July 31, 2021

Wealth Matters: Financing Start-Up Dreams With Retirement Savings

They had three very different dreams, but these women had one thing in common: they all lost jobs and decided to use sizable retirement accounts to start their own businesses in very different fields. They did so by converting traditional 401(k) accounts into new retirement plans — known as “rollovers as business start-ups,” or ROBS — that they could invest in their companies.

“It’s fueled by the fact that stock market has returned to all-time highs, real estate is up, consumer confidence is up — but we’re also suffering from a credit crisis, and unemployment remains high,” said David Nilssen, chief executive of Guidant Financial, which specializes in helping people use 401(k) assets to invest in businesses or other nontraditional assets, like property. “People look at this because they can capitalize a business without taking on any debt.”

While this may sound like an easy solution to finance a company, it is incredibly complicated, and the risks of running afoul of the Internal Revenue Service or the Department of Labor, which has jurisdiction over 401(k) plans, are significant. The worst possible outcome is a triple-whammy loss of a person’s retirement savings, the business and a source of income if the idea fails.

Adding to the complications, ROBS exist in a parallel financial universe, where those who promote the plans see them as solutions for retirement-rich but cash-poor entrepreneurs, while many other financial advisers see the plans as treading the line of legality.

“The I.R.S. has said that they don’t view them as tax-avoidance schemes per se,” said Carol J. Ventura, retirement specialist at H.D. Vest, a broker-dealer with $33 billion under management. “They’re not illegal, but the I.R.S. is saying that they have to be perfectly put in place. They’re very complicated.”

Failure to do everything right could lead to anything from penalties to having the entire retirement plan disallowed, which would mean a big tax bill.

Still, Mr. Nilssen said the idea had been gaining in popularity. He said his company had its best year in 2012 with 1,300 new ROBS and expects to do 1,700 this year. I wanted to know what the attraction was to something that seemed so complicated and magnified the sizable risk of starting any business.

Here’s how ROBS work: People take their 401(k) account (or other qualified retirement plan) and roll it over into a new plan that buys shares in an operating company that will own their business. Unlike most small businesses, which are set up as limited liability corporations or S-corporations, a business financed through ROBS has to be a C-corporation, which can issue shares and does not prohibit ownership by trusts.

In many cases, people turn to ROBS because they don’t have other sources of financing and have not been able to secure a small-business loan.The companies of the people I spoke to were owned by anywhere from 90 percent of one person’s 401(k) to 100 percent of two entire plans.

That might sound simple, but what effectively happens is that the plan, not the person, owns the business. That means the person cannot act in his best interest but must act in the best interest of the plan. For example, if he wants to give himself a raise, he needs to find out what similar business owners make.

“I have counseled people on how to do them correctly and then I typically say, ‘I find it to be a bad idea and you’re probably going to get yourself in trouble,’ ” said Bill Smith, a tax lawyer and managing director in the CBIZ National Tax Office. “The I.R.S. is not consistent on what it considers correct. It’s very easy to mess these things up.”

Mr. Nilssen said Guidant helped people set up the initial plan and managed the reporting requirements. He said that of his firm’s 8,500 clients, about 50 had been audited, but none had had action taken against them.

Ms. Jones said that in the course of putting $260,000 of the $340,000 she had in her retirement account into buying a Decorating Den franchise in Nashville, she had several lean years during the recession, but that she is now doing well. She says she is also happier than when she was working in health care technology.

But she said the paperwork to comply with the I.R.S. rules could be complicated — and managing paperwork was part of her previous career. One requirement of these plans is that she and any employees pay into the 401(k) set up to buy the company. “That check has to be out the door seven days after payroll,” she said. “If I’m late at writing a check to deposit my 401(k) money, there are penalties, and I’ve paid penalties.”

Article source: http://www.nytimes.com/2013/09/14/your-money/financing-start-up-dreams-with-retirement-savings.html?partner=rss&emc=rss

Consumer Spending and Income Rose a Faint 0.1% in July

After rising 0.3 percent in June, income was held back in part by steep government spending cuts that reduced federal workers’ salaries. Overall wages and salaries tumbled $21.8 billion from June, with a third of the decline coming from forced furloughs of federal workers.

Consumers cut their spending on long-lasting manufactured goods, like cars and appliances. Overall spending had risen 0.6 percent in June.

The tepid gains suggested economic growth was off to a weak start for the quarter.

A measure of consumer confidence slipped this month from a six-year high in July, as Americans expressed less optimism about the coming months. Americans said they were less confident that the job market would improve, but more confident that their income would rise.

