Perry energy jobs may take years to create

"I believe one of the quickest ways to create jobs and restore investor confidence in America is to expand energy production in America," the Republican presidential contender, who plans to roll out other parts of his economic plan in coming days, said in his proposal.

But there's at least one big problem with Perry's plan ... it could take years for these jobs to materialize, energy and labor experts say.

"It's not going to be overnight," said David Dismukes, associate executive director for the Center for Energy Studies at Louisiana State University. "These are big capital-oriented investments. People don't turn on a dime with these investments."

Perry plan: More drilling, more jobs

The heart of Perry's plan is to open oil and gas fields for exploration that are currently off limits. This includes drilling in the Gulf of Mexico, Alaska, the mid-Atlantic and the American West.

He estimates opening up Alaska alone could create 120,000 jobs, while ramping up production in the Gulf could result in another 230,000 positions.

Perry stressed that he would speed the process because he could largely cut Congress out of the system. He would accomplish much of his goals through executive orders and by "getting the EPA out of the way."

"It can be done without being mired in Washington gridlock, because a president has all the authority he needs to roll back intrusive regulations, create energy jobs and make our nation more secure," he said.

But his proposal also acknowledges that creating the bulk of these jobs will not be so speedy. For instance, Marcellus shale development in Pennsylvania could create up to 250,000 jobs. But it would take until 2020 to hit that number. Same goes for the 500,000 jobs in the American West.

Other jobs could materialize sooner. Approving the Keystone XL pipeline project could create 20,000 jobs immediately, while the Gulf could add 230,000 jobs next year if more permits are granted.

Perry's job figures are backed up by the American Petroleum Institute, which last month released a report that showed the industry could create as many as 1 million jobs. These include direct energy jobs, as well as indirect jobs, such as trucking and suppliers.

The trade association estimates it would take until 2018 to do so, because it takes time to arrange the leases for the development area and get a drilling project up and running.

Another concern is that many of these positions are short-term construction jobs.

"Once the well is drilled, the demand for labor goes away," said Robert Kaufmann, chair of the Boston University Department of Geography and Environment. "Overall, it's relatively few jobs."

Energy companies, however, often develop one well after another, so the jobs would transfer to the new location, said Rayola Dougher, an institute spokeswoman. And if the regulations are loosened, it could stimulate even more production.

"I don't know any other industry that can bring this quantity of jobs to the market," she said. "We have the potential that's not being realized and it could be."

Energy producers would also likely ramp up activity if the threat of higher taxes and stiffer environmental and permitting regulations were removed by a president sympathetic to the industry, Dismukes said. Getting rid of the uncertainty would go a long way to creating more jobs.

It's not surprising that Perry is linking the country's economic fortunes to the energy industry. It's been a big contributor to the success of his state, which is the nation's largest producer of oil and gas.

Since November 2009, the oil and gas extraction industry has created 48,500 jobs, or 12.6%, in the Lone Star State, according to the Dallas Federal Reserve. It's enjoyed the fastest growth rate of any industry by far.

In coming days, Perry said he will unveil a "complete economic growth package" that will address tax and entitlement reform, as well as spending reductions

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Breast cancer entrepreneurs

Patricia Brett lost three aunts to breast cancer; her two younger sisters were diagnosed with it; and six first cousins all have the disease.

In 2002, Brett, an architect by training, was diagnosed with the BRCA1 gene, meaning there was an 85% chance that she would get breast cancer in her lifetime.

A year later, Brett underwent a preventive bilateral mastectomy and reconstructive surgery at age 39. Her changed body, however, made her realize how difficult it is for women who undergo mastectomies to find lingerie and swimsuits that are fashionable and fit properly.

This feeling was reinforced during a road trip in 2007 with her sister and niece. "My niece who was 29 at the time was getting ready to do the same surgery that I had," said Brett. "She was venting that afterwards she wouldn't be able to wear cute bras and swimsuits."

That's when a light bulb went off in her head. "I have a Masters in architecture from Yale. If I could design beautiful buildings, why couldn't I design fashionable swimsuits?"

So she launched Veronica Brett, a line of fashionable swimsuits for women with breast cancer in 2010, named after her aunt who passed away from the disease.

Today, her swimsuits, which are all made in America and priced between $68 to over $200, are sold in boutiques in the United States and in Canada. Next year, she expects to double her sales and cross the $1-million-in-revenue mark.

"I just had my first runway show in Phoenix," said Brett. "The models I used don't have breast cancer. This shows that my swimsuits can be worn by all women."

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7 hot startup incubators

A lack of high paid jobs has created a wellspring of entrepreneurs in New Mexico.

"Entrepreneurship for a long time has been key to this area," said Agnes Noonan, president of WESST, a statewide small business development and training organization.

Consequently, New Mexico has become a rich financial ecosystem that offers startups access to private capital, both through venture capitalist and angel investors.

WESST was founded in 1988 by three women to help women start their own businesses. Six years later, the organization expanded to five centers across the state with 75% of its clientele being women. Two and a half years ago, WESST also opened its first incubator in downtown Albuquerque.

"Because of our unique collaboration with the city of Albuquerque, it's all about job creation," said Noonan. WESST both physically houses young startups at its business incubator and also provides "virtual" incubation to entrepreneurs through training programs at its five other centers.

Over the past two years, Noonan said WESST Enterprise Center has created 136 new jobs in the Albuquerque area and generated $14.3 million in revenue.

Medical Practice Solutions, a women-owned medical billing and patient advocacy company has been in the program for about two years, and has grown to 13 employees.

Nouveau, a women-owned cosmetics company, was acquired by a larger Dallas cosmetics company one year after joining the program. And IntelliCyt, a biotech company that's not women-owned, but is graduating from the WESST incubator next month, has doubled in size and selling its products overseas.

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Buffett Rule could hit 25% of the very rich

The Buffett Rule is a guiding principle for tax reform to ensure that millionaires pay a higher percentage of their income in federal taxes than those who make less.

The CRS found that 94,500 millionaires pay an effective federal tax rate that is less than that paid by 10.4 million moderate-income taxpayers.

That is, 25% of those with adjusted gross incomes over $1 million pay a smaller portion of their income in federal taxes -- income, payroll and corporate -- than 10% of those with AGIs below $100,000.

There are two key reasons why a millionaire or billionaire may end up paying a lower percentage of his income than the average American: A lot of his money may come from investments, which are taxed at a lower rate than wages, and he may not pay very much in payroll taxes since they are only assessed on wage income, which could be a small share of his total income.

The CRS report also analyzed arguments that critics of the Buffett Rule make.

Critics of higher taxes, for instance, often assert that small businesses are the source of the greatest job creation, and so raising rates on small business owners would be bad for the economy.

The report notes, however, that recent studies have found that "small businesses contribute only slightly more jobs than larger businesses relative to their employment share." And that difference is attributable to hiring by startups, which also end up destroying about 40% of the new jobs they create within five years when the businesses flame out.

Furthermore, the CRS report said, "most small business owners of startup firms are not in the top income categories and would not be affected by tax policies that observe the Buffett Rule."

Buffett Rule: Not so simple

More broadly, the report noted that only about 1% of all federal tax returns that report business income have AGIs over $1 million. And of those, only a quarter appear to pay tax rates that would violate the Buffett Rule.

"[That] suggests that tax reform policies designed to ensure adherence to the Buffett Rule will affect few small businesses," the CRS report said.

The debate over how much to tax millionaires and billionaires is far from over, as Congress faces the prospect of having to reduce deficits by trillions of dollars in the coming years.

Buffett this week tried to advance his campaign to get lawmakers to "stop coddling" the super-rich as they contemplate the sacrifices Americans should make in the quest to put the country on a more sustainable path.

