My finance view

The unemployment rate has fallen dramatically over the last six months, but just how low can it go?

The answer is being debated among two camps of prominent economic thinkers. One school of thought says that unemployment will return to around 5% as the economy eventually recovers. But an opposing view states that permanent changes in the labor market mean higher unemployment is here to stay.

.staticLauncher {width:218px;border:1px solid #e8e8e8;} .staticLauncher a {font:normal 12px Arial; text-decoration:none;} .staticLauncher a:hover {text-decoration:underline;} .staticLauncher .staticLauncherHeader {clear:both; color: #000;padding:10px 10px 5px 10px; letter-spacing: -1px;} .staticLauncher .staticLauncherDek {color: #575757;font: 11px Arial;padding: 7px;} .staticLauncher .staticLauncherHeader a { font:bold 18px Arial;} .staticLauncher .imageContainer {width:218px;height:120px;} .staticLauncher .imageContainer img {display:none;position:absolute;} .staticLauncher .imageContainer img.show {display:block;} .staticLauncher .staticLauncherMore {float:right;}

Obama battles job crisis

Before Obama even took office, America had lost 4.4 million jobs. Track his progress since then.

Among those who believe the first, more optimistic scenario is Federal Reserve Chairman Ben Bernanke. He thinks that unemployment will fall as part of the regular business cycle, and stimulative policies that boost demand could bring us back to a more normal unemployment rate of between 5% and 6% some time after 2014.

There’s plenty of research to back that up. A recent report by economists at Harvard, the San Francisco Federal Reserve and the International Monetary Fund suggests that three-quarters of the sharp rise in unemployment during the financial crisis was in fact due to cyclical, not permanent, factors.

And unemployment has indeed fallen sharply as the economy has slowly recovered from the recession. As of February, the unemployment rate stood at 8.3%, a substantial drop from 10% at the height of the financial crisis.

Check the unemployment rate in your state

Under the second, far less rosy scenario, 5% unemployment is out of reach. Devotees of "structural" unemployment, believe permanent shifts mean the job market may never fully recover, even as the broader economy does cash advance.

Nobel Prize winning economist Edmund Phelps, for example, calls a return to a 5% unemployment rate a "pipe-dream."

Phelps likens the economy to a skater who’s taken a bad fall. Just getting a boost might not be enough, because the skater may have a few broken bones.

What are those broken bones?

Less innovation, increased competition from low-wage countries, more efficient technology and a shortage of high-tech skills among American workers may all be to blame.

Another problem: Baby Boomers are working longer than their predecessors, creating a demographic shift in the labor market.

Plus, many Americans are finding themselves in the wrong place at the wrong time.

"Many workers do not have the skills required by employers in the location where employers are seeking jobs," Wells Fargo Chief Economist John Silvia said in a recent research note.

All of these factors are a recipe for a longer lasting shift in the labor market, and mean stimulative policies won’t have much of an impact, according to the structuralists.

So just how much further will unemployment fall?

The Labor Department will release March’s unemployment rate on Friday. Economists surveyed by CNNMoney are expecting the report to show the unemployment rate remained at 8.3% for the month.

Longer term forecasts are all over the map.

The Congressional Budget Office predicts that the unemployment rate will eventually fall as low as 5.3%, but not until 2021. Economists at Goldman Sachs, however, estimate that due to structural reasons the new normal unemployment rate may now be 6% at best.

The biggest wild card that could shift that balance is the long-term unemployed. Of the 12.8 million Americans who are unemployed, 42.6% have been out of work for six months or more.

"If progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further possibly converting a cyclical problem into a structural one," Bernanke said last week. 

Source

Satellite images of an Iranian military facility show trucks and earth-moving vehicles at the site, indicating that crews were trying to clean it of radioactive traces possibly left by tests of a nuclear-weapon trigger, diplomats told The Associated Press on Wednesday.

Two of the diplomats said the crews may be trying to erase evidence of tests of a small neutron device used to set off a nuclear explosion. A third diplomat could not confirm that but said any attempt to trigger a so-called neutron initiator at the Parchin site could only be in the context of trying to develop nuclear arms.