Consumer spending drives roughly 70 percent of economic activity. So the weak spending report led some economists to sound a more pessimistic note on growth in the current quarter.

“This is a disappointing report on a number of levels,” said James Marple, senior economist at TD Economics. “Prospects for a pickup in economic growth in the third quarter hinge on a broad-based acceleration in spending by households and business to offset the ongoing drag from government. The data for the first month of the quarter are not following this script.”

Several analysts said that economic growth was unlikely to match the 2.5 percent annual rate reported Thursday for the April-June quarter. That was more than twice the growth rate in the first quarter and far above an initial estimate of a 1.7 percent rate for April through June.

The Federal Reserve will consider the latest data at its September meeting, when it decides whether to begin pulling back on its stimulus efforts. The most critical factor the Fed will weigh is the August employment report, due out next Friday.

Another concern is that rising interest rates could dampen consumer spending, particularly on homes and cars. Mortgage rates have already risen more than a full percentage point since May.

The small rise in spending was driven by a 0.9 percent gain in purchases of nondurable goods, like clothing. Purchases of durable goods like cars fell 0.2 percent, while money spent on services like utilities and doctor’s visits was unchanged in July.

A price gauge tied to consumer spending was up 0.1 percent in July compared to June. Prices excluding volatile food and energy are up just 1.4 percent compared to a year ago, significantly below the Federal Reserve’s 2 percent target for inflation.

Article source: http://www.nytimes.com/2013/08/31/business/economy/consumer-spending-and-income-rose-a-faint-0-1-in-july.html?partner=rss&emc=rss

Itineraries: The Leisure Pack Is Back

It was after midnight, and Leilanie Ramos just wanted clean clothes.

An event planner for a satellite communications company, Ms. Ramos was halfway through a stretch of back-to-back trade shows that kept her on the road for nearly two weeks. She checked into her hotel in Tampa, Fla., after a late-night arrival from Istanbul with plans to do her laundry at the hotel’s facility, figuring she would have the machines to herself at that hour.

“There were two other people doing laundry at almost 1 o’clock in the morning,” she said. Since there were only two washing machines, Ms. Ramos had to wait, finally getting to bed around 3 a.m., she said.

“There’s a lot more people where you don’t expect them to be,” she said.

For a few years, business travelers had lobbies and lounges (not to mention laundry rooms) to themselves. It was a silver lining of sorts, even if the economic outlook was grim, consumer confidence was shaken and personal finance experts promoted the benefits of the “staycation.”

This summer, that trend is over. The U.S. Travel Association says leisure travel will hit a record high this year, while belt-tightening in the hotel and airline industries means packed houses all around. “Now, it’s a free-for-all,” said Jeff Butler, an engineer for a company that makes broadband equipment whose work takes him on the road three to four days a week.

“Leisure travel is back, and it’s back stronger,” said Alex Tonarelli, general manager at the Loews Miami Beach Hotel.

Scott Berman, principal at PricewaterhouseCoopers Hospitality and Leisure, said that from a hotel industry perspective, that’s good news. “People are feeling better about themselves,” he said, making them more likely to indulge in a vacation this summer.

PricewaterhouseCoopers predicts that the average hotel occupancy in the United States this year will reach 62.2 percent, the most crowded that hotels have been since 2007. Planes are also “chockablock full,” said the airline industry analyst Robert W. Mann Jr., who predicted domestic flights would be 84 percent full this year. “It means everyone is sharing an armrest,” he said.

Business travelers wistfully remember when they had elbow room — or even an entire row to themselves — on flights that left at inconvenient times. “The early morning flights that used to be just business travelers are now filled with people on a discount fare,” Mr. Butler said.

What’s more, he said, the Transportation Safety Administration lines aren’t as fully staffed at odd hours, making the wait to be screened even longer. “It never used to be that bad,” he said.

Ms. Ramos said she remembered when “you’d have empty seats next to you for those red-eyes and long international flights; you could easily stretch out.” But on her international trips so far this year, she said, “All of the seats were taken.”

Barry Richards, a vice president for production at a company that creates media for hospital marketing, said he was seeing a lot of completely full flights.

“The thing I always watch out for is families and school groups and anybody who doesn’t look like they have much experience traveling,” he said. “I don’t want to be behind somebody that requires a lot of re-scanning.”

