U.S. may default on its debt half a month earlier than expected, new analysis shows
Posted by Khaled Ali
The U.S. government may default on its debt as soon as Feb. 15, half a month earlier than widely expected, according to a new analysis adding urgency to the debate over how to raise the federal debt ceiling.
The analysis, by the Bipartisan Policy Center, says that the government will be unable to pay all its bills starting sometime between Feb. 15 and March 1.
The government hit the $16.4 trillion statutory debt limit on Dec. 31 , but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.
The Treasury has said that the accounting schemes, known as “extraordinary measures,” ordinarily would forestall default for about the first two months of the year, though officials were clear that they could not pinpoint a precise date because of an unusual amount of uncertainty around federal finances.
“Our numbers show that we have less time to solve this problem than many realize,” Steve Bell, senior director of economic policy at the Bipartisan Policy Center, said in a statement. “It will be difficult for Treasury to get beyond the March 1 date in our judgment.”
The fast-approaching deadline to raise the debt limit is likely to be Washington’s next fiscal battleground. Republicans say they plan to use the occasion to demand deep federal spending cuts, with House Speaker John A. Boehner (Ohio) insisting on a dollar reduction in federal spending for every dollar increase in the nation’s borrowing limit.
But the White House says President Obama will not negotiate this point, because the debt ceiling represents a limit to obligations that Congress already has promised to pay.
“What he will not do — as he has made clear — is negotiate with Congress over Congress’s sole responsibility to pay the bills that Congress has already incurred,” White House press secretary Jay Carney said Monday. “Nobody forced Congress to rack up the bills that it incurred. And it is an abdication of responsibility to say that we’re going to let the country default and cause global economic calamity simply because we’re not getting what we want in terms of our ideological agenda.”
The Bipartisan Policy Center’s debt-limit deadline is based on several assumptions, two of which conceivably could change the calendar.
One is that the confusion around end-of-year tax policy could lead to delays in the filing of taxes and refunds, throwing a curveball into projections about the nation’s finances.
The other is the overall pace of economic growth; faster growth tends to lift tax receipts.
If Congress does not raise the debt ceiling by the deadline, the White House has said that the nation probably will default. In a previous episode — in the summer of 2011 — officials determined that the best course would be to withhold all of a given day’s federal payments until enough money became available to pay them.
Source: Washington Post
Eurozone unemployment reaches new high
Posted by Maha Shawki
The unemployment rate across the eurozone hit a new all-time high of 11.8% in November, official figures have shown.
This is a slight rise on 11.7% for the 17-nation region in October. The rate for the European Union as a whole in November was unchanged at 10.7%.
Spain, which is mired in deep recession, again recorded the highest unemployment rate, coming in at 26.6%.
More than 26 million people are now unemployed across the EU.
For the eurozone, the number of people without work reached 18.8 million said Eurostat, the official European statistics agency said.
Barroso confidence
Greece had the second-highest unemployment rate in November, at 20%.
The youth unemployment rate was 24.4% in the eurozone, and 23.7% in the wider European Union.
More recent figures from Spain's Labour Ministry suggest that the number of people registered as out of work in the country - a narrower measure than the Eurostat figures - fell in December.
The ministry said earlier this month that the number of people registered as unemployed fell in December by 41,023 or 0.8%.
The eurozone and wider European Union economies have struggled in recent years as government measures to reduce sovereign debt levels have impacted on economic growth.
However, European Commission President Jose Manuel Barroso said on Monday that he believed the worst was over.
Mr Barroso said the turning point was last September's promise from the European Central Bank to buy unlimited amounts of eurozone states' debts.
BBC Economics Correspondent Andrew Walker said: "The biggest rises, in percentage terms, were in countries at the centre of the eurozone financial crisis - Greece, Spain, Cyprus and Portugal. One striking exception to that pattern was the Republic of Ireland where unemployment fell.
"The general trend however remains upwards and it makes it even harder for the governments concerned to collect the taxes they need to stabilise their debts."
The record low for the eurozone unemployment rate was 7.2%, which was recorded in February 2008, before the financial crisis that first gripped the banking sector spread to the real economy.
The historic low for the eurozone youth unemployment rate was 15% in March 2008.
Source: BBC
France hints at lowering 75% tax rate
Posted by Khaled Ali
French actor Gerard Depardieu shows off his new Russian passport on January 6, 2013.
(Financial Times) -- France's socialist government has hinted that a replacement for its controversial 75 per cent income tax bracket, struck down late last month by the country's constitutional council, may be at a lower rate but imposed for the rest of its five-year mandate, not just two years as previously proposed.