In a letter to Republican Rep. Tim Huelskamp Tuesday, Buffett revealed new details about his income and tax burden, and reiterated his promise to release his federal tax return if his ultra-rich peers did the same

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House Democrats call for bank fee probe

Rep. Peter Welch of Vermont, the Democratic Chief Deputy Whip in the House of Representatives, told reporters Thursday he has sent a letter to Attorney General Eric Holder urging him to explore whether banks have engaged in what's called "price signaling," a tacit agreement not to compete on matters such as the strategy and implementation of what consumers must pay for services.

Welch's letter was co-signed by Reps. John Conyers (D-Mich.), Raul Grijalva (D-Ariz.), Keith Ellison (D-Minn.) and Michael Honda (D-Calif.).

Ellison said Bank of America's (BAC, Fortune 500) recent announcement to raise the monthly fee for using a debit card to $5 "may be a signal to others that, 'hey, lift up your prices and we'll all just do it,' but I think that's why we need the AG to inspect and investigate to find out whether the consumer's interest is being served."

At a news conference on Capitol Hill, Welch declined to illustrate how to distinguish between the normal business practice of charging what the market will bear and illegal collusion, which he says could be a violation of federal antitrust laws.

Durbin to customers: Dump Bank of America

But Welch did say big banks have reacted poorly to lawmakers' efforts to control bank fees, and he suggested the industry is trying to make up for lost profits by coordinating price strategies in other areas.

He said "we have very serious questions as to whether or not there has been an antitrust violation, and we call upon the Attorney General to do a full and compete investigation to get to the bottom of this."

Welch said the inquiry should center on the swipe-fee practices of Bank of America, JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500), which together control a substantial share of the consumer banking market. The banks charge retailers a swipe fee every time a customer slides, or "swipes," a debit card through the store's card reader when making a purchase.

BofA chief: We have a 'right to make a profit'

Welch said Americans pay the highest swipe fees in the world and that could represent "the big bank model that is all too much now a fee-driven shakedown of consumers." He stood alongside a chart that represented the dwindling number of banks left today, thanks to mergers and consolidations over the past 20 years.

"There are enormous questions that are being raised as to whether or not they're crossing a line into anticompetitive practices," Welch said, "and the Attorney General has the responsibility to be protecting us."

Ellison told reporters an investigation, regardless of its outcome, could discourage banks from trying to take advantage of customers. Comparing the call for a probe to a cop walking a street patrol, Ellison said "I think the AG, investigating and making sure the industry knows the Attorney General is watching the market carefully, will encourage better behavior"

Later Thursday, another member of Congress, North Carolina Democrat Brad Miller, met with Molly Katchpole, who has organized a petition drive against Bank of America aimed at trying to persuade the bank to cancel its new $5 debit card fee. Miller is considering legislation to make it easier for people to switch banks.

I ditched my big bank!

Miller told CNN after the meeting that more and more people have reason to leave one bank and find a better deal for their banking elsewhere, including as a protest against Bank of America's new charge.

"But the banks have deliberately make it sticky to leave," he explained, because of sometimes burdensome procedures to discontinue direct-deposit paychecks and automated bill paying.

That's where Miller's legislation comes in. Among the provisions, it would address whether banks can require a departing customer to visit a branch, instead of allowing them to close their accounts online. "It's a nuisance," he told Katchpole during their meeting, praising the young woman's signature drive as a way to draw attention to problems with retail banking.

Republicans: Repeal rule that spurred bank fees

Katchpole says her petition, now with 200,000 signatures, prompted Bank of America to say that it is responsive to customer feedback, but the bank added that it would be premature to roll back the new charge.

Miller said he does find it curious that banks began raising their fees all at the same time -- right after the passage of legislation restricting other bank charges.

And while he said he supports his colleague's call for an investigation by the Attorney General, Miller said "I do not see any evidence of collusion" to

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Bring profits home and create jobs? Maybe not

Proponents from the left and right say it could create jobs and boost revenue. Critics -- also from the left and right -- say it would do just the opposite, costing the economy jobs and the government revenue.

Just this week, a group of fiscally conservative House Democrats sent a letter to the congressional debt committee endorsing the idea, while Senate Democrats Carl Levin and Kent Conrad sent a letter urging the panel to reject it.

And both sides are pointing to various studies of a repatriation tax holiday in 2004 to bolster their case.

What the debate's all about: Bipartisan bills in the House and Senate would coax U.S.-based companies to bring home profits they made abroad by offering them a lower tax rate on those earnings than the 35% imposed on profits made on U.S. soil.

Right now, earnings made abroad aren't subject to U.S. tax until they're "repatriated" through the distribution of dividends from the company's foreign subsidiary to the parent corporation.

Hiring gains momentum

As a result, proponents of the tax break say, companies have more than $1 trillion "trapped" abroad in low-tax countries. That money, they argue, could be put to much better use in the U.S. economy.

It sounds logical. But the truth is that the money is not really locked out of the United States at all, said corporate tax expert Edward Kleinbard, a former chief of staff for the Joint Committee on Taxation.

"A large portion of these earnings is kept in liquid investments, and those in turn invariably are in U.S. dollar liabilities of U.S. borrowers, like U.S. bank deposits, commercial paper, and Treasuries. All those investments already are fully at work somewhere in the U.S. economy," Kleinbard said.

What's more, Kleinbard said, the large multinational corporations that would benefit most from a repatriation holiday are not exactly hard up for cash. On the contrary, they have a lot of money sitting on the sidelines and have access to low-cost debt financing. So if they wanted to make more of an investment on U.S. soil they could, Kleinbard notes.

The Joint Committee on Taxation estimates that a repatriation "holiday" could boost revenue by about $26 billion over the first three years -- but lose as much as $80 billion over the next decade.

And the Senate's permanent subcommittee on investigations, which Sen. Levin chairs, released a report this week that said the 2004 tax holiday resulted in a loss of nearly 21,000 jobs among the top 15 repatriating corporations, and cited other studies which found no evidence that the holiday increased overall employment.

Proponents of the holiday challenge JCT's assumptions and assert that Levin's report is "one-sided." They point instead to a study done by economist Douglas Holtz-Eakin for the U.S. Chamber of Commerce.

Holtz-Eakin, a former director of the Congressional Budget Office, estimates that a repatriation holiday could result in the creation of roughly 2.9 million jobs and a $360 billion boost to GDP

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China-U.S. trade wars: What's at stake

The U.S. Senate, in a rare show of bipartisan agreement, passed a bill Tuesday that would slap steep taxes known as tariffs on imports from nations with undervalued currencies. It is a provision aimed squarely at China's yuan, and it prompted harsh attacks from Chinese officials.

"Should the proposed legislation be made into law, the result would be a trade war and that would be a lose-lose situation for both sides," said Vice Foreign Minister Cui Tiankai. "It would be detrimental to the development of economic ties and might have an adverse impact on bilateral relations."

But despite overwhelming support in the Senate, the bill might never become law as House Speaker John Boehner has signaled his opposition to it.

"I think it's pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency," Boehner said.

President Obama has also questioned whether he would sign the bill, saying he didn't want to pass "symbolic" laws that would be slapped down by the World Trade Organization.

Is China's currency undervalued?

For years China has intervened in currency markets to keep its currency, the yuan, essentially pegged to the dollar through a fixed exchange rate.

The Chinese briefly allowed the yuan to start appreciating starting in 2005, but it stopped when the financial crisis hit in 2008. In June 2010 it again allowed the currency to start rising slowly in value. It has gained almost 7% versus the dollar since then.