Business travelers say they find themselves stuck in long lines more often at hotels, too. On a recent trip to Las Vegas, Mr. Butler said his hotel’s front desk was overwhelmed, even with five people working behind it. Most of his fellow travelers didn’t appear to be visiting the city on business, he said, adding, “They were folks that were there to have fun in Vegas.”

“It was crazy getting through,” he said. “I probably waited close to an hour at check-in.”

In some cases, business travelers can’t even get a room. “We seem to encounter more and more sold-out hotels,” Mr. Richards said. “In the past, we haven’t run into that a whole lot.” He said in his 15 years of business travel, the competition for rooms was never this fierce.

Article source: http://www.nytimes.com/2013/06/18/business/overcrowding-makes-business-travelers-wistful-for-the-recession.html?partner=rss&emc=rss

March Retail Sales Fell as Consumers Cut Back

Retail sales declined a seasonally adjusted 0.4 percent last month, compared with February, the Commerce Department said on Friday. That followed a 1 percent gain in February and a 0.1 percent decline in January. The figures for February and January were both revised lower from initial reports.

Consumers cut back spending across a wide range of categories last month. Sales at auto dealers dropped 0.6 percent. Gas station sales dropped 2.2 percent, partly reflecting lower prices for fuel. The retail figures are not adjusted for price changes.

Excluding the volatile categories of autos, gasoline and building materials, core sales dropped 0.2 percent in March. That followed a gain of 0.3 percent in February. Department stores, electronics retailers and sporting goods outlets all reported lower sales.

The retail sales report is the government’s first look at consumer spending, which drives about 70 percent of economic activity.

The decline in March shows that higher Social Security taxes are starting to affect consumers and could blunt growth in the spring.

Many economists still predict that economic growth accelerated to an annual rate of roughly 3 percent in the quarter from January to March. That would be a significant increase from the anemic growth rate of 0.4 percent reported for the quarter from October to December.

Still, economists say the improvement is most likely temporary. Many now expect weaker spending will be among factors that slow growth again in the quarter from April to June quarter, with an annual growth rate of around 1.5 percent.

“The U.S. consumer looks a little less resilient,” said Michael Feroli, an economist at JPMorgan Chase. “It now appears that close to $200 billion in higher taxes may have actually had some impact on consumer spending.”

A separate report Friday on consumer confidence for April seemed to underscore that point.

The University of Michigan’s preliminary survey of consumer sentiment fell to 72.3. That’s down from 78.6 in March and the lowest since July. The discouraging jobs report and other weak economic reports are probably responsible for influencing consumers’ sentiment.

Companies are also less optimistic about the next few months, according to a separate Commerce Department report issued Friday. Businesses increased their stockpiles only 0.1 percent in February, the smallest gain in eight months. That suggests that companies had expected sales to weaken this spring, a point confirmed by the March retail sales figures.

Economists said restocking would probably remain tepid in the quarter from April to June. Slower restocking means companies order fewer goods, which slows factory output and growth.

“The economy appears to have lost some momentum,” said Paul Dales, an economist at Capital Economics. “But with gasoline prices now falling, we don’t expect too sharp a slowdown.”

The cost of a gallon of gas averaged $3.56 nationwide Thursday, down from $3.70 a month earlier, according to AAA.

The increase in Social Security taxes has lowered take-home pay this year for nearly all workers. Someone earning $50,000 will have about $1,000 less to spend in 2013. A household with two high-paid workers will have up to $4,500 less.

There were a few positive signs in the retail spending report. Furniture stores reported a 0.9 percent sales increase, suggesting that the housing recovery was still encouraging more spending. And sales at hardware and garden supply stores ticked up 0.1 percent, despite an unseasonably cold March.

But sales at general merchandise stores, which include major department stores like Macy’s and big discount stores like Walmart and Target, dropped 1.2 percent.

Article source: http://www.nytimes.com/2013/04/13/business/economy/march-retail-sales-fell-as-consumers-cut-back.html?partner=rss&emc=rss

U.S. Economy Unexpectedly Contracted in Fourth Quarter

The United States economy contracted unexpectedly in the final quarter of 2012, hurt by weaker exports, a drop in military spending and a slower buildup in inventories.

The Commerce Department said Wednesday that economic output in the quarter fell at an annual rate of 0.1 percent, compared with growth of a 3.1 percent pace in the third quarter.

It marked the economy’s worst performance since the second quarter of 2009.

The third-quarter figures had been bolstered by a big jump in inventories, so part of the slowdown was expected as businesses eased back in the fourth quarter. Still, the magnitude of the pullback caught economists by surprise.