The images, provided to the IAEA by member countries, are recent and constantly updated, said one of the diplomats.

The diplomats are nuclear experts accredited to the International Atomic Energy Agency, and all asked for anonymity to discuss sensitive information.

Iran is under growing international pressure over its nuclear program, which it insists is peaceful. Israel has warned that it may resort to a pre-emptive strike against Iran’s nuclear facilities to prevent Tehran from obtaining atomic weapons payday loans.

The IAEA has already identified the Parchin military site as the location of suspected nuclear weapons-related testing. In a November report, it said it appeared to be the site of experiments with conventional high explosives meant to initiate a nuclear chain reaction.

It did not mention a neutron initiator as part of those tests but in a separate section cited an unnamed member nation as saying Iran may have experimented with a neutron initiator, without going into detail or naming a location for such work.

In contrast, the intelligence information shared with the AP by the two diplomats linked the high-explosives work directly to setting off a neutron initiator at Parchin.

Source

U.K. house prices fell in February for a third month in four, as economic uncertainty weighed on demand for housing, Halifax said.

Prices (UKHB3MYR) dropped 0.5 percent from January to an average 160,118 pounds ($253,400), the mortgage unit of Lloyds Banking Group Plc (LLOY) said in a statement in London today. From a year earlier, values were down 1.6 percent.

While inflation is cooling, a recovery in consumer confidence is being kept in check by rising unemployment and concern about the impact of Europe

The economy is looking better to the American public and with it President Barack Obama

China

Retails sales in the 17-nation eurozone dropped in November, official statistics showed Friday, as consumers felt the bite of austerity measures and feared the currency union could slip deeper into crisis.

Retail sales in the eurozone fell 0.8 percent compared with October and were down 2.5 percent from November 2010, according to Eurostat, the EU’s statistics agency.

The steepest declines were seen in Portugal, which had to be bailed out in April and where sales fell 2.6 percent during the month and were down a massive 9.2 percent from a year earlier.

But even in richer states like Germany and the Netherlands, consumers were more reluctant to part with their money, with retail sales slipping 0.9 percent in both countries during November. That shows how the eurozone’s worsening debt crisis is taking its toll even on countries with strong economies.

For the whole European Union, which includes non-euro members like the U.K. and Sweden, November retail sales dropped 0.6 percent from October and 1.3 percent compared with a year earlier.

Consumers appear worried by high unemployment, which remained stuck at 10.3 percent in November _ unchanged from October but above the 10 percent seen a year earlier _ and a darkening outlook on the economy easy pay day loans.

The weak data also underlines how many people found themselves in a worse position at the end of 2011 than at the end of 2010 _ when there were hopes that the continent was turning a corner after two difficult years brought on by the collapse of U.S. investment bank Lehman Brothers in 2008.

Spain’s unemployment rate was highest at 22.9 percent, up from 20.4 percent a year earlier. That’s more than four times as high as in Austria, where only 4 percent of people were looking for work. For the whole EU, the unemployment rate remained at 9.8 percent.

The dark mood is set to continue in the eurozone, with a Eurostat economic sentiment indicator falling 0.5 of a point to 93.3 in December, far below the long-term average of 100.

Italy and Spain, the eurozone’s third and forth largest economies which have been pulled into the eye of the crisis in recent months, grew especially pessimistic about the economy. Economic sentiment fell 4.6 points in Italy and 1.3 points in Spain.

In the 27 EU countries, economic sentiment was down 0.8 point at 92.

Source

Shares in UniCredit, Italy’s largest bank, slid Wednesday after the company priced its euro7.5 billion ($9.8 billion) cash call from shareholders at the bottom end of market expectations.

UniCredit shares dropped 14.5 percent lower at euro5.42, as investors were spooked by the scale of the discount in the company’s rights issue. Other European banks, many of which are looking to raise money to plug financial holes, also saw their share prices take a hit amid concerns that they too would be forced to price their cash calls at low levels too.

The aim of UniCredit’s rights issue _ shareholders have been asked to buy two new shares for every one they hold _ is to help the bank shore up its capital reserves, in line with European regulatory demands. Last month, industry regulator, the European Banking Authority, said the bank needed to raise around euro8 billion.