But experts claim that if the currency had been allowed to trade freely like the euro or many other major currencies, it would be much stronger today. Critics of China's policy estimate that the yuan is still undervalued by 25% to 40%, even with the recent rises in value.

What's wrong with an undervalued currency?

The low value of the yuan has kept Chinese exports very cheap, and gave Chinese businesses an edge in competition with U.S. companies.

The Economic Policy Institute, a liberal think tank, estimates that the United States has lost 2.8 million jobs since 2001 because of the growing trade deficit with China.

One way that China keeps the currency value low is by using its trading profits to buy up U.S. Treasuries. That helps to keep the cost of borrowing low for the federal government and for U.S. businesses and consumers. But it also means that China now holds $1.2 trillion in U.S. government debt, more than any other country in the world.

What products do the U.S. and China trade?

The value of the Chinese currency has helped China become the largest source of imports to the United States, sending $255.5 billion of goods to the U.S. between January and August of this year. That has resulted in the United States having a $189.3 billion trade deficit with China -- the largest of all U.S. trading partners.

Figures from the Commerce Department show that the top imports ranked by dollar value in the first seven months of this year are computers ($28.8 billion), cell phones and other telephone equipment ($18.8 billion), office equipment and printers ($10.2 billion), and televisions ($6.6 billion).

Meanwhile, U.S. exports to China include soybeans ($4.8 billion) civilian aircraft ($3.3 billion) motor vehicles ($2.9 billion) and electronic circuits and chips ($2.4 billion).

While Chinese exports to the United States dwarf U.S. exports to China by nearly a four-to-one margin, the $66.1 billion of U.S. exports still makes China the No. 3 market for U.S. goods, behind only Canada and Mexico and ahead of Japan or any single country in Europe. And those figures don't include sales that U.S. companies get from products they produce in China for the Chinese market. For example, General Motors (GM, Fortune 500) now sells more cars in China than in the United States

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Oil speculation seen adding $600 to your gas bill

Consumer spending is the main driver of the U.S. economy, and gasoline spending is responsible for less than half of all U.S. oil product consumption, CFA said. In the current weak economic environment, the consequences of rising oil prices are very serious.

"When speculators, oil companies and OPEC rob consumers of that much spending power, the inevitable result is a dramatic reduction of economic activity and employment," said CFA Director of Research Mark Cooper.

Speculation has been an integral part of the oil market for some time, but it alone may not be to blame for the recent volatility and price spikes. The report says market deregulation has a lot to do with it.

The oil market was deregulated in December of 2000, creating opportunities for excessive speculation and a massive increase in the market's size, the report states. Prior to this change in policy, speculation didn't have a heavy impact on oil prices, nor was it so widespread.

"This report provides a timely reminder that it was weak regulation that landed us in our current economic mess," CFA Director of Investor Protection Barb Roper said, "and it will take a strong policy response to restore the economy to health."

The CFA said deregulation added about $30 per barrel to the cost of oil in 2011, draining more than $200 billion -- 1% of gross domestic product and 2% of consumer spending -- from the economy.

Keystone pipeline: Why the oil sands conduit will get built

A 2% reduction in consumer spending on goods and services translates into the loss of hundreds of thousands of jobs, according to the CFA.

In 2011 oil prices traded in a range between about $80 and $100 a barrel.

Without speculation, the price of crude oil would instead fall somewhere between $60 and $75 per barrel, according to the CFA

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First-time jobless filings remain above 400,000

There were 404,000 initial unemployment claims filed in the week ended Oct. 8, the Labor Department said Thursday, down 1,000 from the prior week's revised 405,000.
Economists had forecast initial claims to rise to 406,000, according to a consensus estimate compiled by Briefing.com.
"The pace of layoffs has nudged up a bit, but we are not seeing a new wave of job losses here," said Ian Shepherdson, Chief U.S. Economist for High Frequency Economics. "Hiring has probably deteriorated more than firings, though, so payrolls will remain soft, but this could have been much worse."
But the bigger picture is pretty bleak. New claims for unemployment benefits have stuck around or above 400,000 since early April, a level economists often say is too high to signal the unemployment rate will come down anytime soon.
The hardest hit states were California and North Carolina, which respectively saw an increase of more than 2,500 and 3,300 in initial claims in the week ended Oct. 1, the latest week available.
California said it was hit with layoffs in the fishing, agriculture and forestry industries while North Carolina had layoffs in the construction, transportation and warehouse industries.
Meanwhile, continuing claims -- which include people filing for the second week or more of benefits -- was 3,670,000, a decrease of 55,000 in the week ended Oct. 1, the most recent week for which the data is available.
The latest monthly job report from the government, issued last week, showed that hiring was stronger that expected in September. Employers added 103,000 jobs in the month. Nevertheless, economists say the economy needs to add at least 150,000 jobs a month just to keep pace with population growth.

With the unemployment rate standing at 9.1%, the bleak job market remains a front-and-center issue for the Obama administration. It also is likely to be an issue to weigh on his re-election campaign: Obama will likely enter the heart of the campaign season with unemployment above 8%

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Fed leaves door open on QE3

But the minutes released Wednesday showed that the possibility of a third round of asset purchases, known as quantitative easing or QE3, is still very much alive.

"A number of participants saw large-scale asset purchases as potentially a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted," the Fed minutes said.

Two of the policymakers believed that "current conditions and the outlook could justify stronger policy action," but they were willing to settle for Operation Twist because it did not preclude further action in the future.

Three members of the Fed -- Dallas Fed President Richard Fisher, Minneapolis Fed President Narayana Kocherlakota and Philadelphia Fed President Charles Plosser -- voted against the move, arguing that no further action to try to stimulate the economy was called for at the time of the meeting. Their dissent was made public at the conclusion of the meeting.

The Fed members agreed that economic growth remained slow but did not suggest the economy had entered a new recession. But fears of a new recession are growing among economists outside the Fed.

The day after the Fed unveiled Operation Twist, the yield on the 10-year Treasury fell to a record low of 1.695%. But yields have crept back up since then, even as the Fed has bought more of long-term bonds, reaching 2.24% in trading Wednesday following the release of the minutes.

Experts say the rise in yields is because fears are easing about a new recession after a better-than-expected September jobs report and hopes for a resolution to the European sovereign debt crisis.

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Debt committee could raise risk of U.S. downgrade

"The public is watching very closely to see if we can show this country that this democracy can work. I carry that weight on my shoulders as does every member of this committee," Sen. Patty Murray, the bipartisan committee's Democratic co-chair, told CNN last week.

That's a lot of pressure for the 12 lawmakers who have until Nov. 23 to demonstrate they can reach across the aisle.

If a simple majority fails to approve at least $1.2 trillion in debt reduction -- or Congress votes down the group's proposals in December -- that could put serious downward pressure on the U.S. sovereign credit rating.

The three major credit ratings agencies, which declined to comment for this article, basically put Congress on notice after the debt-ceiling nightmare this summer.

Standard & Poor's took the hardest line by replacing the United States' top-notch AAA rating with the lesser AA+ largely because of lawmakers' willingness to risk default to extract concessions on budget cuts.

S&P's action was, in essence, a political downgrade.

Super committee: 'The world is watching'

Looking ahead, S&P said it could downgrade the country again if Congress fails to implement at least $1.2 trillion in deficit reduction on top of the initial round of cuts called for by the debt-ceiling deal.

If the super committee process fails, in theory, $1.2 trillion in automatic spending cuts would be triggered. But many seasoned observers expect Congress may end up modifying or repealing that trigger.

By contrast, if the super committee process succeeds and Congress votes through more than the minimum $1.2 trillion in savings, S&P said that could help to stabilize the country's long-term AA+ rating.

Moody's, for its part, affirmed the country's AAA rating but revised the outlook to negative, and said if the super committee process proves "ineffective, this could affect the rating negatively."

