Standard & Poor’s 500 index .SPX.
The company also reported a fiscal fourth-quarter profit that exceeded analysts’ forecasts, boosted by lower costs.
Net income fell 53 percent to $205 million, or 43 cents per share, in the quarter, ended on September 25, from $434 million, or 91 cents per share, a year earlier.
Earnings from continuing operations, excluding special items, came to 61 cents per share, beating analysts’ average forecast of 54 cents.
U.S. Bancorp is probably the biggest bank you’ve never heard of. But there are two reasons why you might want to start paying attention to it.
It is about to get bigger and it’s also a favorite investment of some guy in Omaha whose name you probably do know: Warren Buffett.
On Friday, U.S. Bancorp agreed to buy the nine banks that were part of FBOP, a privately held multibank holding company that failed and was seized by the FDIC.
As a result of the deal, U.S. Bancorp will add $18.4 billion in FBOP’s assets and 150 branches spread throughout California, Illinois, Texas and Arizona. This acquisition is U.S. Bancorp’s fourth purchase of a failed bank or savings and loan since last November. Including FBOP, U.S. Bancorp has added nearly $35 billion in assets and about $27.7 billion in consumer deposits.
Still, U.S. Bancorp (USB, Fortune 500) doesn’t get nearly the attention that other big banks receive, despite the fact that it has $265 billion in assets and is the sixth-largest commercial bank in the country.
While its bigger rivals JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500) were all singled out to receive $25 billion in "rescue" money as part of the first installment of TARP funds last fall, U.S. Bancorp had to wait and apply for TARP just like other smaller banks.
It received $6.6 billion in bailout funds last year but it also was one of the first big banks to return taxpayer money.
In June, U.S. Bancorp was one of 10 banks that took part in regulators’ stress tests earlier this year that was given a relatively clean bill of health.
That might be one reason why Warren Buffett is such a big fan of U.S. Bancorp. As of June 30, Buffett’s Berkshire Hathaway (BRKA, Fortune 500) owned 69 million shares in the bank, a 3.6% stake. That makes Berkshire the fourth-largest owner in U.S. Bancorp. What’s more, U.S. Bancorp is Berkshire’s tenth-biggest holding.
The bank has held up remarkably well during the credit crisis and recession. It has posted a profit in each of the past five quarters.
And the stock, like that of other Berkshire bank holdings such as Wells Fargo and Buffalo’s M&T Bank (MTB), has responded to the relatively strong results. The stock has more than doubled since the market hit its low point of the year in early March, outperforming the big gains at many of its regional bank rivals.
Investors appeared to like the news of the FBOP (not to be confused with the annoying Hanson song MMMBop from a decade ago) acquisition as well. The stock was up about 2% in midday trading Monday.
So if Warren Buffett thinks so highly of U.S. Bancorp, does it make sense for your portfolio. It might. The stock does trade at a higher valuation on both a price-to-earnings and price-to-book value basis than many other large regional banks.
But Frank Barkocy, director of research with Mendon Capital Advisors, an investment firm that focuses mainly on financial stocks and owns shares of U.S. Bancorp, said the stock is worth it.
"The stock does sell at a premium to the banking group and that might frighten some investors away but we think it’s one of the better managed financial institutions out there," Barkocy said. "You get what you pay for. U.S. Bancorp is a consistent quality performer."
Barkocy added that the purchase for FBOP will give U.S. Bancorp a small, but important, foothold in Texas. It is taking over three branches in the Lone Star State as a result of the deal.
That obviously isn’t a whole lot right now but it could allow U.S. Bancorp to expand more in Texas, which is a key banking market that has not been hit as hard as the rest of the country during the wave of bank failures over the past two years.
Of course, the bank is not perfect. It’s a bank after all. U.S. Bancorp reported last month that its non-performing loans and net charge-offs tied to bad loans rose in the third quarter.
But the pace of loans going sour is starting to slow. That’s a good sign. And U.S. Bancorp’s credit quality has been much higher throughout the credit crisis than most of its peers.
As of the end of September, non-performing assets made up 2.4% of total loans. By way of comparison, the non-performing asset to loan ratio for Bank of America was 3.7% in the third quarter.
"Part of the dilemma with banks is there a degree of the numbers being a black box. But U.S. Bancorp didn’t wind up with as much junk in their portfolio. That intrigued us," said Don Yacktman, manager of the Yacktman fund and Yacktman Focused fund. U.S. Bancorp is a holding in both funds.
Add all that up and it shows that not all banks mucked it up royally during the housing boom and resulting bust. Some banks have somehow managed to continue growing without taking on ridiculous levels of risk.
So it looks like there’s a good chance U.S. Bancorp will continue to impress Buffett and the rest of its shareholders.
Talkback: Do you think it makes sense to follow the investing advice of Warren Buffett? Share your comments below.
Singapore’s largest sovereign wealth fund GIC said on Tuesday it had halved its stake in Citigroup to below 5%, making a profit of $1.6 billion as global equity markets rebound.
The stake sale came after Singapore’s smaller fund Temasek Holdings lost an estimated over $4 billion in Bank of America-Merrill Lynch and Barclays in hasty exits around the start of 2009.
Analysts said GIC, also known as the Government of Singapore Investment Corp., took advantage of a rally in world stocks to take some money off the table and the sale suggested the fund may have some concerns about the outlook for global banks.
"Perhaps timings-wise, GIC benefited from the rally," said Song Seng Wun, an economist at CIMB.
"The sale also reflects underlying concerns that although global institutions may have seen their darkest days, there could still be uncertainty ahead as OECD countries in particular could see patchy growth as a result of the recession," he said.
From late 2007, GIC ploughed billions of dollars into Citigroup (C, Fortune 500) and UBS (UBS) and like other sovereign funds, had suffered initial losses in battered global banks as the financial crisis hit companies.
Ng Kok Song, group chief investment officer of GIC, which manages an estimated $200 billion-plus in assets, said the fund realized a profit of $1.6 billion from the sale of Citigroup shares.
The Singapore investor had a profit including unrealized gains of about $3.2 billion based on Citigroup’s closing price of $4.43 on Sept. 21, he said.
On Sept. 11, GIC exchanged its $6.88 billion holding of Citigroup convertible preferred stock into ordinary shares at $3.25 a share as part of a rescue package, gaining in the process a more than 9% stake in the U.S. bank.
"A stake below 5% reflects GIC’s goals and desire to be a portfolio investor," it said in a statement. "GIC will continue its investment in Citigroup as we are confident of its long-term prospects."
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