Earlier in the day, UniCredit shares were briefly suspended after the cash call was priced at a 69 percent discount to Tuesday’s close, much lower than most predictions. So far, only 24 percent of the shares on offer have been taken.

The discount was bigger than those that have been offered by UniCredit’s peers recently and knocked sentiment in Europe’s banking sector as a whole, notably of Germany’s Commerzbank AG, which has been asked to raise euro5.3 billion ($6.9 billion) by the European Banking Authority. Its share price fell 4 percent.

Last month, the EBA said European banks have to raise about euro115 billion ($150 billion) to meet a new standard meant to inoculate the lenders against market turmoil, including bad government debt.

European banks have billions of euros of risky government bonds on their books, and, as the continent’s crisis has deepened, investors have become increasingly concerned the lenders won’t be able weather all of the expected losses on those loans.

That, in turn, has made banks wary of lending to one another _ since they worry that one of their number could go under at any moment. When banks stop lending to one another and businesses, the entire economy seizes up.

Much of the current focus in Europe’s debt crisis has centered on Italy, the third-largest economy in the eurozone.

International markets have punished Italy in recent months for failing to come up with a coherent strategy to deal with its euro1.9 trillion ($2.5 trillion) debt mountain. That drove up the borrowing rates for the eurozone’s third-largest economy and effectively forced Silvio Berlusconi from office.

Source

Stephen Wancha was promoted to food and beverage director at Four Seasons St. Louis Hotel.

Wancha is responsible for overseeing Cielo restaurant and bar at the hotel as well as the food/beverage service for banquets and catering. He manages a staff of about 110 people.

Wancha previously worked at the Four Seasons Hotel here before briefly taking a job in food service at Four Seasons San Francisco Hotel cash till payday. He visited 91 regional wineries during his 18 months in San Francisco and says the contacts he made there will help Cielo bring new wines to St. Louis that aren’t usually available in the area.

Source

Britain’s Treasury chief defended Prime Minister David Cameron’s decision to veto changes to the European Union treaty, saying Saturday the move protected U.K. economic interests.

Cameron rejected an invitation to join 26 European partners in a tighter financial alliance to save the euro which he said didn’t adequately protect Britain’s national interest and meant giving up too much control over regulation of Britain’s dominant financial sector.

The move isolated Cameron from the European Union and raised doubts about whether Britain realistically can remain a member of the 27-nation bloc _ prompting cheers from the prime minister’s typically anti-EU party and jeers from the opposition.

Britain’s typically brash media reflected the divide Saturday, with The Guardian headline “Cameron Cuts UK Adrift” batting against the Daily Mail’s “The Day He Put Britain First.”

Treasury chief George Osborne defended Cameron on BBC radio, saying he thinks Britons are pleased the prime minister “stood up for the British national interest.

“We have protected Britain’s financial services and manufacturing companies that need to be able to trade their products into Europe from the development of eurozone integration spilling over and affecting non-euro members of the EU,” he said.

Osborne added that if the prime minister had “caved in” to signing the treaty, the “full force” of the EU could have undermined British interests.

“We were not prepared to let that happen,” he said.

Osborne’s vote of confidence echoed support from other Conservative lawmakers over the prime minister’s move to set Britain apart.

But Cameron also is facing a chorus of criticism from the opposition Labour Party and growing tensions with his Conservative Party’s junior coalition partner, the Liberal Democrats.

Deputy Prime Minister Nick Clegg has rejected talk of a rift between his Liberal Democrats and the Conservatives and backed Cameron’s move, but dissent bubbled up from elsewhere in the party.

One Liberal Democrat lawmaker accused Cameron of “betraying Britain,” while another called the fallout “a black day for Britain and Europe.”

Emboldened by Cameron’s move, Conservatives stepped up calls for a full re-negotiation of Britain’s position in the EU, but Liberal Democrat deputy leader Simon Hughes shot down that idea in an interview with Sky News, insisting the issue was “not on the table” and telling the Tories to “calm down.”