And Fitch, which still maintains a stable outlook on its AAA rating for the United States, said failure by the committee to reach agreement on at least $1.2 trillion could hurt the rating.

And budget experts say even if the committee can lock arms on $1.2 trillion, it still matters how it gets there. Rather than just gunning for low-hanging fruit, lawmakers will impress markets and ratings agencies far more if they meaningfully address the drivers of the long-term debt -- entitlement spending and an insufficient revenue base to support it.

All three credit rating agencies, meanwhile, also noted that they would take into account whether economic growth prospects have worsened, which itself can increase U.S. debt. That's potentially ominous, since many economists now believe the risk of another recession has risen.

What the practical effects of another downgrade would be are anyone's guess. While conventional wisdom suggests such a move would increase the country's borrowing costs, in fact the 10-year Treasury rate began to fall immediately after S&P's rating action on Aug. 5, and today stands about 19% lower.

That's because investors still perceive the United States to be a safe haven relative to the rest of the world, in particular Europe, which is mired in its own debt crisis.

Stocks, meanwhile, got pummeled in the immediate aftermath of the downgrade. And they're still down. How much of a role the downgrade has played, though, isn't crystal clear.

It likely added to market volatility, but stocks are still hurting due to the uncertainty caused by Europe's situation more than anything else -- particularly its potential to harm U.S. banks and the broader economy.

Still, another downgrade when the market is unstable won't be a welcome event.

Of course, the committee could defy expectations and bolster market confidence, former Treasury Department official Roger Altman told the Senate Banking subcommittee.

"Expectations are awfully low right now. ... One of the advantages of actually achieving an agreement, especially if it were above the minimum, would be ... doubly beneficial because it would [confound] conventional wisdom."

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Senate rejects Obama's jobs bill

This dismissal, while not altogether unexpected, still comes as a grave disappointment to the millions of unemployed Americans who have been waiting for Congress to do something other than trade barbs over their job creation plans. Now, the jobless are expecting to see their unemployment checks start to disappear come January.

More than 6 million Americans are set to lose federal unemployment benefits in 2012, with 1.8 million running out in January alone, according to new figures from the National Employment Law Project.

President Obama's $447 billion American Jobs Act would have extended the deadline to file for federal unemployment benefits for another year.

While many Washington observers say the administration's jobs bill is dead in the water, it's possible the unemployment extension could be separated and sent through on its own, or as part of another bill before year's end. The extension is estimated to cost $44 billion, according to the Congressional Budget Office.

From unemployment to startup

Extending unemployment insurance is one of the few areas that has some bipartisan support. While some Republicans and conservative experts feel that jobless benefits dissuade people from taking new jobs, many lawmakers are hesitant to cut off the checks when unemployment remains at a stubbornly high 9.1%.

Supporters, meanwhile, say unemployment benefits are an essential lifeline for the jobless, especially since work opportunities remain sparse. There were 3.6 million people collecting federal unemployment benefits as of mid-September, according to the Labor Department.

"If you don't extend unemployment insurance, things will get worse and they'll get worse in a big way," said Judy Conti, NELP's federal advocacy coordinator.

The average time that the unemployed have been without work hit a record 40.5 weeks in September. Also, some economists say unemployment benefits stimulate the economy since the jobless usually spend their checks right away.

Still, getting another extension past lawmakers would take some political wrangling. Federal emergency benefits began in June 2008 and have been increased or extended eight times since then, including on four occasions last year. When Congress passed a 13-month extension last December, it was thought by some to be the last.

Here's what's at stake: The jobless can collect up to 26 weeks of state benefits before shifting to the extended federal program. Federal benefits consist of up to 53 weeks of emergency compensation, which is divided into four tiers, and up to another 20 weeks of extended benefits. The maximum is 99 weeks.

So those who reach the end of their state benefits after early January will not be able to apply for federal benefits. Same goes for those now collecting federal benefits, who will not be able to advance to the next tier once they finish their current one.

One potential area for compromise involves a larger overhaul of the unemployment insurance system. Republicans, particularly in the House, are interested in giving states more flexibility in their use of unemployment benefit funds and providing more job training opportunities.

When he unveiled his jobs proposal last month, Obama called for "the most sweeping reforms to the unemployment insurance system in 40 years." The expanded goal: helping the jobless transition back to the workplace.

Republicans could get on board with some of the initiatives, which include enhanced training, reemployment and startup opportunities.

House Majority Leader Eric Cantor last month identified unemployment insurance reforms as an area of potential common agreement.

"Unemployment benefits should not turn into a permanent solution," he said last month. "We should somehow connect the unemployed and unemployment benefits with work and job opportunity."

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Volcker Rule gets FDIC approval

WASHINGTON (CNNMoney) -- The board of the Federal Deposit Insurance Corp. on Tuesday approved a draft version of a rule aimed at cracking down on big banks that make risky bets with their own money or own hedge funds.

The FDIC board unanimously passed the draft rule, agreeing it should be published so regulators can collect public comment. At the same time, Federal Reserve published the rule on its website, soliciting comment.

Named for its creator, former Federal Reserve chief Paul Volcker, the rule aims to rein in how banks use their own accounts to chase profits, what's known as proprietary trading.

The Volcker rule was part of the massive Wall Street reforms passed in 2010 and was heralded as one of the sharpest tools available to prevent future financial crisis by chasing speculation and risk out of the banking system.

But the draft rule would still allow the big banks to own a 3% stake in hedge funds and allow banks to "make markets" and risky bets for their clients, using their money.

"Given the controversy that has surrounded this provision --- how it addressed root causes of the financial crisis; whether it does too much or too little--- I am delighted the agencies reached agreement," said the head of the Office of the Comptroller of the Currency John Walsh, who is on the FDIC board.

The draft rule leaves a lot of blanks to be filled out and includes more than 100 questions for stakeholders, such as what type of inventory should a bank be able to build up on behalf of clients.

The rulemaking is a combined effort of the FDIC, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Board of Governors.

Now regulators will collect what could be several thousand letters, e-mails and calls about the proposal over the next three months, a period ending Jan. 12.

After that, regulators will jointly issue a final rule after analyzing the comments, but that could also take several more months.

Congress had wanted the Volcker rule to kick into place next July, but they gave banks until July 2014 to comply. Some banks could delay the rule until 2017.

The Volcker rule was intended to be a nod toward Glass-Steagall, a Depression-era law that Congress repealed in 1999.

Glass-Steagall had prevented commercial banks from dabbling in investment banking. Some critics argue that its demise paved the way for deposit-taking banks to make colossal bad bets, while bank traders chased profits and big bonuses.

Knowing the rule was coming, some banks have already started changing how they do business.

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Jobs report: Good news for Obama? Not exactly

Here's the problem: 103,000 new jobs a month is still about 50,000 jobs off the pace economists say is needed just to keep pace with population growth.

The unemployment rate stands at 9.1%. It's been half a year since the economy added more than 150,000 jobs in any one month.

And the problems driving unemployment -- slow growth and a crippled housing market -- remain a policy puzzle.

It's a trend that should be setting off alarm bells at Obama's 2012 campaign headquarters. After one full term, it will be difficult to blame the previous Republican regime for the lackluster economy.

"Right now, we are the ones in charge," Vice President Joe Biden said in September. "And [the economy has] gotten better. But it hasn't gotten good enough."

Barring an economic miracle, Obama will likely enter the heart of the campaign season with unemployment north of 8%.

The Congressional Budget Office estimates the unemployment rate will fall to 8.9% in the fourth quarter of 2011 and to 8.5% in the fourth quarter of 2012.

