The Collapse of the U.S. Economy

After the Holidays, Filing Bankruptcy May Be Only Option for Many Retailers

November 24, 2009

Mac Slavo - SHTFplan contributors opined about the 2009 holiday retail season in The Recession in Pictures, with many coming to a similar conclusion to Alan Cohen, Chairman of Abacus Advisors.

From An Unbiased View of The Holiday Shopping Season:

Deep concern about both the credit crisis and cutbacks in consumer spending has translated into retail strategies marked by caution, Cohen noted.

“Manufacturers produced less, and retailers ordered less. In the run-up to the 2009 holiday season, everybody was in a conservative mood.”

Visual confirmation of this can be found at most major retailers, including Hobby Lobby. A quick visit to the retailer of art supplies, holiday decorations and crafts suggests that they are holding much lower inventory levels this year, as compared to last. Normally, Hobby Lobby is loaded with merchandise, but it seems quite low this year, and it looks like popular items, once sold, will not be restocked for the very reasons mentioned above. So, if you’re waiting for the last minute to pick up some popular gift and hoping it will be discounted, you risk the possibility that it will be sold out and unavailable, as retailers will not be reordering mid-season. And even if they chose to reorder, the manufacture may not have any inventory to send.

When all is said and done after the holidays, filing for Chapter 11 bankruptcy protection may be the only option for many chains, Cohen added.

“I certainly see more bankruptcies down the road,” he said. “And we will also see vacancies going up at shopping centers and malls across the country. With a limited number of conventional retail, restaurant or entertainment tenants actively looking for space, landlords will be exploring alternative uses like dental or emergency clinics or, in the case of large big-box spaces, flea markets.”

It was Gerald Celente who has suggested that shopping malls will become ghost towns. Perhaps this is how the overt collapse in commercial real estate may be triggered. If retailers can’t deliver this season, they will have no choice but to bail on landlords. The landlords will subsequently lose their ability to service their debts and the CRE meltdown may begin. There may be a delay of course, as a CRE meltdown will likely lag bankruptcies and not be felt until later in the year. Look for bankruptcies as early warning indicators for problems in commercial real estate.

Despite some stock-market gains and a few positive economic indicators, Cohen believes the recovery will be a hard, long slog and is anything but right around the corner.

“Most of the profit increases you are seeing at publicly held companies are not being driven by traditional revenue improvements,” he said. “These gains are related to cost-cutting, and you just can’t cut costs forever to improve profits.”

You can only layoff so many employees, and lower prices so much before you start losing money. Retailers have spent the last year slashing prices and laying off employees. It now comes down to the 75% – 80% of consumers who still have jobs to deliver the sales numbers and prove the economy is on the mend. Retailers are at the mercy of the consumer, who is coming into stores with less money to spend, no credit and anxiety about continued financial hardship.

An underperformance of retail sales this season could be quite disasterous for not just the economy, but the stock market as well. Could a Christmas Crash be in the cards, similar to last year’s stock market lows which started around mid January and bottomed in mid March?

Maryland's $1 Billion in Budget Cuts Not Enough

November 19, 2009

AP - A state panel on Wednesday approved more than $361 million in cuts and other revisions to Maryland's general fund budget, bringing total budget revisions since the fiscal year started in July to more than $1 billion.

The revisions recommended by Gov. Martin O'Malley's administration and approved by the Board of Public Works were higher than the roughly $300 million that had been expected. They include eliminating 112 state jobs, more than half of which are currently filled, for a savings of about $5.7 million.

"There have been no easy decisions," Mr. O'Malley said before the unanimous vote by the three-member board he chairs. The governor noted that with the changes to the fiscal 2010 budget approved Wednesday, expected general funding spending for the current year is $500 million less than the spending level for fiscal 2007.

"I don't think anybody this side of the Depression can find a time when that has happened," he said.

But Mr. O'Malley and state budget secretary T. Eloise Foster warned that even with Wednesday's changes, the state still faces an estimated $1.5 billion shortfall in fiscal 2011.

