June 23, 2021

Jobless Claims Continue Decline

WASHINGTON — The number of Americans filing new claims for unemployment benefits unexpectedly fell week, the latest indication the labor market recovery was gaining traction.

Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 332,000, the Labor Department said on Thursday. That was the third straight week of declines. Economists polled by Reuters had expected first-time applications last week to rise to 350,000.

The previous week’s figure was revised to show 2,000 more applications than previously reported.

The four-week moving average for new claims, a better measure of labor market trends, fell 2,750 to 346,750, the lowest level in five years, suggesting a firming in underlying labor market conditions.

The report follows news last week that nonfarm payrolls increased 236,000 in February, with the unemployment rate falling to a four-year low of 7.7 percent.

The sustained pace of steady job gains is starting to push up wages, which should support domestic demand. Though layoffs have ebbed, sluggish domestic demand has made companies cautious about ramping up hiring.

A government report on Tuesday showed layoffs in January were the fewest since 2000. The signs of strength in the labor market could intensify the debate at the Federal Reserve on the future course of monetary policy.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 89,000 to 3.02 million in the week ended March 2. The so-called continuing claims were at their lowest level since June 2008.

Separately, the Labor Department said Thursday that producer prices in February rose by the most in five months, but there was little sign of a broader increase in inflation pressures.

The seasonally adjusted Producer Price Index increased 0.7 percent last month after advancing 0.2 percent in January, the government said. The rise in prices received by farms, factories and refineries was in line with economists’ expectations.

However, underlying inflation pressures remained contained, with wholesale prices excluding volatile food and energy costs rising 0.2 percent after a similar advance in January. The so-called core index had been expected to rise 0.2 percent last month.

Article source: http://www.nytimes.com/2013/03/15/business/economy/jobless-claims-continue-decline.html?partner=rss&emc=rss

Fair Game: Credit-Rating Club Is Tough to Get Into

That was probably a common response to the news last week that the Justice Department had filed a civil suit against Standard Poor’s, one of the two big credit ratings agencies that were so central to the mortgage boom and bust. The department said that S. P. misled investors by presenting its ratings as the product of objective analyses when, the suit says, they were more about generating revenue to the firm. S. P. denied the allegations, saying it was prepared to go to trial. 

Many people have been disappointed that S. P. and Moody’s Investors Service, the big and powerful companies that are supposed to assess the creditworthiness of bonds, have escaped culpability. Not only do these companies still hold sway in securities markets, they’ve also hung on to their lush profits from the glory days of mortgage origination. During 2005 and 2006, for example, Moody’s made $238 million by rating complex mortgage instruments. Investors who trusted those ratings lost billions.

Given that the financial crisis began unfolding more than five years ago, it is discouraging to see how entrenched the large and established ratings companies remain. Ratings are still used to determine bank capital requirements, and investors rely heavily on them.

Over the years, lawmakers have tried to open up the duopolistic world of ratings agencies to greater competition and, therefore, better performance. Legislation in 2006 encouraged the Securities and Exchange Commission to let new companies into the ratings club. The commission set up the Office of Credit Ratings to register new entrants and to monitor all participants’ activities. Today, 10 credit ratings agencies are recognized by the S.E.C.

But gaining regulatory approval to join the ratings arena is exceedingly burdensome. That, at least, has been the experience of RR Consulting, a firm with a stable of highly respected credit analysts and an enviable record of having predicted the mortgage mess in 2003.

RR has been trying to get recognition as a credit rating agency since 2011. Frustrated by what it perceives as roadblocks erected by the S.E.C., its executives are beginning to wonder if the commission really wants increased competition.

The firm was founded in 2000 by Ann Rutledge and Sylvain Raynes, experts in structured finance who previously worked at Moody’s. It is a small shop, with seven employees, but its clients include investors, small and medium-size banks, financial regulators and other institutions. RR’s specialty is risk measurement for all asset types.

RR’s approach differs from traditional ratings agencies because, in addition to being able to rate new issues, it analyzes risks in securities that are trading in the secondary, or resale, market, after they are issued. By contrast, S. P. and Moody’s became known for giving mortgage securities high ratings and downgrading them only when defaults were soaring. 

 “In the primary market, everyone prices a security around the credit rating,” Ms. Rutledge says. “In the secondary market, no one cares about the credit rating; what they want is valuation. We connect primary-market ratings with secondary-market valuations.”

THE RR distinction between a rating and a valuation, however, seems to pose a problem when it comes to getting S.E.C. approval as a ratings agency, Ms. Rutledge says.

By law, many requirements must be met before a firm can become a ratings agency. Chief among them is that the applicant must provide letters from 10 “qualified institutional buyers” that have used the company’s ratings over the previous three years.

RR has had difficulties with its letters. One was rejected because its writer identified the firm’s work as ratings or valuations, not simply as ratings, Ms. Rutledge says. Another letter failed to pass muster because it was from a German institution that characterized itself as the equivalent of a qualified institutional buyer. When a foreign institution could not get its letter notarized as required — notaries are not as common overseas — it was not good enough for the S.E.C.

And not all clients want to write such a letter for use by the S.E.C. Instead, some said they would discuss the company’s work by telephone. The S.E.C. rejected the idea.

“It’s extremely difficult for us to satisfy the ‘10 qualified institutional buyers’ requirement,” Ms. Rutledge says. “Proof that you’ve done business with them is not enough; it says you must have letters. And they have a suggested text for the letter. When we changed the text slightly they said it was not in conformity.”