Congress sits idle while economy falters

The anecdotal evidence is lined up firmly against Obama. No president since Franklin D. Roosevelt has won re-election with an unemployment rate over 7.2%.

But that's just one data point. According to political scientists and election watchers, a more useful predictor of electoral success is how the public feels about the economy.

In other words, a series of positive reports and robust economic expansion in the months leading up to the election might give Obama the wiggle room he needs.

But the economy will have to actually improve. Right now, the public is downright pessimistic. A recent CNN/ORC International poll shows 90% of those polled believe current economic conditions are poor.

Setting aside public sentiment, there is also a very real threat that economic conditions could deteriorate further.

According to a forecast from the Economic Cycle Research Institute, the economy is staring down another recession.

The ECRI produces widely-followed leading indicators that predict when the economy is moving between recession and expansion -- and all those indicators are now pointing to a new economic downturn in the immediate future.

Congress could lend the president a hand and pass measures designed to stimulate the economy. But that seems unlikely. Obama's stimulus proposal -- the American Jobs Act -- is all but dead.

The House will not hold a vote on the bill. In the Senate, it appears Democrats are having trouble getting enough votes to muscle the measure through.

The inability of Congress to pass a bill -- any bill -- might actually become an Obama campaign theme.

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Herman Cain's 9-9-9 tax plan: Break for the rich?

ain, who's recently moved up in the polls to become one of the leading Republican presidential candidates, is basing much of his campaign on what he calls the 9-9-9 plan, which would get rid of almost all current taxes and replace them with a 9% flat tax on income, a 9% flat corporate tax and a 9% national sales tax.

Cain claims his system would raise as much tax revenue as the current complex system of federal income tax, corporate taxes and payroll taxes. And he believes his plan could bring in additional revenue by boosting economic growth.

Tax experts from various nonpartisan think tanks say without seeing more details of the plan than Cain has released thus far, they can't say for sure whether the system would match current tax collections, or add to the deficit.

"It is theoretically possible it could be revenue neutral, if you literally taxed all of consumption," said Diane Lim Rogers, chief economist with the Concord Coalition, a think tank that focuses on reducing the federal deficit.

Millionaire tax would cover cost of Obama jobs bill

Other experts doubt Cain's proposal would be able to raise as much revenue as the current system, even with the addition of the sales tax.

"That's a big revenue hole you have to fill," said Joe Minarik, director of research for the Committee for Economic Development, referring to the significantly lower rates for income, payroll and corporate taxes. "A 9% sales tax is relatively muscular. It will raise a lot of money But my guess is you'll probably be revenue short."

But what is far more clear, according to the experts, is that the wealthy would end up paying less than under the current system, and the poor would end paying more.

About 22% of taxpayers, primarily low-income earners, pay no taxes and even get money back from tax credits, according to Roberton Williams, senior fellow for the Tax Policy Center. Credits they get for things like having children and the earned income tax credit offset the money they own in payroll taxes. And since they'd be paying a 9% sales tax under Cain's proposal, their dollars won't go as far.

"For the bottom end it's certain to be a tax rise of substantial proportion," he said.

The effective tax rate for the top 1% of wage earners is about 18%, Williams said, so a flat rate of 9% would mean a substantial reduction for most, even with the addition of a 9% sales tax on purchases. The wealthy are far less likely than low- or middle-income wage earners to be spending all of their earnings on purchases that would be subject to the sales tax.

"Every change in the tax system shifts who pays how much. If you're trying to be revenue neutral, there's always going to be winners and losers," said Williams.

But Cain's chief economic advisor, Rich Lowrie, said that low-wage earners would be better off with the 9-9-9 plan because some of the government assistance they now receive quickly falls away as they start to earn more, which he said prevents upward mobility, creating what he calls a "poverty trap."

He also said the sales tax would not increase costs for consumers, because lower corporate taxes would lead businesses to cut prices in order to stay competitive.

And he said the plan would also include some tax breaks in inner cities, details of which are still being worked out.

"We did focus a lot on how do you address the poverty problem," he said. "Clearly, the current system is not working. The advocates of the present system haven't been able to show results for 40 years," Lowrie said.

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Not a recession. But who cares?

Yes, the good news from Friday's jobs report is that more jobs were added than expected in September. In addition, jobs growth figures for July and August were revised higher. Some feared that there could be a loss of jobs after the government originally reported that no jobs were added in August.

"Hopeful means not horrible," said Bill Seyfried, professor of economics at Rollins College in Winter Park, Fla.."We've lowered our expectations. The good news is simply that we're not losing jobs."

But the addition of 103,000 jobs in September is meager. It wasn't enough to make a dent in the unemployment rate, which remained 9.1%. That's not a good number.

What's more, the percentage of so-called "underemployed" workers rose from 16.2% in August to 16.5% last month. That's the highest it's been this year.

Then there's the issue of stagnant wages. The government said Friday that hourly earnings were up just 1.9% over the past 12 months. But according to the government's most recent readings on inflation, overall consumer prices were up 3.8% over the past year.

Even if you want to play the silly economist game of pretending that people are robots who don't need to eat or drive and strip out "volatile" food and energy costs, the so-called core inflation rate was still 2%. That means that people are not making enough to keep up with rising prices.

Unemployed risk a permanent pay cut

And as long as the unemployment and underemployment rates remain as high as they are, wages are unlikely to move up.

Hirers hold all the cards in the job market right now. If you have a job, you are likely to cling to it for dear life even if you're not happy about your salary. And if you're looking for work -- and have been for some time -- you're more likely to take a job that comes with a smaller paycheck.

"Salaries are flat at best. That's not indicative of a strong recovery," said Cam Albright, director of economic research with Wilmington Trust in Wilmington. Del.

"With high employment, there is no pressure for companies to increase wages and that's very much a problem. I think that's going to continue," Albright added.

That's what is so troublesome. Even if the economy doesn't technically double dip and head back into recession, it still feels as if the last recession never really ended.

"Some people are referring to this as a 'growth recession.' But if you are unemployed, it doesn't make a difference what this is being called," Seyfried said.

Albright said he expects the economy to grow at a less-than-2% annualized pace in the second half of this year and only in the mid-2% range in 2012. That's just not enough to make Americans feel better about the economy.

Do you think the economy will recover in 2012?

Nobody may like to hear this. But no matter what the White House, Congress and regulators do or don't do about taxes, stimulus, the deficit, interest rates or what have you, the sad reality is that the only real solution for this economic malaise is time.

It took decades of wanton spending by consumers and governments and reckless risk-taking by banks and other corporations before the economy finally seized up and stopped functioning normally. It will take years to get back to anything resembling a real recovery.

The consumer is still slowly "deleveraging" and the federal government is attempting to do the same. And while the only major bright spot in this economy is that many large corporations have repaired their balance sheets and are now reporting healthy profits, the notable laggard is the financial sector.

The bad news in the good jobs numbers

If banks continue to languish, they are not going to lend as much to small businesses that may be deemed risky borrowers. And that's going to mean more months of low and slow jobs gains.

"Growth is elusive. We are still dealing with the residual effects of the financial crisis. That will stay with us for awhile," Albright said.

Reader comment of the week. The biggest story of the week was obviously about Jobs with a capital J. The death of Apple co-founder Steve Jobs affected us all. And at a time when most Americans are still worried about their own jobs, one reader said that more companies should follow the lead of Apple.

"Let's focus on Jobs and learn from him maybe that's the solution to the jobs situation #learning," tweeted Ashley Garcia.

Great point. Considering that Apple had only about 8,400 workers when Jobs was renamed CEO of Apple in 1997 and now employs more than 46,000 people worldwide, I do think many companies can learn a lot from Apple.