"We're still going to need to go back through all the state agency budgets," said Ms. Foster, adding that a fund balance of about $120 million remaining after Wednesday's actions may need to be tapped for further spending reductions in the current fiscal year.

"We're less than half the way through it, and this is our third major cut," state Comptroller and board member Peter Franchot noted.

The work force reductions approved Wednesday include eliminating 21 jobs associated with the downsizing of a facility in Rockville for children with severe emotional disabilities. Eighteen other positions within the Department of Health and Mental Hygiene also would be eliminated.

State Treasurer Nancy Kopp, the third member of the board, said cutting funds and jobs is the last thing the panel wanted to do.

"I think this is extraordinarily painful," she said. "I look forward to a better time."

In the meantime, officials expect to save $55 million, including $21.3 million in general fund revenues, by reducing Medicaid payments to hospitals, and $20.8 million, including $7.3 million in the general fund, by reducing the budget for the Maryland Children's Health Program because of lower-than-expected enrollment.

An additional $11 million is expected from denying unnecessary Medicaid services and ineligible claims, and $7 million from reducing public funding for private colleges and universities. A transfer from the University System of Maryland's fund balance will boost the general fund by an additional $25 million.

The board reduced the appropriation to the state's rainy day fund by $25 million, while maintaining the fund at the mandated 5 percent of estimated general fund revenues. It also agreed that all of the $129 million in anticipated corporate tax payments related to a $4.5 billion joint venture between Baltimore-based Constellation Energy Group and France's EdF go to the general fund.

Geithner Savaged On Unemployment During Fiery Capitol Hill Hearing

November 19, 2009

PrisonPlanet.com - Congressman Michael Burgess scalded Treasury Secretary Tim Geithner during a fiery hearing on Capitol Hill this morning, telling the former New York Fed chief that he should never have been hired and demanding that the TARP program come to an abrupt end, shortly after GOP Rep. Kevin Brady had called on Geithner to resign.

“The public has lost all confidence in your ability to do the job,” Brady told Geithner during a heated Joint Economic Committee meeting, adding that he had failed to oversee an economic recovery before asking Geithner, “Will you step down from your post?”

Geithner responded by claiming that confidence in the economy was substantially stronger than before Obama took office, to which Brady responded, “Tell all of that to the millions of American who no longer have jobs because of your decisions,” adding, “At some point you have to take some responsibility for your decisions.”

This is your budget! This is your bailout”, shouted Brady.

Obama pledged to create 3.5 million new jobs by 2010, however, with unemployment running at 10.2 per cent, and with 3.5 million jobs lost, the Obama jobs deficit stands at over 7 million.

Shortly after the fracas, Rep. Michael Burgess confronted Geithner on how TARP funds were used to bail out banks in Europe while the American people suffered with spiraling mortgage defaults and unemployment.

“We’ve got the TARP, it’s supposed to expire, why won’t we let it die a natural death rather than letting it painfully linger?” asked Burgess, to which Geithner responded, “We are working to put TARP out of its misery,” contradicting reports of a “second stimulus” being planned for early 2010.

Geithner’s claim that he was working aggressively to terminate TARP programs was met with Burgess’ response:

“Well it looks like money is going out with little or no oversight,” which Geithner denied, despite the fact that Fed chairman Ben Bernanke admitted earlier this year that he didn’t know which foreign banks had received over half a trillion dollars in credit swaps when pressed by Congressman Alan Grayson, who this week introduced an amendment with Ron Paul to secure more oversight on money leaving the U.S. earmarked for foreign banks.

Burgess stressed that small businesses were frightened of adding jobs because they were worried about the potential costs of health care, regulation and the impact of the cap and trade program, stating:

“We don’t need another stimulus, we need to provide some tax relief and then get the heck out of the way and the American economy will recover as it has always done.”

Referring to Brady’s comments, Burgess commented, “I don’t think that you should be fired, I thought you should never have been hired.”

