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U.S. Postal Service Reports $15.9 Billion Loss

November 16, 2012 by Leave a Comment

The widely expected loss, more than triple the service’s loss last year, included accounting expenses of $11.1 billion related to two payments that the agency was supposed to make into its future retiree health benefits fund. But because of revenue losses, the post office was for the first time forced to default on these payments, which were due in August and October. Nearly $5 billion in other losses were because of a decline in revenue from mailing operations. The agency also reached its $15 billion borrowing limit from the Treasury.

Despite its financial troubles, officials said that the Postal Service would keep operating as usual and that employees and suppliers would be paid on time. The agency had warned that it could face a $100 million cash crunch in October because of a decline in revenue. But the agency reported more than $500 million in revenue from campaign mailings by candidates, political parties and other interest groups before the election. The agency said the revenue from political mail and the holiday season should help its cash situation until Congress acts on legislation to overhaul the post office.

The agency’s financial reports show that mail volume continues to decline as Americans increasingly turn to electronic forms of communication. Total mail volume was 159.9 billion pieces, down 5 percent from 168.3 billion pieces a last year. Operating revenue was $65.2 billion, down from $65.7 billion over the same period.

For nearly a year, the agency has been urging Congress to pass legislation that would allow it to save costs, including cutting back the number of days it delivers mail to five days a week, reducing annual payments required for its future retiree health fund and entering into new lines of business, like delivering beer and wine by mail.

Patrick R. Donahoe, the postmaster general, says Congress needs to act fast. “It’s critical that Congress do its part and pass comprehensive legislation before they adjourn this year to move the Postal Service further down the path toward financial health,” Mr. Donahoe said.

In April, the Senate passed a bill that provided incentives to retire about 100,000 postal workers, or 18 percent of its employees, and allowed the Postal Service to recoup more than $11 billion it overpaid into an employee pension fund. The Senate refused to stop Saturday deliveries. The House has taken no action, and it is unclear if the legislation will be taken up as lawmakers work to avert a series of across-the-board tax increases and spending cuts scheduled to take place Jan. 1.

The Coalition for a 21st Century Postal Service, a business group tied to the mailing industry, urged Congress to enact comprehensive postal legislation during its lame-duck session.

“The Postal Service is facing a fiscal cliff of its own, and any unanticipated drop in mail volumes could send the agency over the edge,” said Art Sackler, a coordinator of the coalition. “If Congress fails to act, there could be postal slowdowns or shutdowns that would have catastrophic consequences for the eight million private-sector workers whose jobs depend on the mail.”

Article source: http://www.nytimes.com/2012/11/16/us/politics/postal-service-reports-a-nearly-16-billion-loss.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

S.& P. Cuts U.S. Debt Rating for First Time

August 6, 2011 by Leave a Comment

The company, one of three major agencies that offer advice to investors in debt securities, said it was cutting its rating of long-term federal debt to AA+, one notch below the top grade of AAA. It described the decision as a judgment about the nation’s leaders, writing that “the gulf between the political parties” had reduced its confidence in the government’s ability to manage its finances.

“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge,” the company said in a statement.

The Obama administration reacted with indignation, noting that the company had made a significant mathematical mistake in a document that it provided to the Treasury Department on Friday afternoon, overstating the federal debt by about $2 trillion.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokeswoman said.

The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have decided not to downgrade the government at this time.

The announcement came after markets closed for the weekend, but there was no evidence of any immediate disruption. A spokesman for the Federal Reserve said the decision would not affect the ability of banks to borrow money by pledging government debt as collateral, a statement that could set the tone for the reaction of the broader market.

S. P. had prepared investors for the downgrade announcement with a series of warnings earlier this year that it would act if Congress did not agree to increase the government’s borrowing limit and adopt a long-term plan for reducing its debts by at least $4 trillion over the next decade.

Earlier this week, President Obama signed into law a Congressional compromise that raised the debt ceiling but reduced the debt by at least $2.1 trillion.