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$1.3 trillion deficit for 2011, CBO says

The deficit is the annual gap between what the government spends and what it takes in. Accumulated deficits make up the national debt, which is currently $14.8 trillion.
The fiscal 2011 deficit accounted for 8.6% of the size of the overall economy -- down slightly from 2010, when the deficit was about 9% of GDP.
One reason for the slight improvement: Individual income tax receipts were up nearly 22% in part because of increases in wage and nonwage income.

CBO to debt committee: Cutting now could hurt

There was some improvement on the other side of the budget as well. Spending on education, commerce, housing and space programs fell, and spending on defense, Medicare, Medicaid and Social Security grew more slowly than usual.
In addition, spending on unemployment benefits fell by 24%, as fewer claims were filed and a temporary $25 weekly increase in benefits expired.
At the same time, businesses paid $12 billion more in unemployment insurance taxes in 2011. Many states have raised unemployment taxes on companies to replenish their depleted UI trust funds.
Not all tax receipt categories grew, however. Nor did all spending categories fall or moderate.
Corporate income tax revenue overall fell about 6% due to stimulus-based tax cuts that let companies accelerate their deductions. Similarly, social insurance tax receipts, which support Social Security and Medicare, fell 5.3% because of the payroll tax cut approved by Congress in December 2010.
Interest costs rose by nearly 17% -- despite very low rates -- because of the big jump in government debt over the past year.
Final numbers for fiscal year 2011 won't be out until later this month, when the Treasury Department releases its monthly budget statement.

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Millionaire tax would cover cost of Obama jobs bill

 

CBO to debt committee: Cutting now could hurt

The single largest measure in the package -- reducing revenues by $265 billion -- is an extended and expanded payroll tax cut.

Employees normally pay 6.2% on their first $106,800 of wages into Social Security, but they are now paying only 4.2%. That break is set to expire at the end of December, and Obama wants to cut the tax in half to 3.1%.

Another notable measure, costing roughly $44 billion, is an extension of emergency jobless benefits to help the long-term unemployed. Lawmakers first expanded benefits to cover 99 weeks in 2009, and have since reauthorized the expansion five times.

Other measures include tax credits for businesses that hire the long-term unemployed, and money to help local communities preserve and create jobs for teachers and first responders such as firemen.

CBO didn't weigh in on the potential economic effects of the bill -- specifically how many jobs it might create. But it did say the bill "could have a noticeable impact on economic growth and employment in the next few years."

The Senate version of the bill differs from the president's original version only in that it replaced his proposals to pay for it with a 5.6% surtax on modified adjusted gross income over $1 million. The Senate is expected to vote on the amended version next week.

The House is a different story. Majority Leader Eric Cantor has said the full bill will not get a vote.

Hiring beats expectations

Many economists have lowered their forecasts for economic growth in recent weeks as the debt crisis in Europe has worsened.

No one expects the jobs bill to pass intact, and it's not clear if pieces of it will survive.

Nigel Gault, chief U.S. economist at IHS Global Insight, said in a research note Thursday that he assumes lawmakers will extend the payroll tax cut and emergency unemployment benefits -- and nothing more.

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Local government jobs evaporate

State and local governments shed 90,000 jobs in the most recent quarter, the third largest loss on record. The sector has downsized for 27 of the past 33 months, according to IHS Global Insight.
However, it had been looking even more bleak, but Friday's report showed that July and and August weren't as dire as originally thought.
The sector only lost 23,000 jobs those months, not 81,000. The quarter had been on track to be the worst job loss ever for state and local government workers.
In September, the federal government lost 1,000 jobs, brought down by a loss of 5,300 postal service slots.
The weakness in the public sector is putting increased pressure on President Obama and Congress to funnel more aid to states.
One reason job losses are mounting is because the 2009 stimulus funds to states has essentially dried up. This money kept many teachers and public workers on the payroll during the depths of the Great Recession.
All that's left now are some funds from last summer's $10 billion in funding to keep teachers and first responders off the unemployment lines. That money, which was estimated to have saved 100,000 positions, will be gone by the end of the fiscal year.

U.S. manufacturing slowdown: 4 cities at most risk

Obama is looking to send more assistance to cash-strapped states. In his jobs proposal, unveiled last month, he included $30 million to stem the crush of teacher layoffs.
The White House estimates its current proposal will prevent up to 280,000 educators from being downsized.
But even if Congress sends more money to the states -- which isn't looking likely at this point -- the bleeding isn't expected to stop. The weakening national economy has prompted several states to lower their revenue forecasts, which means more budget reductions could be on the way.
Education will likely continue to bear the brunt of the cuts, especially since school districts make up 60% of local payrolls.
"That's the sector where there's the most meat to cut," said Greg Daco, principal U.S. economist for IHS Global Insight. "It's at all levels, from kindergarten to university.

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OECD indicators paint dark picture of global economy

The outlook for the world's major economies is continuing to darken according to the latest data from the OECD published on Monday, which showed sharp falls in leading indicators for all countries except Japan.
The Paris-based Organization for Economic Cooperation and Development said its composite leading indicator (CLI) for its 33 member countries dropped for a fifth straight month in August, hitting 100.8 after 101.4 in July and signaling a slowdown in economic activity.
Individual country readings fell across the board, including for non-OECD member countries, with most seeing their CLIs drop below their long-term average of 100.
Only Germany, Russia and the United States kept readings above 100. Japan, meanwhile, stood out as the only country not yet headed for a clear slowdown, registering a modest 1-point decline in its CLI to 102.5 from 102.6.
"For all other major economies, except Japan, the CLIs are now pointing strongly to a slowdown in economic activity below long-term trend," the OECD said.
The OECD CLIs are designed to anticipate turning points in economic activity relative to trend - a turnaround in an indicator tends to precede turning points in economic activity by around six months.
The consensus at the moment is that many major western economies are teetering on the brink of recession, as they struggle to repay inflated levels of debt.
The OECD's reading for the Group of Seven major economies -- France, Germany, Italy, Japan, the United Kingdom and the United States -- slumped to 101.1 in August from 101.7 in July, while the reading for the euro area fell 9 points, to 99.8 from 100.7.
(Reporting By Vicky Buffery; Editing by Toby Chopra)

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Insight: New bankruptcy ripples may emerge