Businesses may also have cut back on production because of the fiscal uncertainty in Washington, economists said. In addition, exports have been hurt by slower growth overseas, especially in Europe.

Before Wednesday’s announcement, the consensus estimate among economists for fourth-quarter growth stood at 1.1 percent.

Because data for exports and inventories tends to be volatile, there was a wide range in the predictions. For example, while JPMorgan anticipated growth of 0.4 percent for the fourth quarter, Barclays expected a 1.5 percent increase.

This was the Commerce Department’s first estimate of fourth-quarter growth; revisions are due in February and March, so the final figure could go up or down significantly.

But economists expect that slow growth has continued into the first quarter of 2013, with the consensus estimate currently calling for output to rise at an annual rate of 1.5 percent.

Consumers have been more cautious recently, especially because of a tw0-percentage-point increase in payroll taxes beginning this month that will cost a worker earning $50,000 a year an extra $1,000 annually. That was reflected in a consumer confidence survey released Tuesday by the Conference Board, which reported a sharp downturn in January that it attributed in part to financial anxiety arising from a reduction in take-home pay.

Article source: http://www.nytimes.com/2013/01/31/business/economy/us-economy-unexpectedly-contracted-in-fourth-quarter.html?partner=rss&emc=rss

You’re the Boss: This Week in Small Business: The Van Indicator


A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

The Big Story: Mobile Payments Go Mainstream

Starbucks makes a big investment in the mobile payment provider Square, which demonstrates how mobile payment options are growing for small companies. Kevin Casey offers five things small businesses should know about Google Wallet, including: “Your larger competitors are already using it.” Adrian Swinscoe says that mobile payment is one of four ways technology can improve customer service: “Whether you are a food truck or one of the many businesses that frequent festivals, farmers markets, trade fairs and many other events, mobile technology is allowing businesses to move from cash-only operations to ones that can take card payments, better aligning themselves with many of their customers’ cashless lives.”

Economy: The Stock to Own

A survey from Wells Fargo and Gallup shows a decline in small-business optimism, while one from Constant Contact finds that 2012 hasn’t been so bad for most small businesses. And the Van Indicator signals a recovery on Main Street. Robert Laura says that if you are bullish on small-business growth, this is the stock you should own. Michael Sivy offers nine reasons the economy feels so bad. Christopher Mahoney explains why the stock market keeps shrugging off bad news. But housing prices register a slight increase, and Bill McBride explains why that is a good thing: “Flat to rising prices give home builders a better idea of the pricing needed to compete in the market — while more consumer confidence in house prices is leading to more demand for new homes.” The weekly hotel occupancy rate is above 75 percent for the first time since 2007, and nonfarm productivity (pdf) increased.

Your People: Free Background Checks

The number of job openings in July remained unchanged from the previous month but employers have advertised the most jobs in the past four years, a sign that hiring could pick up in the coming months. The auto industry plans more hiring, and a man becomes very excited about a train. Extended benefits are coming to an end. Victor Fiorillo explains how you can run a background check on anyone free. Flossing, diaper changing and the “pantsing” of a co-worker are all things you can see in an office elevator. A survey finds many small-business owners do not intend to retire. A New York man holds a funeral for a Honda. When Google employees die, their spouses gets half of their salaries for 10 years.

Management: The Netflix of Neckties

Nicole LaPorte says that if your company’s name gets in the way, you should change it. Here are five things entrepreneurs can learn from Olympic athletes. This 17-year-old wins the gold for fastest texting. Karl Young suggests five ways to stay motivated in your home office, including: “Consider getting out of the house for a while — go for a jog, swim or run on your lunch break.” Joe Evans asks whether your culture matches your business model. Brian Lane wonders if on-demand manufacturing sites are changing the market. This little company is the Netflix of neckties. Gay people may be better entrepreneurs. Happy 100th birthday, Julia Child!

Marketing: More Mobile

A Dunkin’ Donuts text-messaging promotion increases store traffic 21 percent. Here’s how Whole Foods gets social media right. James Furbush loves this Sears commercial. Jay Heyman says you should be touchier. A social media dashboard maker that helps small businesses manage their Twitter, Facebook and LinkedIn postings raises a million bucks. Here are three hyperlocal networks for small businesses. David Bratvold says there are five ways crowdsourcing improves your content marketing. Twenty-six percent of consumers get access to their social networks on mobile devices, and Michael Tasner explains how you can empower your customers using mobile: “Consumers these days want emotional connections with the brands and businesses they support; they want to feel empowered, and brag to their friends, usually through social channels, how they received 10 percent off because they are now the ‘mayor.’”