“I’ll tell you, my constituents, they’re not just anxious, they are mad, they are fighting mad about what is happening in the economy, they’re fighting mad about what is happening in the stimulus,” concluded Burgess...

‘Glitch’ Could Cut Jobless Benefits for a Million

November 19, 2009

The New York Times - About one million laid-off workers will see their unemployment benefits end in January unless Congress acts quickly to renew existing federally paid extensions, according to a new report and legislators and state officials.

The record-long extension of emergency benefits that was hastily signed into law on Nov. 6 was widely praised as an essential lifeline for the hundreds of thousands of Americans who had spent a year or more in fruitless searches for jobs.

The new law provided up to 14 weeks of federally paid aid to unemployed people who had exhausted existing state and federal limits, benefits that already ranged up to 79 weeks in many states. And for the majority of states with particularly high unemployment, it added on an additional six weeks of payments, bring the potential total to 99 weeks...

The Worst Is Yet to Come: Unemployed Americans Should Hunker Down for More Job Losses

November 17, 2009

New York Daily News - Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.

Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession...

China Bubble, U.S. Dollar Top 2010 Risks, Bank of America Says

November 12, 2009

Bloomberg - China’s surging asset prices, a dollar “crisis” and oil prices above $100 a barrel are among the “tail risks” that investors face in 2010, said Bank of America Corp.’s chief global equity strategist Michael Hartnett.

Rising Chinese equity and real estate markets and the government’s “stubborn refusal” to revalue the yuan could fuel “liquidity-driven speculation” and inflation expectations across emerging markets, Hartnett wrote in a note to clients obtained today.

The Shanghai Composite Index has climbed 74 percent this year as record lending and government stimulus spending helped drive the nation’s economic rebound.

Tail risks are unpredictable, low probability events that can have a “meaningful impact” on investors portfolios, he said. Other events include a “double-dip” recession, growing protectionism, a debt default in Japan and recoveries in U.S. housing and the American consumer, he wrote.

Hartnett said Bank of America’s “base case” is for global economic growth to accelerate next year, low inflation, a slow withdrawal of policy stimulus and equities and commodities to outperform bonds and cash.

A weaker dollar and quickening U.S. inflation could push oil prices “well above” $100 a barrel, Hartnett said. Investors should hedge against inflation by buying gold, commodities and emerging-market equities and currencies, he said.

“There is plenty of evidence that asset markets are still far from normal and that investor confidence remains fragile,” Hartnett wrote. “Perhaps the best symbol that investors believe we still live in a world of fear and loathing is the huge popularity of gold.”

The Inflation Time Bomb

November 10, 2009

Rolfe Winkler, Reuter's Blog - The public debt will likely pass $12 trillion this week, up another trillion since March. With Obama’s left flank calling for a second stimulus – which is really a third stimulus if you count George Bush’s tax rebates – there’s still no serious discussion about how to deal with debt. The bond market is telling us not to worry. But if history is any guide, the bond market is wrong.

I’m referring to Treasury Inflation Protected Securities, TIPS for short, in particular those that reflect long-run inflation expectations. The current spread tells us to expect annual inflation averaging a bit over 2 percent for the next 30 years. That would be fairly benign. And fairly wrong.

Why? Because it assumes U.S. political leadership will put the country on a sustainable fiscal path. I highly doubt it will happen...

Stock Rally Just Getting Started in History of Period Preceding Rate Rises

November 9, 2009

Bloomberg - Stocks around the world are falling at the fastest rate since the worst of the credit crisis on speculation central banks will start raising rates, a signal that triggered the biggest rallies over the past three decades.

Benchmark indexes from New York to Tokyo to Frankfurt lost an average of as much as 6.4 percent after Oct. 19 on concern policy makers will curtail stimulus measures before the global economy revives. History shows stocks have climbed 92 percent of the time in the six months before government borrowing costs began the biggest increases, data compiled by Bloomberg show...