Three years after the collapse of Lehman Brothers touched off a tidal wave of bankruptcy filings, corporate failures may be about to pick up again, with some big-name companies among those struggling for survival.
Companies in a range of businesses, including hair salons, restaurants, renewable energy, and the paper industry, have tumbled into Chapter 11 in the past few months.
The weak economy, lackluster consumer spending, a shaky junk-bond market and increasingly tight lending practices are also threatening struggling companies in industries as diverse as shipping, tourism, media, energy and real estate.
AMR Corp's American Airlines may need to go to court to restructure its labor contracts, though a spokesman for the airline reiterated on Monday that bankruptcy is not the company's goal or preference.
Kodak confirmed that a law firm known for taking companies through bankruptcy has been advising on strategy as attempts to overcome the loss of its traditional photography business falter. It has denied any intention of filing for bankruptcy.
Some bankruptcy and restructuring experts warn a fresh U.S. recession could trigger a string of failures to rival the one that followed Lehman Brothers, which in 2008 filed the biggest bankruptcy in U.S. history.
"It's getting busier for everyone I know," said Jay Goffman, global head of the Corporate Restructuring Group at law firm Skadden Arps, Slate, Meagher & Flom. "I think 2012 will be a busy year and 2013 and 2014 will be extraordinarily busy years in restructuring."
No one is currently predicting a second Lehman-type collapse. Its $639 billion bankruptcy came after a loss of confidence in the investment bank as asset values plummeted, leading to the drying up of credit lines.
In fact, predicting a bankruptcy wave at all is a tricky task, experts say. It could depend on several unknowns: how much money banks and other institutions are willing to lend troubled companies, whether the economy lands in a double-dip recession and what happens in the European debt crisis.
The sovereign debt crisis in Europe could be the most important X factor. Even the experts who say that a bankruptcy crisis is not coming because current low interest rates make it easy for companies to get cash to finance their way out of trouble, say that the euro zone's problems could trigger defaults here.
"It is possible that one or two sovereign debt defaults would increase the pressure we'd feel in the U.S. credit market. Then we might see an environment like we had in 2008," said Peter Fitzsimmons, president for North America for turnaround advisory firm AlixPartners LLP.
MORE FILINGS
Chapter 11 filings are picking up, bankruptcy data show. Ten companies with at least $100 million in assets filed for bankruptcy in September, the most since 17 filed in April, which was the busiest month since 2009, according to Bankruptcydata.com.
For a graphic click here link.reuters.com/nuw34sp:
Recent failures included renewable energy companies Evergreen Solar and Solyndra. The latter collapsed in a politically-charged bankruptcy after taking a $535 million loan from the federal government.
Other recent bankruptcies include glossy magazine paper manufacturer NewPage Corp, which was the largest bankruptcy of the year and the largest non-financial company filing since 2009; Graceway Pharmaceuticals, which makes skin creams; Hussey Copper Corp., which makes the copper bars used in switchboards, and the Dallas Stars of the National Hockey League.
So far this month, five companies with more than $100 million in assets have filed, including the Friendly's ice cream chain - and wireless broadband company Open Range Communications Inc.
It is difficult to predict trends in filings. For example, experts who focused on macroeconomic credit indicators and default projections in 2006 or 2007 wouldn't in many cases have been prepared for the severity of failures that followed.
In 2009, General Motors, Chrysler Group, LyondellBasell Industries and General Growth Properties all filed for bankruptcy, contributing to a record number of filings and topped the list of largest bankruptcies ever.
At the same time, some experts were predicting an even deeper and longer list of corporate collapses. But within a year of bankruptcy filings breaking records, banks and other financial institutions were buying debt and lending, making it easy for companies to finance their way out of trouble.
Two months after Lehman failed, the U.S. Federal Reserve slashed rates to near zero. Once confidence began to return to the debt markets, investors flocked to high-yield bonds sold by ailing companies, allowing them to refinance.
Other failing companies were able to "amend and extend" - or to critics, "amend and pretend" - by striking new borrowing terms with lenders that delayed debt maturities in the hopes the economy would rebound smartly and business would pick up.
Those measures often avoided operational overhauls, creating what some experts called "zombie companies" that cut staff and prices to survive, but were too sick to invest in new projects.
Bankruptcy court allows troubled companies to shed debt and also become more operationally efficient as they renegotiate labor contracts, as airlines have done, or reject pricey store leases, which retailers often do.
But these changes do not always work, especially when companies find little support among suppliers or creditors for their turnaround plans. Bankrupt book chain Borders, for instance, recently closed its doors after failing to find a buyer.
In addition, confidence in the economy and easy access to debt allowed companies to complete restructurings in 2009 and 2010 with business plans and debt loads that were based on an economic pickup that has now faltered. That could create the potential for trouble at companies that have already restructured once.
SIGNS OF TROUBLE
Restructuring advisers agree that a dimming economic outlook will force lenders to make some tough calls about troubled companies. Those who see a broader wave of bankruptcies expect the economy to dip back into recession as the U.S. government cuts spending and Europe's debt problems worsen.
They also look beyond the equity market for less visible signs of trouble. They see a junk-bond market that has suffered its worst sell-off since the Fed cut rates to near zero in 2008 and falling loan market prices as lenders reduce their exposure to weak borrowers.
There are even troubling signs coming from otherwise sanguine rating agencies that assess corporate debt. Moody's noted that the number of downgraded liquidity ratings for troubled companies rose for a third straight month in September, an ominous sign that was similar to the third quarter of 2007 when the economy last slid into recession.
Indeed, one analyst said the Evergreen Solar bankruptcy as well as the recent filing of restaurant operator Real Mex Restaurants Inc show that weak companies are finding it hard to borrow. Both failed to reach the kind of refinancing deal with creditors that until recently was saving many troubled companies from Chapter 11.
"The idea that a couple of companies can't even go to existing lenders for a real lifeline is quite telling right now," said Kevin Starke, an analyst with CRT Capital Group, a brokerage that specializes in distressed securities.
LACK OF HOME RUNS
Still, not everyone is convinced more bankruptcies are on the way. Jim Hogan, the head of GE Capital's restructuring finance unit who works with a lot of medium-sized companies, said he expects only a gradual increase in business, limited to the weakest industries.
"I'm not telling anyone internally I'm expecting some big home runs for us," Hogan said.
Some said the current rise in bankruptcy filings is routine as fatigued lenders pull the plug on deadbeat companies. While debt and equity markets may have recently been in a swoon, many credit indicators generally show Corporate America to be in decent health.
For example, corporate balance sheets are stuffed with cash, and the rate of corporate loan defaults is expected to end the year at 0.23 percent, well below the historical average of 3.57 percent, according to Standard & Poors.
One of the biggest concerns of recent years, a looming "wall of maturities" of bonds that come due in the next few years, has largely been refinanced, according to Moody's.
Despite this, the level of debt held by consumers, the federal government and the corporate sector weighs heavily on the economy and will likely spell trouble for some major companies.
"You have this huge overhang of debt. You don't see a significant amount of improvement in the economy. How long can that continue?," said Jay Indyke, chair of the bankruptcy and restructuring practice at law firm Cooley LLP.
(This story corrects Jay Goffman's title in paragraph 7 to head of restructuring, from co-head)

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For Americans, recovery feels like recession: study

No wonder many Americans feel as if the economy never recovered at all.
The incomes of U.S. workers, adjusted for inflation, fell even more rapidly since the rebound began in the summer of 2009 than during the recession itself, according to a new study.
The findings from research conducted by two former Census Bureau economists offer insight into the sluggish nature of the recovery. The U.S. economy relies on consumer spending to fuel around two-thirds of total output.
The study, conducted by Gordon Green and John Coder and published by Sentier Research, found median annual incomes adjusted for inflation dropped 6.7 percent between June 2009 and June 2011, more than double the 3.2 percent drop experienced during the recession.
This knocked real median annual household income down to $49,909 in June 2011 from $55,309 in December 2007, when the recession began. Essentially, American households continued to lose ground even though growth had resumed.
Economic growth in the first half of 2011 has been particularly disappointing, advancing at less than a 1 percent annual rate. In the second quarter, consumer spending rose at only a 0.7 percent pace, the weakest since the fourth quarter of 2009.
President Barack Obama, whose reelection prospects could hinge on a stronger labor market recovery, has proposed a $447 billion stimulus program aimed at cutting unemployment. The U.S. jobless rate, which peaked at 10.1 percent in October 2009, has been stuck above 9 percent for the past five months.
The research indicates the risk of deflation, which the Federal Reserve has fought off with aggressive monetary policy, has been even more pronounced than previously thought.
While falling prices sound like a good thing, a downward spiral in costs and salaries can lead to a prolonged period of contraction, say economists.
Fed Chairman Ben Bernanke recently signaled the central bank might be forced to act if inflation or inflation expectations fell substantially.

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Sept small business confidence improves: NFIB

 

Small businesses in the United States grew more confident in the economy's future for the first time in seven months during September as their outlook for sales improved, according to survey released on Tuesday.
The National Federation of Independent Business said its Small Business Optimism Index rose 0.8 point to 88.9. The increase was largely because fewer small business owners expect inflation-adjusted sales to contract.
The index reading was based on a survey of NFIB members.