Finance: Facebook Banking

Jim Brendel explains the basics of crowdfunding. U.S. Bank is inviting small-business owners in 12 cities across the country to explain why their businesses are unique for a chance to win $5,000 in radio advertising and $5,000 for a charity. “Facebook banking” shows signs of life.

Start-Up: Put Women on the Board

Here are five start-ups to watch from DreamIt’s latest conference. These are the top five American cities for start-ups. A Latin American start-up accelerator is taken over by 500 Startups. To create a company that won’t fail, put women on the board. Leticia Leite shares the pros and cons of start-up life, including: “Doing work that I love, and being able to do it from anywhere in the world (time zone permitting), has given me a level of flexibility that is invaluable.” Here’s how a few “e-tailor” start-ups are challenging Amazon in a $200 billion market.

Around the Country: Mohawk Guy

The goal of this event is to help 1,000 women get a Web site up and running on the same day. Dell and Manta team up to put on events to help small businesses grow. Score announces the winners of its 2012 small-business awards. The top 100 small-business influencers are named. This is how manufacturers helped NASA’s recent Mars landing and how the Mohawk Guy became a Web sensation. Here’s this week’s edition of “your tuition dollars at work,” and two high school grads show a better way to get an education than going to college. American airports are on pace to post their best year for on-time arrivals.

Around the World: H.M.S. Romney

This was the silent star of the London Olympics. Italy’s economy sinks deeper into recession. German industrial orders fall. Output in India shrinks. China disappoints in July. Spain and Italy are downgraded. Japan’s economy is looking weak. The Queen’s Jubilee hits British manufacturing output. The Netherlands has new e-mail addresses. A Ugandan billionaire introduces Africa’s first multilingual portal for youth mentorship and entrepreneurship. Historians remind us that the British sent H.M.S. Romney to Boston to enforce tax laws in 1768.

Red Tape Update: The Price of Pizza

The election outcome may determine if some businesses drop their health care coverage. Papa John’s vows to raise prices because of health care reform. Certain government economic recovery programs for small businesses will expire in September.

Technology: Even More Mobile

A new, flexible battery could lead to gadgets that fold up. A company provides mobile modular power for remote areas. Disney figures out how to make any plant into a multitouch sensor. A 5-year-old Skypes with Jeremy Lin. Google Chrome grabs a third of the browser market and Google adds e-mail to its search results. Verizon Wireless enhances its portfolio of mobile tools for small businesses with Microsoft Office 365. This is how most mobile app makers make money. Paper clips are banned.

Tweets of the Week

@levie – The Mars Rover has to fly 350,000,000 miles to do its job. It turns out your commute isn’t so bad after all.

@ValaAfshar – Ideas are the easy part. Learn to execute with a passion. Celebrate discipline.

@JonahLupton – Am I the only person that likes going into business conversations, calls and meetings with a structured game-plan?

The Week’s Bests

Brent Adamson, Matthew Dixon, and Nicholas Toman believe that if the customer is always right, you’re in trouble. “If we go back five years, customers used to have few options but to speak with suppliers relatively early in a purchase as most information about possible solutions wasn’t available anywhere else. In many ways, it was the golden age of the solution sale. Today, with the explosion of information on the Internet and the rise of third-party purchasing consultants, that’s no longer the case.”

Boyd Cohen says smart cities should be more like lean start-ups: “Lean start-up principles suggest that innovators should develop a hypothesis about likely reactions to a minimum viable product and be prepared to rigorously measure the results. Smart city solutions frequently involve the use of sensors and real-time data to enable city staff to monitor key metrics and modify systems to improve performance. For example, I recently wrote about a new city development in Portugal that will make use of over 100 million sensors for a planned population of only 225,000.”

Christine Erickson explains how to master social media like a comedian: “Humor sells. The fastest way to establish a relationship, build trust and get a customer to value your presence is to make them laugh. Comedians are active thinkers. A skilled comedian is confident and aware of what his audience needs. He knows what the next joke in his routine will be — he doesn’t ask the audience. A brand should know what its customers need by studying how they think and how they react to different marketing approaches.”

This Week’s Question: Will your business accept mobile payments this year?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2012/08/13/this-week-in-small-business-the-van-indicator/?partner=rss&emc=rss

Data Show Euro Area Downturn Deepened at Year-End

Europe’s worsening sovereign debt crisis and the tough cost-cutting response by many governments appear to be driving the 17-nation currency bloc back into recession following the 2008-2009 global financial crisis, while the number of people out of work is rising.