Fed Funds Futures

U.S. Federal Reserve Chairman Ben S. Bernanke may start to increase borrowing costs in June, according to Fed funds futures prices compiled by Bloomberg. Traders assign a 52 percent chance of an increase to at least 0.5 percent at the end of the Federal Open Market Committee’s meeting on June 23, when the American economy is forecast to be in its fourth straight quarter of expansion, according to estimates compiled by Bloomberg...

Home Sales, Confidence

The S&P 500 declined as much as 5.6 percent after reaching a one-year high on Oct. 19 as reports on new home sales and consumer confidence trailed forecasts. The MSCI World Index of 23 developed country markets slipped 5.7 percent. Both gauges rebounded last week after the Fed said it will keep rates “exceptionally low” for an “extended period.”

The steepest advance in U.S. stocks since the Great Depression is fading as investors speculate that more spending will be needed to maintain the pace of growth. The S&P 500 posted its first monthly retreat since February last month.

European Central Bank President Jean-Claude Trichet said Nov. 5 that he will withdraw some of the emergency measures aimed at ending the credit crisis and the Bank of England slowed the pace of bond purchases. A day earlier, the Fed outlined the circumstances in which it would be prepared to raise rates...

0.5% Fed Rate

Economists forecast the Fed funds rate will rise to 0.5 percent in the second quarter of 2010, according to a survey of 63 financial companies by Bloomberg last month. The rate will climb by a quarter percentage point every quarter through the first three months of 2011, the projections show...

Broader Measure of U.S. Unemployment Stands at 17.5%

November 7, 2009

The New York Times - For all the pain caused by the Great Recession, the job market still was not in as bad shape as it had been during the depths of the early 1980s recession — until now.

With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time...

CIT Bankruptcy Plan May Win OK at December 8 Hearing

November 4, 2009

* CIT hopes to emerge from Chapter 11 by year's end
* CIT lawyer sees "need for speed"
* 1 million businesses depend on company for lending
* CIT shares little changed on Pink Sheets

Reuters - A U.S. bankruptcy judge set a Dec. 8 hearing to consider approval of CIT Group Inc.'s reorganization plan, aiding the large commercial lender's effort to emerge from bankruptcy by year's end.

"We are on a very fast track," Judge Allan Gropper said at a Tuesday hearing in Manhattan bankruptcy court.

A quick reorganization is crucial if New York-based CIT expects to retain most of its customers, and remain what its lawyer Gregg Galardi called "a source of strength" for its banking unit, which did not file for bankruptcy protection.

It is also crucial for the several hundred thousand small- and mid-sized businesses that depend on CIT for financing such as the operators of Dunkin' Donuts stores. Small businesses employ about half of the U.S. labor force.

"This is a financial services company that has to make loans, and is perceived by the market to need to make loans," said Galardi, a partner at the law firm Skadden, Arps, Slate, Meagher & Flom LLP. There is a "need for speed," he added.

Gropper also approved a series of CIT motions, including its requests to immediately borrow $125 million from Bank of America Corp. and to pay workers and so-called "critical" vendors.

CIT filed for Chapter 11 protection on Sunday, one of the five-largest bankruptcies in U.S. history, to reduce $10 billion of debt following a failed debt exchange offer. The filing came after CIT gathered support from most of its bondholders to restructure, and a $1 billion financing commitment from investor Carl Icahn.

CIT also has a dominant position in factoring, which often involves short-term financing for customers that provide merchandise to retailers. Wells Fargo & Co. is also another provider of factoring.

According to its bankruptcy petition, CIT had $71 billion of assets and $64.9 billion of liabilities on June 30.

GOVERNMENT STAKE ENDANGERED

The reorganization plan calls for unsecured debtholders to receive 70 cents on the dollar of new notes plus new common stock.

By contrast preferred shareholders, including the U.S. government which injected $2.33 billion through the Troubled Asset Relief Program, could be wiped out. That would be the first realized loss for the $700 billion program.