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Credit terms for dealers little changed in summer: Fed

Big firms that finance securities and derivatives dealers grew more wary about terms they were offering over the summer after easing terms for a lengthy period, a Federal Reserve study on Tuesday showed.
"Responses to the September survey pointed to small changes in credit terms across major classes of counterparties with no clear overall bias toward either easing or tightening over the past three months, in contrast with the broad-based easing that had been since...June 2010," the Fed survey said.
The so-called Senior Credit Officer Opinion Survey was conducted in late August and at the beginning of September but asked about changes between June and August -- a period of considerable strain in markets when worry about Europe's debt crisis was sapping stock prices.
It covered 21 firms that handle nearly all the dealer financing of dollar-denominated securities and that are the most active intermediaries in over-the-counter derivatives markets.
"Dealers indicated that their clients' willingness to bear risk had decreased somewhat, on net, over the past three months," the survey said, adding that hedge funds had displayed "a more pronounced decline" since the start of 2011 in their risk appetite than had other client types.
The survey said that "a significant majority" of dealers said they now were devoting more resources and attention toward managing concentrated exposures to dealers and other financial intermediaries in recent months.
It also said that there had been some tightening in terms under which a broad spectrum of securities were financed in recent months, though terms on equities financing were little changed.
"These responses stood in contrast with prior surveys in which responses had generally indicated an easing of terms," the survey said,. adding the tightening of terms appeared to apply to both average and most-favored clients.

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Wall St jobs, bonus outlook dims for 2011

 

Wall Street cash bonuses are likely to drop for the second year in a row, the New York State Comptroller said on Tuesday.
The securities industry, one of the biggest employers in New York State, could also lose another 10,000 jobs by the end of 2012, according to the report.
The job losses would bring the total layoffs on Wall Street since January 2008 to 32,000, according to Comptroller Thomas DiNapoli's office, a contraction of about 17 percent. The industry shrank closer to 20 percent in the early 1990s and the early 2000s.
The outlook for the industry may be grim, but many employees are optimistic about their compensation, according to a separate survey on Monday.
Recruiting website eFinancialCareers said 62 percent of Wall Street employees think their 2011 bonuses will be the same or better than last year.
"People on Wall Street in general don't have small egos," said Malcolm Polley, chief investment officer at Stewart Capital Advisors, with $1.1 billion under management.
Polley added that people on Wall Street are always surprised when they lose their jobs, or their bonuses decline.
Wall Street employees are less optimistic than they were a year ago, when 71 percent thought their bonus would be flat to up -- but in the intervening year, there has been a significant downturn in the industry.
Trading profits have suffered as new regulations have forced banks to scale back on their proprietary trading activities.
Banks including Bank of America Merrill Lynch have announced layoffs, and Goldman Sachs -- seen as one of the savviest investment banks -- is expected to report its second loss ever as a public company next week. In addition, protesters against Wall Street have also taken over a park in lower Manhattan.
The European sovereign debt crisis, the weak U.S. economy, unstable stock prices and regulatory changes are weighing on the sector, according to DiNapoli's report.
"The reality today is that trading volumes are down and other businesses that were drivers of growth in the last decade are less vibrant," said Marshall Front, chairman of Front Barnett Associates with $600 million under management.
But, he added, there may be more bonus money to go around for those who remain.
RIPPLES IN NEW YORK
Last year, securities-related activities accounted for 14 percent of the state's tax revenue and almost 7 percent of the city's tax revenue, DiNapoli's report found.
One in eight jobs in New York City and 1 in 13 jobs in New York State are linked to the securities industry. Given the current weakness, tax collections are likely to fall short of city and state targets in their current fiscal years and may decline more the following year.
"It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year," DiNapoli said in a statement.
"As we know, when Wall Street slows, New York City and New York State's budgets feel the impact, and that is a concern," DiNapoli said.
The average securities industry salary in 2010 was $361,330, or 5.5 times higher than the average private sector salary of $66,120, according to DiNapoli's report.
(Reporting by Holly McKenna in Albany, New York, and Clare Baldwin in New York City. Editing

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Executives tell Obama how to create jobs

 

President Barack Obama could create millions of jobs by attracting more foreign capital to the United States, helping entrepreneurs and being more aggressive in energy, business leaders said on Monday.
In a new report, the chief executives of GE, Intel, Boeing and other companies also backed White House proposals to fix infrastructure like airports, railways and electricity grids and to expand broadband Internet networks as a way to boost hiring and speed up flagging growth.
"If Washington can agree on anything, it should be this -- and it should be now," the President's Council on Jobs and Competitiveness said in the report, to be presented to Obama at a meeting in Pittsburgh on Tuesday.
GE chief executive Jeffrey Immelt, who also chairs the non-partisan advisory panel, said the long list of proposals -- which include streamlining drug approvals, reducing costs of initial public offerings and improving air traffic control -- could have a big impact taken together.
"We never thought there was going to be a silver bullet to create jobs," Immelt told Reuters in a telephone interview.
"What we want to offer the president is a very broad set of ideas that can help more the economy forward," he said. "It's comprehensive and it's specific."
Obama, who faces a tough re-election fight in November 2012 with unemployment high and voters fearful of another recession, has sent his own $447 billion job-creation plan to Congress, where it has hit hurdles over how it will be funded.
The jobs council, which also includes executives from Facebook, Eastman Kodak and DuPont, was created in February to help the White House find ways to promote growth.
Its initial findings in June focused on measures with an immediate jobs impact, like cutting red tape that delays public works projects and speeding up tourist visa applications.
The latest report focuses speeding job creation over a two- to five-year period. It includes proposals the council said "have the potential to create millions of jobs in the years ahead while improving America's competitive standing."
MORE COMPETITIVE
It seeks to bolster entrepreneurship by changing student loan repayment rules for graduates who own or work for new companies and offering visas to foreign-born entrepreneurs who form or join start-ups in the United States.
The jobs council also calls for a speedier process of immigrant visa decisions. It proposes foreign graduates who earn U.S. degrees in science, technology, engineering and math should get green cards offering them permanent residency.
"Delays all too often result in these talented people opting to start or join companies in other countries, where they will compete against American firms," the report said.
It also recommends lower corporate taxes for new companies in their first three years, a reduced capital gains rate for investors buying equity in young firms and other measures to encourage people to launch start-up companies.
The report calls for tax reforms to make it more competitive for companies to locate in the United States, part of an effort to attract more foreign direct investment.
It said rising wage and operating costs in India and China have made the United States more attractive to firms that have shifted their business abroad in recent years but may want to return because of strong U.S. universities and research hubs.
"By capitalizing on these shifts in costs with a more aggressive marketing of America's attractiveness as an investment destination, the United States has an opportunity to recapture lost market share and grow jobs previously lost in tradable sectors," it said.
Some of the ideas, including an infrastructure bank to drum up finance for projects, have been suggested by Obama but not gained the traction needed to clear a divided Congress where Republicans are worried about keeping deficits in check.
Other ideas, including a call for a more aggressive stance on energy extraction, may be hard for the president's fellow Democrats to accept in the run-up to the 2012 election.
The report said environmental concerns about three projects -- the pipeline to transport heavy oil from Canada to Oklahoma and the Gulf Coast, the resumption of deepwater drilling in the Gulf of Mexico and the drilling of shale gas supplies -- had overshadowed their job-creating potential.
"These three streams of private investment could together support or preserve hundreds of thousands of jobs in the next few years," it said, also calling for a new federal financing institution to ensure U.S. energy investments are sufficient for the country to be a global leader in the field.

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