It is also to divert €2bn in extra funds into state-backed job creation schemes in a bid to meet President François Hollande's bold promise to reverse a trend of fast-rising unemployment by the end of this year.
Mr Hollande and other ministers have so far pointedly avoided specifying what rate would be set for a revamped supertax, leading to speculation that it might be watered down.
The move to impose a 75 per cent marginal rate on incomes above €1m a year, coupled with steep rises in wealth and capital gains taxes, caused a political storm in France, culminating in the apparent defection of film star Gérard Depardieu.
France's most famous actor travelled to Russia at the weekend where he met Vladimir Putin, president, and was handed a promised Russian passport.
Jérôme Cahuzac, France's budget minister, said on Sunday: "I find it a little ridiculous that for tax reasons, this man has gone into exile so far to the east."
Mr Cahuzac reiterated in a television interview that the government would formulate a replacement for the 75 per cent measure, which was intended to "incite a bit more prudence and decency in a very rare number of leaders", in order to reduce pay gaps between workers and executives.
He said "part of the parameters" being considered was to run a newly adapted supertax for the rest of Mr Hollande's term, rather than limit it to two years. But he hinted that the rate would be lower than 75 per cent, pointing out that the constitutional council had indicated that a total tax burden above that level, including other levies, "could be judged as a confiscatory rate" by the council.
He added that the government would not impose any further new taxes after this year. "Tax stability from now is the policy of the government," he said.
Despite the furore over tax, the chief political threat facing the government is unemployment, which has risen sharply in recent months to more than 10 per cent of the workforce.
An Ifop poll published in Sunday's Journal du Dimanche showed 75 per cent of voters doubted Mr Hollande would be able to fulfil his promise to "invert the curve" of unemployment by the end of the year.
Mr Cahuzac said €2bn would be diverted from elsewhere in the 2013 budget to boost an existing €6.5bn contingency fund with the intention of using the money to boost government employment projects.
Since coming to power last May, the government has moved to implement Mr Hollande's campaign promises to provide 100,000 starter jobs this year for young people with low qualifications and provide state backing for a "contract of the generations" aimed at generating over five years 500,000 permanent jobs for youngsters in companies, which would also pledge to retain a matching 500,000 older workers.
Apart from state-backed schemes, Mr Hollande is looking to reforms of the country's rigid labour market regime to provide some relief. Employers and trade unions are set to hold a new round of talks on a potential deal later this week, but remain at odds over how to strike a balance between business demands for more flexibility and union stress on job security.
Source: CNN
Rebound in construction hiring offers hope for economy
Posted by Adam Jon
After five years of hemorrhaging jobs, the construction industry has become one of the bright spots of the labor market — a hopeful sign that one of the most damaged sectors of the economy may finally be starting to heal.
Overall, the government’s monthly jobs report, released Friday, showed continued modest growth in December. The economy added 155,000 jobs, on par with the monthly average for both 2012 and 2011. The unemployment rate remained at 7.8 percent.
But a closer look reveals that nearly one-fifth of the jobs created were in construction, marking only the third time since the recession ended in June 2009 that the industry has added 30,000 workers or more. The surge capped one of the largest three-month gains the sector has seen since the recession began in December 2007.
The return of construction jobs is an especially critical component of the economic recovery. That’s partly because of the sheer number of jobs lost — more than 2 million since 2007 — but also because of fears that many of those workers’ skills may not translate to other industries, rendering them permanently unemployable.
“These jobs have been the backbone of the middle class for many, many years,” said Arne L. Kalleberg, a professor at the University of North Carolina at Chapel Hill and author of “Good Jobs, Bad Jobs.” “Now they’re coming back.”
The jobs report follows several other encouraging data sets that show year-end momentum in the economy. Automakers reported surprisingly robust sales last month and consumers piled into shopping malls, unfazed by the political wrangling over the “fiscal cliff.” But economists say they are particularly heartened that the uptick in construction coincides with new strength and stability in the housing market, suggesting the gains are more sustainable.
The number of new homes under construction topped 800,000 in September for the first time in four years and stayed there through the fall, according to government data. Permits are being sought on more than 900,000 homes. Private estimates show that housing prices in hard-hit Phoenix have risen for 13 straight months, while San Diego has increased for nine months.
“We underbuilt houses from 2006 until this year. At some point, there is a long-term catch-up where you have to go out and build a lot of new houses,” said John J. Canally Jr., economist and investment strategist for LPL Financial.