Shares of CIT began trading on the Pink Sheets on Tuesday. In afternoon trading, the shares were little changed at about 25 cents.

CIT's operating units, including the bank, were not part of the bankruptcy filing.

It is likely that a post-bankruptcy CIT would depend more on deposits gathered by that bank to fund further lending for businesses, such as factoring and vendor financing.

Gropper has been a bankruptcy judge since 2000, and is also overseeing proceedings for the giant mall owner General Growth Properties Inc. He took over the CIT case from Judge Robert Gerber, who recused himself.

The case is: In re CIT Group Inc, US Bankruptcy Court, Southern District of New York, Case No. 09-16565.

Oil Prices Tumble After U.S. Unemployment Report

November 6, 2009

AP - Oil prices tumbled Friday after the government said the U.S. unemployment rate topped 10 percent for the first time since 1983.

Benchmark crude for December delivery gave up $2.21 at $77.41 a barrel on the New York Mercantile Exchange. In London, Brent crude for December delivery shed $1.95 at $76.04 on the ICE Futures exchange.

America's thirst for petroleum has slumped all year. With nearly 16 million people now out of work, traders found few reasons to expect it will return anytime soon. Crude prices shed most of their gains from earlier in the week, when financial reports showed consumers were spending more, and companies were squeezing more productivity out of their workers.

"There's some shock value that comes with double-digit unemployment," said Phil Flynn, an analyst with PFGBest. "It's worse than expected. If the job market isn't strong, then the economy isn't strong."

For most of the year, oil prices shrugged off growing unemployment and steadily climbed above $80 a barrel as investors bet that American energy demand would return with an economic recovery. The weak U.S. dollar also pushed oil higher since crude contracts are priced in dollars, and a drop in U.S. currency gives investors with foreign money more buying power.

But oil hasn't been able to push past $82 a barrel as U.S. oil consumption dropped well below average for this time of year. With millions of people giving up the morning commute, gasoline demand has plunged.

"I'm glad that it's finally being talked about," trader Stephen Schork said. "We have way too much oil."

Still, Francisco Blanch, head of global commodities research with Bank of America-Merill Lynch, believes that crude prices will continue to march to $100 a barrel by 2011. The weak dollar will continue to boost oil prices next year, he said, though it's hard to tell how much more the market will bear.

"What we know is at $150 (a barrel last year), the world economy blew up. So it will be somewhere in that range," Blanch said.

At the pump, retail gasoline prices slid throughout the week, giving up less than a penny overnight to a new national average of $2.679 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of gas is 21.4 cents more expensive than last month and 33.9 cents more expensive than the same time last year.

President Obama and Congress Extend the $8,000 Home Buyers’ Credit

November 6, 2009

AP - It’s official. Today President Obama will sign a bill into law that extends the $8,000 First Time Home Buyers’ Tax Credit, recently set to expire on November 30, until April 30 next year. The tax credit, originally part of the American Recovery and Reinvestment Act of 2009 was intended to stimulate the real estate industry, and Congress has been talking about extending the credit for months.

1.8 million home buyers have qualified for the $8,000 first time home buyers’ tax credit so far or will qualify by the end of November. According to the National Association of Realtors (who have a vested interest in seeing the credit be extended and expanded) says 335,000 of those home buyers would not have purchased a new house if not for the credit.

With house prices still lower than their highs and not much activity in the market, the industry wants more stimulation. And the industry is getting more than the $8,000 stimulus. Formerly, the tax credit was available only to home buyers who hadn’t owned a house in the past three years. The new bill adds a $6,500 tax credit for current home owners who buy a new house, and who have lived in their current house for at least five years. The extensions comes at a cost of $10.8 billion over 10 years according to the Joint Committee on Taxation

In order to qualify for either credit, the purchase contracts need to be signed by April 30, 2010 and the closing must take place by June 30, 2010. The value of the purchased house must be less than $800,000. There is an income limitation as well, but it has been increased with the passing of this bill into law. If your adjusted gross income is above $125,000 (single filers) or $225,000 (joint filers), the maximum credit you are allowed to claim is phased out.