“This data has recession written all over it,” said Martin van Vliet, a euro zone economist at ING. “It is all but guaranteed that we are going to see a contraction in the euro zone in the fourth quarter.”

Economists are divided over how deep the recession — defined by two consecutive quarters of economic contraction — will be, after a free fall in industrial sentiment appeared to stabilize in December.

But it is clear the euro zone, which accounts for about 16 percent of the world economy, will struggle to grow in 2012 and could contract by as much as 1 percent, with its impact reverberating to the United States and Asia.

Retail sales for the bloc fell 0.8 percent in November from October, data released Friday by the European Union’s statistics office Eurostat showed. Economists polled by Reuters had forecast a monthly fall of just 0.2 percent.

The volume of sales fell by 0.9 percent in Germany, the euro zone’s top economy, and was down 0.4 percent in France and 0.7 percent in Spain.

Pointing to the cautiousness of European households even in the run-up to Christmas, the busiest shopping time of the year, the European Commission said Friday that in December, consumer confidence fell 0.7 points in the 17 countries sharing the euro.

In its overall reading of economic sentiment in the euro zone, the commission said its indicator fell 0.5 points to 93.3, its lowest level since November 2009.

A rise in the purchasing managers’ indices for both manufacturing and services in December had been a cause for optimism, but the commission’s figure may dampen that.

One bright spot in the data was the improvement in the commission’s business climate indicator, which increased for the first time in 10 months as factory managers showed optimism about future production plans and export order books.

That indicator was -0.31 points in December, compared to -0.42 points in November and better than the -0.50 point reading seen by economists polled by Reuters for the month.

Unlike the euro zone’s economy, which is expected to contract in the fourth quarter of 2011 and the first quarter of 2012, the U.S. economy is expected to grow about 2 percent in 2012, helping to increase export demand in Europe.

But Christoph Weil, an economist at Commerzbank, cautioned that it was too early to say things had turned around. “With the debt crisis still unsolved, we are reluctant to predict an end to the recession this spring,” he said.

The rate of the deterioration in confidence lost some pace, however, as German economic sentiment improved and returned to September levels. But Italy and Spain, the euro zone’s third- and fourth-largest economies respectively, saw confidence slip.

The sovereign debt crisis has swept to Rome and Madrid, and investors are watching to see if the two countries can raise the billions of euros they need to finance their economies in the first quarter.

Concerns about a possible euro zone break-up subsided over the end-year holiday period, but the focus is still on the European Central Bank’s willingness to help boost growth, such as by taking interest rates to below 1 percent for the first time.

High unemployment is also afflicting the euro zone, hurting consumers. Eurostat said the bloc’s joblessness rate was 10.3 percent of the working population in November, the same as October and up slightly from a year ago, when it was 10 percent.

That compared with an unemployment rate of 8.6 percent in the United States, Eurostat said.

The number of unemployed increased for the seventh consecutive month by 45,000 people to 16.37 million out of work, while hiring intentions fell further in December.

But while unemployment fell in Germany to 5.5 percent, the increase in Spanish and Portuguese unemployment rates to 22.9 percent and 13.2 percent respectively were the largest rises recorded, according to Eurostat.

Article source: http://feeds.nytimes.com/click.phdo?i=b6f3d6252677095d42dd38e4c8ec02a4

U.S. Adds 103,000 Jobs; Rate Holds Steady at 9.1%

The unemployment rate for September was unchanged from August, 9.1 percent.

With President Obama continuing to press a balky Congress to pass his jobs bill, the Labor Department’s monthly snapshot highlighted the challenges for an administration faced with an economy that has struggled to deliver significant employment growth since the recovery started more than two years ago.

September’s number of new jobs was well more than analysts had expected — one consensus predicted a gain of 55,000 jobs — and the Labor Department also revised the August figure of zero job growth to a gain of 57,000 jobs.

Still, the report came on the heels of disappointing data about consumer confidence and the housing market. Economists have also grown increasingly concerned about a ballooning European debt crisis that could send ripples across the Atlantic.

In a news conference on Thursday, the president urged Congress to act to prevent weaker growth and more job losses. “There are too many people hurting in this country for us to do nothing,” Mr. Obama said. “And the economy is just too fragile for us to let politics get in the way of action.”

The private sector added 137,000 jobs in September, although that included about 45,000 Verizon workers who had been on strike during August and returned to work by September. As has been the case throughout most of the downturn and tepid recovery, health care and education were among the strongest sectors, adding 45,000 jobs in September.