In Italy, Premier Mario Monti has summoned union leaders to discuss his new austerity plan as lawmakers tinker with his tough proposals to try to rescue the country from its debt load and get the economy growing again.

Unions have bitterly contested Monti’s proposal to reform Italy’s generous pension system and have called a strike for Monday. Monti’s office said Saturday the premier, fresh from the EU summit in Brussels, would meet with union leaders on Sunday to discuss the proposals.

Monti has also proposed restoring a property tax suspended during Premier Silvio Berlusconi’s government. The proposal has renewed criticism of the tax-exempt status of the Catholic Church in Italy, even though the church merely enjoys the same tax-exempt status as any non-profit.

Source

Standard & Poor’s is threatening to downgrade the credit rating of 15 eurozone countries, saying the worsening debt crisis is affecting the bloc’s strongest economies.

The decision Monday to put 15 eurozone countries, including AAA-rating nations such as Germany and Luxembourg, on watch for a possible downgrade piles pressure on eurozone leaders to find a solution to the currency union’s debt troubles at a summit later this week.

S&P said its decision was “prompted by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole.”

The only two euro nations not put on credit watch were Cyprus, which was already under review, and Greece, which already holds the world’s worst rating.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BRUSSELS (AP) _ Efforts to stabilize Europe’s financial crisis were thrown into disarray late Monday as the 17 countries that use the euro braced for a possible downgrade of their credit ratings.

The leaders of France and Germany sought to restore confidence in the troubled European currency during the day with a joint call for changes to the European Union treaty so that countries using the euro would face automatic penalities if budget deficits ran too high.

Stock prices rose and borrowing costs for European governments dropped sharply in response to the changes proposed by French President Nikolas Sarkozy and German Chancellor Angela Merkel. They said their proposals would prevent the kind of out-of-control spending and borrowing that led to the debt crisis that is engulfing Europe and threatening the global financial system.

But on Monday night two people familiar with the matter said Standard & Poor’s is examining the credit rating of all 17 eurozone countries for a possible downgrade as the continent’s debt crisis lingers. They said S&P is likely to make an announcement on putting the euro countries on “credit watch” after the closing of markets in the U.S. on Monday.

The people were speaking on condition of anonymity because of the sensitivity of the matter.

The threat to downgrade all 17 eurozone countries _ including the ones that enjoy the stellar AAA-rating _ comes ahead of a crucial summit of EU leaders later this week. If there is widespread support at the summit, it is assumed that would be an important first step in bringing an end to the crisis, which has dragged on for more than two years.

“Our wish is to go on a forced march toward re-establishing confidence in the eurozone,” Sarkozy said at a news conference in Paris, with Merkel at his side. “We are conscious of the gravity of the situation and of the responsibility that rests on our shoulders.”

EU treaty changes could take months, if not years, to implement and don’t wipe away the mountains of government debt dragging down Europe’s economy. But preliminary buy-in Friday from the 17 countries that use the euro could set the stage for further emergency aid from the European Central Bank, the International Monetary Fund or some combination.

“The onus is still on the ECB to print money to make huge loans or bond purchases and draw a line under the crisis,” said Jennifer McKeown, senior European economist at Capital Economics. “Perhaps if other member states sign up to Merkel’s and Sarkozy’s proposals this week the (ECB) will step in.”

Sarkozy pledged to have a revised EU treaty ready for signing by March. It would then need to be ratified in each country, which could mean lengthy parliamentary debates or national referendums in some cases.

“A lot depends on the specifics and how these are going to be framed by lawyers,” said Piotr Maciej Kaczynski, an expert on EU constitutional issues at the Center for European Policy Studies in Brussels.

At the very least, it could take at least 18 months to ratify a new treaty once it has been signed by all heads of state, said Kaczynski. “That is a much longer timeline than what markets might want,” he said.

Bond-market analysts said they remain skeptical of Europe’s ability to prevent future profligacy. “If you say it strong enough and often enough maybe people will believe it,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. “But I don’t think the markets believe ‘Merkozy’ at this point.”

EU governments reacted with caution.