The extension of the home buyers’ credit was included within H.R. 3548 (Unemployment Compensation Extension Act of 2009), a bill which increases unemployment benefits for Americans for up to 20 weeks.

Do you think this extension is a good idea or with the economy beginning to improve, should we cease creating more stimuli?

U.S. Jobless Rate Hits 10.2 Percent, Highest in 26 Years

November 6, 2009

Reuters - The U.S. jobless rate unexpectedly jumped to a 26-1/2-year high of 10.2 percent last month, adding to pressure on the Obama administration to do more to tackle unemployment even as signs of recovery mount.

The Labor Department said on Friday that employers cut 190,000 jobs in October, more than the 175,000 markets had expected but fewer than the 219,000 lost in September. Taking some of the sting out of the report, job losses for August and September were revised to show 91,000 fewer jobs were lost than previously reported. While that hinted at some improvement in labor market conditions, economists had looked for the jobless rate to rise to 9.9 percent from September's 9.8 percent.

"Unfortunately, the problem is becoming deeper and more protracted," Mohamed El-Erian, chief executive of bond giant Pacific Investment Management told Reuters. "It's not just the increase in the headline number. ... It's also about the longer-term nature of unemployment, the increase in underemployment, and the prospect for only a very gradual recovery."

Stocks erased early losses on the heels of the report, somewhat heartened by a lessening in the pace of monthly job losses. The report lifted prices for U.S. government bonds and the flight to safer assets initially boosted the U.S. dollar, but it later fell back.

President Barack Obama has called job creation priority No. 1, but his scope to take further steps to lift the economy is limited by record budget deficits...

Senate Poised to Adopt Jobless, Housing Aid

November 4, 2009

Reuters - The U.S. Senate was poised on Wednesday to extend aid for jobless workers and broaden tax breaks for homebuyers and businesses in a bill aimed at breathing life into the U.S. economy.

After weeks of partisan bickering, the Senate voted 97 to 1 to clear a procedural hurdle and move to final passage on Wednesday or Thursday. The House of Representatives is expected to approve it quickly and send it to President Barack Obama to sign into law.

Democrats who control Congress are under pressure to get the economy moving before the November 2010 congressional elections. But they have been reluctant to assemble another massive stimulus package after February's $787 billion measure, fearing a voter backlash over record budget deficits.

Instead, they have opted for a smaller, budget-neutral package that broadens several existing measures.

The bill would give an additional 14 weeks of unemployment benefits to jobless workers. Those in high-unemployment states would get six weeks on top of that.

Unemployment insurance payments, which average $308 per week, usually expire after six months but Congress has already extended them twice in a recession that has been marked by a high number of long-term unemployed.

Economists say the payments stimulate the economy because they are spent quickly and help the jobless avert foreclosure and bankruptcy.

Unemployment stands at 9.8 percent, the highest since 1983, and analysts expect it to climb to 9.9 percent when new figures for October are released on Friday.

The rate is expected to rise into next year, even if the economy climbs out of the deepest recession in decades.

HOMEBUYER CREDIT EXPANDED

The bill also extends an $8,000 tax credit for first-time homebuyers which has helped the housing industry recover from the foreclosure crisis, though some analysts say it has largely gone to people who would have bought houses anyway.

The credit, which is due to expire on November 30, would be extended until April 30 and expanded to include more affluent homebuyers. People who have owned a home for at least five years would also be eligible for a $6,500 credit if they move.

Businesses would be able to apply losses from 2008 or 2009 to prior years when the economy was booming.

The additional unemployment benefits would be paid for by extending a tax on employers. The housing and business tax breaks, which would cost the government $21.2 billion over 10 years, would be financed by delaying a rule change that governs how companies allocate interest expenses.

The lopsided vote did not reflect the partisan bickering that had held up the bill for weeks while lawmakers sparred over unrelated provisions, such ending the unpopular bank-bailout program...