The public sector was the weakest link, with local government shedding 35,000 jobs, including 24,400 in public education. Randi Weingarten, president of the American Federation of Teachers, said that with local budgets under such tight constraints, school districts were not hiring as many new teachers and classroom aides as they had in the past. She said that about 300,000 education jobs have been lost since 2008 and projected a further 280,000 job losses due to state and local budget cuts.

Over all, there were still 14 million people out of work, 6.2 million of whom have been on the job hunt for six months or more, the report showed. Including those who are working part-time because they cannot find full-time employment and those who are too discouraged to look for work anymore, the total unemployment rate rose to 16.5 percent in September.

Despite all the talk of another recession, some recent economic indicators actually paint a slightly better picture of the economy. Auto sales rose close to 10 percent in September to their highest level in five months, and sales at chain stores also rose last month. But the focus of political attention remains job growth.

Economists suggested that employers still have little incentive to add many jobs. “Given the complete lack of clarity as to what the economic outlook will be and the uncertainty about what’s going on in Europe and the political paralysis in Washington,” said Bernard Baumohl, chief economist at the Economic Outlook Group, “there is not much of an economic justification for employers to suddenly ramp up hiring.”

Other precursors of future hiring, such as temporary employment, showed modest improvement. Temporary help services added just 19,400 jobs in September. And the average weekly hours worked, which tend to rise before companies start hiring again, rose slightly, as did average weekly earnings.

Allen L. Sinai, chief global economist at Decision Economics, a consulting firm, said he supported the president’s jobs plan and estimated that it could create about 500,000 to 600,000 new jobs. But he said that even companies that are profitable are hesitant to part with their cash to hire people.

“C.E.O.’s are paid to grow shareholder value,” said. “They are not paid to hire people if demand isn’t there and if they can substitute machines for people. That’s a no-brainer for the people who run companies.”

Article source: http://feeds.nytimes.com/click.phdo?i=e9620d4af751b579e862678a53656875

Stocks Fall on Fresh Economic Data

Stocks fell on Wall Street and in Europe on Friday after data showed only a slight increase in American consumer spending and an unexpected rise in European inflation.

The Commerce Department said consumer spending in August rose 0.2 percent, while incomes actually fell for the first time in two years.

The Standard Poor’s 500-stock index fell 1.5 percent in early trading. The Dow Jones industrial average fell 1.1 percent and the Nasdaq composite index lost 1.6 percent.

Consumer prices in the 17 European Union nations that use the euro rose 3 percent in September, after a 2.5 percent increase in August, the largest increase since October 2008.

Coming on the heels of data showing declining consumer confidence in Europe and evidence that the economy is slowing in much of the region, the inflation figures complicate the monetary policy challenge facing the European Central Bank, which has a primary responsibility to maintain price stability.

Still, said Ben May, an economist at Capital Economics in London, investors are right to continue expecting another move by the European Central Bank to cut interest rates by the end of 2011, noting that so-called “core” inflation, which subtracts energy and food prices because of their volatility, appeared to be well below the bank’s 2 percent target.

“What’s more, any rise is likely to prove temporary, given the recent signs that the recovery is coming to an end,” Mr. May said.

The United States Federal Reserve, the Bank of England, the Swiss National Bank and the Bank of Japan all have set their main overnight target rates at close to zero.

In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, was down 2 percent, while the FTSE 100 index in London slid 1.8 percent. The DAX in Germany lost 2.7 percent.

American crude oil futures for November delivery fell 2.3 percent to $80.26 a barrel. Comex gold futures rose 0.1 percent to $1,616.80 an ounce.

The dollar gained against most other major currencies. The euro fell to $1.3429 from $1.3597 late Thursday in New York, while the British pound fell to $1.5547 from $1.5627. The dollar was flat against the Japanese currency, at 76.85 yen, but higher against its Swiss counterpart, rising to 0.9043 francs from 0.8971 francs.

Asian shares were mixed, with both the Tokyo benchmark Nikkei 225 stock average and main Sydney market index, the S.P./ASX 200, essentially unchanged. But the Hang Seng index in Hong Kong fell 2.3 percent and in Shanghai the composite index fell 0.3 percent.

Bond prices were mostly higher, with the yield on the benchmark 10-year Treasury note dipping 5 basis points to 1.95 percent and the yield on the German 10-year falling 10 basis points to 1.9 percent.

David Jolly reported from Paris.