Article source: http://www.nytimes.com/2013/02/10/business/credit-rating-club-is-tough-to-get-into.html?partner=rss&emc=rss

Parties Seeking to Blame Each Other’s Policies for Gas Prices

President Obama touched off the latest flurry with a letter to Congressional leaders last week calling for the repeal of $4 billion a year in tax incentives for domestic oil and gas production, saying the industry was doing very well, thank you, and needed no help from the government. Republicans responded that the president’s proposal would only raise the cost of production and the price of gasoline, which now tops $4 a gallon in many parts of the country.

Both parties are planning legislative maneuvers this week to try to caricature their opponents as either in the pockets of the oil companies or hostile to domestic energy production.

The debate may generate a fair amount of noise that provides one side or the other with a temporary political advantage but is unlikely in the end to have an appreciable impact on gasoline prices.

“Every time Americans have to shell out $60 or $80 to fill their tanks, they mutter under their breaths about government and it puts pressure on Congress and the White House to do something,” said Byron L. Dorgan, the former Democratic senator from North Dakota who is now co-chairman of an energy project at the Bipartisan Policy Center in Washington. “But it’s just howling at the moon. The basic laws of supply and demand haven’t changed.”

House Speaker John Boehner unwittingly gave the Democrats a political opening to pile on the oil companies by saying in an interview with ABC News last week that oil companies should “pay their fair share in taxes” and that Congress ought to reconsider some of the tax incentives they enjoy. He has since walked away from those remarks and said that raising any taxes would choke off the economic recovery and lead to higher prices of gasoline and other goods.

His comments came as lawmakers from both parties were home on recess, hearing a torrent of constituent complaints about the high cost of gasoline at the same time major oil companies were reporting near-record quarterly profits. Exxon Mobil, the world’s largest oil company, said it earned $10.7 billion in the first three months of the year, and other companies reported similarly robust earnings.

Mr. Obama seized on the opportunity to try to deflect some of the heat he has been feeling as gas prices have steadily climbed. He noted wryly at a political fund-raiser last weekend that his poll numbers tend to go up and down with pump prices, even as he admitted he had no “silver bullet” to bring those prices down in the short term. But he found ammunition in the tax breaks the oil industry has enjoyed for decades, portraying the industry as undeserving of them at a time when government needs all the revenue it can get.

“As we work together to reduce our deficits,” Mr. Obama said in a letter to Congressional leaders last week, “we simply can’t afford these wasteful subsidies.” Mr. Obama says the money saved should be used to finance more research into clean energy alternatives — a proposal he has made in his last two budget requests that has largely been ignored.

“The odds are low that the tax repeal goes through as a stand-alone measure, but you might see it as part of a broader deal,” said Michael A. Levi, an energy and environment specialist at the Council on Foreign Relations. He said it was in Mr. Obama’s interest to keep the issue alive both to align Republicans with the unpopular oil companies and to use as leverage as new budget negotiations begin.

Harry Reid, the Senate Democratic leader, said he would press for a vote as early as next week on repealing the tax subsidies. Democrats hope to paint Republicans who vote against the plan as tools of the industry.

“Now is not the time to stand idly by while large oil and gas companies get billions of dollars in tax breaks,” said Senator Max Baucus, Democrat of Montana and chairman of the finance committee. “Now is the time to take concrete steps toward cleaner, more affordable, domestically produced energy.”

The measure could well pass in the Democratic Senate, although some Democrats from oil-producing states, like Mary Landrieu of Louisiana and Mark Begich of Alaska, are likely to oppose it.

But it has little chance of even coming to a vote in the Republican-run House, where Speaker Boehner is orchestrating a fresh chorus of “drill, baby, drill” with a series of votes on bills to allow new oil and gas exploration in the Gulf of Mexico and off the coast of Virginia.

“Our goal is to expand the supply of American energy to lower gas prices and create jobs,” said Michael Steel, spokesman for Mr. Boehner. “Raising taxes would have the opposite effect.”

Neither the Senate tax measure nor the House drilling bills is likely to become law because of the fierce partisan calculus of the current Congress. But some Republicans, including Representative Paul Ryan of Wisconsin, the party’s leader on budget matters, have left open the door for rethinking a range of government tax breaks as part of an agreement on the federal budget and deficit ceiling.

Some conservatives oppose energy subsidies of all sorts — including those for ethanol, wind, nuclear and solar power — and would be willing to see them all repealed as part of a reform of the business tax code.

Oil industry tax breaks — some of them dating back a century — have been debated for years but have survived every elimination attempt. According to a breakdown by the nonpartisan Joint Committee on Taxation, oil companies receive about $4 billion a year in federal subsidies and can avail themselves of tax breaks at virtually every stage of the prospecting and drilling process.

One lingering provision from the Tariff Act of 1913 — enacted to encourage exploration at a time when drilling often led to dry holes — allows many small and midsize oil companies to claim deductions for tapped oil fields far beyond the amount the companies actually paid for them.

Another subsidy, devised by the State Department in the 1950s, allows U.S.-based oil companies to reclassify the royalties they are charged by foreign governments as taxes — which can be deducted dollar-for-dollar from their domestic tax bill. That provision alone will cost the federal government $8.2 billion over the next decade, according to the Treasury department.

David Kocieniewski contributed reporting from New York.

Article source: http://feeds.nytimes.com/click.phdo?i=ac7511272d34162af1fd0fb7bcaf1a1a