Here Comes Stimulus 2.0

November 3, 2009

Zero Hedge - In this Bloomberg clip, commerce secretary Gary Locke says that:

"If there is to be another stimulus — and that’s being hotly discussed and very seriously considered within the administration as well as members of Congress – it needs to be very targeted, very specific and we need to be very mindful of the deficit as well."

In other words, with unemployment not improving after the first $787 billion was spent, with GDP improvements having peaked, and since at this point nothing matters since America will never be able to realistically service its debt, with mid-term elections coming up, and Obama’s rating plummeting even despite an orchestrated 50% rally, it is a matter of months, if not days, before the President unveils another multi-trillion Treasury sinkhole. And since no horrible policy decision can go unused, the next stimulus is likely to be promptly followed by the Chairman announcing the next iteration of Quantitative Easing.

Obama Warns More Job Losses Coming

November 2, 2009

Reuters - U.S. President Barack Obama said on Monday that more U.S. jobs will be lost in coming weeks and months but stressed the economy has recovered a lot of ground since he took office in January.

Speaking at a White House meeting of his Economic Recovery Advisory Board, Obama said the current pace of job losses was "distressing" and the labor market would not improve quickly.

"We anticipate that we are going to continue to see some job losses in the weeks and months to come," Obama said.

The advisory board's meeting was shown on a White House website in a departure from normal practice.

Obama said the economy was beginning to stabilize after the deep slump that it entered amid a U.S. and global financial crisis but said it still had a long way to go and that policymakers need to find new models for future growth.

"It's not going to happen overnight, but we will not rest until we are succeeding, until we are generating the jobs that this economy needs," the President said before the official board meeting started.

He said past U.S. growth had been "debt-driven" and that was no longer feasible. With the United States running record budget deficits as it spends furiously to try to stimulate the economy, Obama said it is going to be vital to find innovative new ways to finance growth.

The U.S. economy posted solid growth in the third quarter after a year of steady decline, with gross domestic product rising at a 3.5 percent annual rate.

In addition on Monday, U.S. manufacturing activity hit its highest level in 3-1/2 years in October and pending home sales surged in September -- all signs of vitality returning to a battered economy.

Obama urged policymakers to consider new ways to spur growth, not simply changes in tax policy, and said that he was confident that job growth will return once the economy is back on a solid growth track.

Ford Auto Workers Reject Contract Changes

October 31, 2009

Time - Ford Motor Co. workers have overwhelmingly rejected contract changes that would have allowed the automaker to cut labor costs.

The United Auto Workers union had given local unions until Monday to complete voting. But a person briefed on the voting said Saturday that the contract changes have been rejected by large margins. The person asked not to be named because the UAW hasn't announced the results yet.

The UAW and Ford agreed to the contract changes several weeks ago, but Ford workers needed to ratify them. Ford has 41,000 UAW-represented workers.

Two large union locals in Kentucky and Ford's home city of Dearborn rejected the contract Friday, sealing its fate. Those unions together represent 13,000 Ford workers. Exact tallies weren't available, but at least 12 UAW locals representing about 27,500 workers vetoed the deal, many overwhelmingly. Only about four locals with a total of 7,000 members favored the pact.

Ford sought the deal to bring its labor costs in line with Detroit rivals Chrysler Group LLC and General Motors Co., both of which won concessions from the union as they headed into bankruptcy protection earlier this year. Under pattern bargaining, the three automakers usually match pay, benefits and other contract provisions.

But workers weren't convinced they should make more concessions, since Ford avoided bankruptcy and is considered healthier than its rivals. Rocky Comito, president of UAW Local 862 in Louisville, said Friday that workers also felt they were being asked to sacrifice more than the company's executives. Ford CEO Alan Mulally made $17.7 million last year, although that was down 22 percent from the year before.

"Some want to see management give more at the upper level," Comito said.

Ford was offering workers a $1,000 bonus if they ratified the contract. But the contract also would have frozen entry-level pay and changed some work rules...