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News Analysis: News Analysis: A Balancing Act For President Obama

The challenge for Mr. Obama is that he must do both.

Despite Republican opposition to spending measures or tax cuts to spur job creation and economic growth, the president is under pressure to fight for a significant stimulus program. The demands come not only from Democrats, but also from many economists, financial analysts and executives who fear a relapse into recession.

But as administration officials are well aware, another display of partisan gridlock this fall could again provoke a downgrade of the United States’ credit and market upheavals that would further batter consumer confidence.

Mr. Obama has said bipartisanship is his aim. Yet even the president’s letter asking to address Congress next Wednesday provoked sparring. House Speaker John A. Boehner insisted on the following day, and more than 24 hours later extended the official invitation, which the White House immediately accepted. The embarrassing episode bodes badly for the reception that Mr. Obama’s ideas will receive, and for the parties’ ability to reach a much more difficult agreement on budget priorities by December as required in the deficit reduction deal last month.

“It is my intention,” the president wrote, “to lay out a series of bipartisan proposals that the Congress can take immediately to continue to rebuild the American economy by strengthening small businesses, helping Americans get back to work and putting more money in the paychecks of the middle class and working Americans, while still reducing our deficit and getting our fiscal house in order.”

People familiar with the White House’s planning say Mr. Obama will focus in his speech on the specifics of his immediate job-creation plans, but leave the details of his longer-term deficit reduction program for later. They say he does not want to dilute the political impact of his jobs message with controversies, especially with his Democratic base, over deficit-reduction ideas like raising the eligibility age for future Medicare recipients.

The signals from the White House suggest that Mr. Obama’s agenda will not be so bold as to satisfy many liberals clamoring for New Deal-style programs. On Tuesday, 68 progressive groups wrote to Mr. Obama urging him “to move beyond these half-measures designed to appeal to a narrow ideological minority who have repeatedly shown their unwillingness to negotiate.”

Still, they say Mr. Obama’s plan will be far more ambitious than would have been expected just months ago, given the weakened economy. He has concluded, Democrats say, that Republicans will oppose anything he proposes, and with an election looming, Mr. Obama must make clear what he stands for.

Expected among those stimulus proposals is an extension for another year of the payroll tax cut for workers that Mr. Obama and Republicans agreed to last December, which has meant $1,000 more this year for the average family. Mr. Obama has been considering whether to seek an expansion of the payroll tax cut for employers. And he is expected to propose a separate tax credit for employers who increase their payrolls.

The total cost could reach several hundred billion dollars. But the White House figures that tax cuts have the best chance of Republican support.

Yet Republicans say they oppose another round of stimulus measures, a stance consistent with their argument that Mr. Obama’s original $800 billion stimulus package was a failure. And despite their party’s longstanding support of tax cuts, Republican leaders say they are opposed to any revenue-losing proposals unless they are offset by equal spending cuts — a condition they did not make for extending the Bush-era tax cuts.

That sets up an opportunity, as Democrats see it, to saddle Republicans with the blame for a weak economy.

“The president wants to work with Republicans and Democrats to create jobs and grow the economy,” said Dan Pfeiffer, the White House communications director. “If nothing happens, it will be because Republicans in Congress made a conscious decision to do nothing. And that is a choice that will have tremendous consequences for the country.”

Mr. Obama also will propose added spending that Republicans are even more certain to oppose.

Much of the money would go to infrastructure projects. Mr. Obama is expected to again propose an infrastructure bank to support work on roads, bridges, airports, schools and other public works. Because such a bank would take up to 18 months to get under way, Mr. Obama has indicated he will propose other innovative ways to support such work quickly.

To hold down overall federal costs, and to avoid having to go to Congress, Mr. Obama and his advisers have been looking for ways to divert existing government money to purposes that will create jobs, especially in the hard-hit construction industry. School repairs and retrofitting buildings for energy efficiency will be a focus. And Mr. Obama is expected to argue that to the extent that states and local governments are relieved of school construction costs, they must avoid further layoffs of teachers.

For the long-term unemployed, the White House is considering a program like one in Georgia, which had Republican support there. The idea is to find temporary jobs for people at no expense to employers, providing them with on-the-job training while they receive unemployment compensation or a government stipend, in hopes of ultimately getting hired or finding a similar job elsewhere.

“It’s very important for the president to set forth his vision,” said Representative Chris Van Hollen of Maryland, the senior Democrat on the House Budget Committee. “I don’t think he should limit his vision to what may or may not pass the House of Representatives.”

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