On Friday, the company notified the Treasury that it planned to issue a downgrade after the markets closed, and sent the department a copy of the announcement, which is a standard procedure.

A Treasury staff member noticed the $2 trillion mistake within the hour, according to a department official. The Treasury called the company and explained the problem. About an hour later, the company conceded the problem but did not indicate how it planned to proceed, the official said. Hours later, S. P. issued a revised release with new numbers but the same conclusion.

In a statement early Saturday morning, Standard Poor’s said the difference could be attributed to a “change in assumptions” in its methodology but that it had “no impact on the rating decision.”

In a release on Friday announcing the downgrade, it warned that the government still needed to make progress in paying its debts to avoid further downgrades.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” it said.

The credit rating agencies have been trying to restore their credibility after missteps leading to the financial crisis. A Congressional panel called them “essential cogs in the wheel of financial destruction” after their wildly optimistic models led them to give top-flight reviews to complex mortgage securities that later collapsed. A downgrade of federal debt is the kind of controversial decision that critics have sometimes said the agencies are unwilling to make.

Eric Dash contributed reporting from New York.

Article source: http://www.nytimes.com/2011/08/06/business/us-debt-downgraded-by-sp.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

U.S. Posts Stronger Job Gains Amid Fear

August 5, 2011 by Leave a Comment

Though the government’s monthly snapshot of the labor market brought a sigh of relief to traders on Friday, the number of jobs created was not enough to provide much comfort to those who have been waiting for the recovery to kick into high gear. The unemployment rate slipped a notch to 9.1 percent, but that was mainly because some people had simply given up looking for work.

The net new jobs created in July exceeded the dismal number reported in June, but the total was barely sufficient to accommodate normal population growth, exceeded the 18,000 net new jobs originally reported in June. The Labor Department also revised its estimate of American job growth in June to 46,000.

Stock markets, pummeled on Thursday on increasing pessimism over the American economy, drew about even in early trading, retreating from a 1 percent bounce higher at the opening.

The latest jobs numbers came in a week when Congress finally agreed to a deal to raise the country’s debt ceiling and cut government spending. Deep divisions remain between the two political parties on how to cut spending further at a time when many economists worry that the economy can ill afford it.

“It gives us some temporary relief,” said Nigel Gault, chief United States economist at IHS Global Insight. “But all we can say is it’s a bit better than the two previous months. I suspect, though, that relief will probably not last too long as people refocus on what they think will happen in the future.”

Indeed, other signs that the recovery has slowed to a crawl are mounting. The Commerce Department reported earlier this week that consumer spending, which accounts for up to 70 percent of economic activity, actually declined in June for the first time in nearly two years. A closely watched survey of manufacturers showed that employment in July grew at a slower rate than in June and that new orders of factory goods actually fell. Housing prices are still extremely weak.

With extended unemployment benefits scheduled to expire at the end of this year, there are still 13.9 million people out of work, 6.2 million of whom have been searching for jobs for six months or longer. Another 8.4 million are working part-time because they couldn’t find a full-time job, and 1.1 million have become so discouraged that they have stopped looking for work altogether. Including such people, the broader measure of unemployment was 16.1 percent.

In a sobering note, only 58.1 percent of the population is working, lower than at any point in 28 years.

With consumer confidence on a knife’s edge and orders slipping, employers have been reluctant to add workers. “We just don’t see where there is much incentive for companies to ramp up hiring at a time when there’s so much uncertainty gripping the country,” said Bernard Baumohl, chief global economist with the Economic Outlook Group.

Mr. Baumohl, who said the risk of a fall back into recession had certainly increased, said the most likely prospect was that the economy would continue in a “muddle through” phase. “I don’t think we’re going to see anything major happen in the labor markets until well into the fall,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=0c37d2c0763e8579995e954bc1856a5e

Filed Under: Business News Tagged With: , ,