No other EU leaders came out against the Franco-German proposals, but no strong statements in favor were immediately forthcoming. The reaction from Austrain Finance Minister Harald Waiglein was fairly typical: “There is nothing here that contradicts our position,” although more details are needed, he said.

The modern EU is based on a set of treaties, dating as far back as the 1950s, when the project of consolidating the continent began payday loan lenders. The treaties detail the rules that countries must follow and outline the mandates of institutions like the ECB. The most recent was the Lisbon Treaty, which was ratified in 2009, giving additional powers to the European Commission and European Parliament.

Sarkozy said he and Merkel would prefer that the treaty changes they’re proposing be agreed to by all 27 members of the EU. But he left the door open to an agreement only among the 17 euro countries and anyone else “who wants to join us.”

Sarkozy and Merkel discussed several broad changes for the EU treaty, but failed to provide much detail. The changes they outlined included:

_ Introducing an automatic penalty for any government that allows its deficit to exceed 3 percent of GDP. A majority of nations would need to oppose automatic sanctions for a country to avoid them.

Governments are supposed to abide by the deficit limit under existing rules, but many, including France, have flouted it. Further, punishment only occurs after a majority of euro countries votes to impose them.

_ Requiring countries to enshrine in law a promise to balance their budgets.

A key issue for the proposal’s final approval will be how much flexibility countries can have to run temporary deficits during economic downturns.

_ Pledging that any future bailouts would not require private bond investors to absorb a part of the costs, as was the case for the Greek bailout.

Germany had earlier insisted that Europe’s permanent bailout fund would demand private investors take losses if a country in the future needs rescuing.

_ Promising to not criticize or otherwise comment on the work of the ECB.

This is intended to ensure the bank’s independence and its ability to act without pressure from European leaders.

Sarkozy said more details would be included in a letter sent Wednesday to European Council President Herman Van Rompuy.

After Sarkozy and Merkel spoke, stocks rose and borrowing rates for governments across Europe plunged, indicating a sharp rise in investor confidence in the continent’s ability to resolve the crisis.

France’s CAC-40 index climbed 1.2 percent, Germany’s DAX rose 0.4 percent and markets outside of Europe also pushed higher, with the Dow Jones industrial average up 1.2 percent.

French banks, which have been hit hard this year over fears about their large exposure to the government bonds of financially weak countries like Greece, saw some of the biggest gains.

Societe Generale’s stock price climbed 6.2 percent while BNP Paribas rose 4.9 percent. In Italy, shares of Unicredit rose 5.4 percent while Spain’s Santander rose 3.6 percent.

Worries about the stability of the euro reached a fever pitch in recent weeks as the yields on Italy’s bonds _ in a nutshell, its borrowing costs _ jumped above 7 percent. That is the level that eventually forced Greece, Ireland and Portugal to require bailouts. By comparison, bond yields in Germany, Europe’s largest and most stable economy, are roughly 2 percent.

Italian and Spanish bond yields fell sharply on Monday, an indication of growing investor confidence in their financial future. The yield on Italy’s benchmark 10-year bond fell from 6.65 percent to 5.93 percent.

Italy, whose government debt is equivalent to 120 percent of the country’s annual economic output, needs to refinance $270 billion of its $2.6 trillion of outstanding debt by the end of April.

The size of the problems facing Italy and Spain are considered too large for the existing funds available to the European Financial Stability Facility ($590 billion) and the IMF ($389 billion.) To boost the firepower of the IMF, several economists have proposed that the ECB lend to it.

The big threat to the global financial system is that Europe’s debt crisis could spiral out of control.

If governments default on their bonds, banks that own them could take a significant hit. It could become very difficult for these banks to borrow and nervous depositors could flee with their cash. In the worst case, a global financial panic could be triggered, in which banks all over are too skittish to lend to each other. That would cause a credit crunch that deprives businesses of the short-term financing they depend on for day-to-day operations.

With such fears in the air, the United States is ratcheting up its involvement.

Geithner will meet Tuesday in Germany with ECB President Mario Draghi and German Finance Minister Wolfgang Schauble. On Wednesday, he travels to France for talks with Sarkozy and the prime minister-elect of Spain, Mariano Rajoy Brey.

Source