That is likely to help address the persistently high unemployment rate among young men, one of the most recalcitrant problems of the recovery. More than a quarter of 16-to-19-year-olds are out of work, while nearly 14 percent of those ages 20 to 24 do not have a job.
“By and large, those guys have been left on the sidelines the last few years,” said Ken Simonson, chief economist for the Associated General Contractors of America, “and construction will give them much more of an option in 2013.”
There have been false starts before, however: A similar jump last winter gave way by spring, when the sector shed 53,000 jobs.
Simonson said job growth in the industry had lagged behind increases in construction spending over the past two years. Some of that discrepancy represented productivity improvements, Simonson said, and some probably came from existing workers putting in overtime. Contractors may have been holding off to see if the housing recovery was durable. But eventually, as housing activity kept growing, the industry was bound to accelerate hiring again.
The December jobs report is the latest piece of data to offer a glimmer of hope for these workers. A working paper by economists Edward P. Lazear and James R. Spletzer issued last year found that though lost construction jobs accounted for nearly 20 percent of the rise in the unemployment rate during the recession, industry gains also helped bring down the jobless rate by roughly the same amount.
“There is no evidence that the recession resulted in a long-lasting skills gap that would require retraining experienced workers to work in different industries,” the authors concluded.
Still, no one is arguing that construction employment will return to its pre-recession peak of more than 7 million. The 45,000 jobs added during the fourth quarter last year represented just a fraction of those losses.
“Even if the housing recovery does maintain the legs we’ve seen recently, we’re not going to hit the boom levels,” said Sarah Watt, an economic analyst for Wells Fargo. “You are going to need some other industries where you don’t traditionally need a college education” to bounce back more rapidly.
The gains may not be large enough or come fast enough to offset what some labor market experts view as a detrimental shift toward low-paying jobs in the recovery. According to research by the nonpartisan National Employment Law Project last summer, low-wage occupations made up 21 percent of jobs lost in the recession but account for 58 percent of of jobs created since then. That trend is reversed for mid-wage occupations.
“We’re not making a lot of progress,” NELP executive director Christine Owens said. “It’s a seesaw effect that’s not going in the right direction.”
At AR Daniel Construction in the Dallas-Forth Worth area, president and chief operating officer Art Daniel said he expects to expand from 80 employees to 100 or 120 by the end of the year.
Daniel’s firm works on major infrastructure projects such as water and sewer systems, a specialty that is booming in North Texas but not growing as fast in other regions, because the weak economy has held down public works spending.
“I’m very optimistic” about growth and hiring this year, Daniel said, but added: “When I talk to my compadres around the country, I don’t hear that same optimism.”
Source: Washington Post
Publisher Tribune to emerge from bankruptcy
Posted by Khaled Ali
(Reuters) - U.S. media giant The Tribune Co, owner of the Los Angeles Times and the Chicago Tribune, said late on Sunday it will emerge from bankruptcy on December 31, ending four years of Chapter 11 reorganization.
Chicago-based Tribune said it will emerge from the Chapter 11 process with a portfolio of profitable assets that will include eight major daily newspapers and 23 TV stations. The company will also have a new board of directors.
"Tribune will emerge as a dynamic multi-media company with a great mix of profitable assets, powerful brands in major markets, sufficient liquidity for operations and investments and significantly less debt," Eddy Hartenstein, Tribune's chief executive officer, said in an email to employees. "In short, Tribune is far stronger than it was when we began the Chapter 11 process."
As part of the Chapter 11 exit, the company will close on a new $1.1 billion senior secured term loan and a new $300 million asset-based revolving credit facility.
The term loan will be used to fund certain payments under the plan of reorganization and the revolving credit facility will be used to fund ongoing operations, the company said.
Upon exiting bankruptcy, Tribune will have issued to former creditors a mix of about 100 million shares of new class A common stock and new class B common stock and new warrants to purchase shares of new class A or class B common stock.
The current chief executive officer, Eddy Hartenstein, will remain in his role until the new board ratifies the company's executive officers.
The company announced a seven-person board that includes Hartenstein, former Fox Entertainment chairman Peter Liguori, former Yahoo interim CEO Ross Levinshohn and Peter Murphy, Walt Disney's former top strategic planning executive.
Liquori is expected to be named Tribune's new chief executive officer.
In November, Tribune received regulatory approval from the Federal Communications Commission (FCC) to transfer its broadcast licenses to the owners who will take over the company when it emerges from bankruptcy.
The company's plan of reorganization was confirmed by the Delaware bankruptcy court in July. Tribune's emergence from bankruptcy was conditional on the FCC approving the transfer of the broadcast licenses to new owners.
The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.
