Jobless rate rises to 4-year high of 5.7 percent
Friday, August 1, 2008
(08-01) 08:30 PDT WASHINGTON, (AP) --
The nation's unemployment rate climbed to a four-year high of 5.7 percent in July as employers cut 51,000 jobs, dashing the hopes of an influx of young people looking for summer work.
Payroll cuts weren't as deep as the 72,000 predicted by economists, however. And, job losses for both May and June were smaller than previously reported.
July's reductions marked the seventh straight month where employers eliminated jobs. The economy has lost a total of 463,000 jobs so far this year.
The latest snapshot, released by the Labor Department on Friday, showed a lack of credit has stunted employers' expansion plans and willingness to hire. Fallout from the housing slump and high energy prices also are weighing on employers.
The increase in the unemployment rate to 5.7 percent, from 5.5 percent in June, in part came as many young people streamed into the labor market looking for summer jobs. This year, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 percent, the highest since late 1992.
The economy is the top concern of voters and will figure prominently in their choices for president and other elected officials come November. The faltering labor market is a source of anxiety not only for those looking for work but also for those worried about keeping their jobs during uncertain times.
Job losses in July were the heaviest in industries hard hit by the housing, credit and financial debacles. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Temporary help firms — also viewed as a barometer of demand for future hiring — eliminated 29,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.
In May and June combined, the economy lost 98,000 jobs, according to revised figures. That wasn't as bad as the 124,000 reductions previously reported.
GM, Chrysler LLC, Wachovia Corp., Cox Enterprises Inc. and Pfizer are among the companies that have announced job cuts in July.
GM Friday reported the third-worst quarterly loss in its history in the second quarter as North American vehicle sales plummeted and the company faced expenses due to labor unrest and its massive restructuring plan.
On July 15, GM announced a plan to raise $15 billion for its restructuring by laying off thousands of hourly and salaried workers, speeding the closure of truck and SUV plants, suspending its dividend and raising cash through borrowing and the sale of assets.
GM also said it would reduce production by another 300,000 vehicles, and that could prompt another wave of blue-collar early retirement and buyout offers.
Meanwhile. Bennigan's restaurants owned by privately held Metromedia Restaurant Group, are closing, driving more people to unemployment lines.
All told, there were 8.8 million unemployed people in July, up from 7.1 million last year. The jobless rate last July stood at 4.7 percent.
More job cuts are expected in coming months. There's growing concern that many people will pull back on their spending later this year when the bracing effect of the tax rebates fades, dealing a dangerous blow to the fragile economy. These worries are fanning recession fears.
Still, workers saw wage gains in July.
Average hourly earnings rose to $18.06 in July, a 0.3 percent increase from the previous month. That matched economists' expectations. Over the past year, wages have grown 3.4 percent. Paychecks aren't stretching as far because of high food and energy prices.
Other reports out Friday showed stresses as companies cope with a sluggish economy.
Spending on construction projects around the country dropped 0.4 percent in June as cutbacks in home building eclipsed gains in commercial construction, the Commerce Department reported.
And, manufacturers' business was flat in July. The Institute for Supply Management's reading of activity from the country's producers of cars, airplanes, appliances and other manufactured goods hit 50, down from 50.2 in June. A reading above 50 signals growth.
The news forced Wall Street to reassess its initial positive reaction to the jobs data. The Dow, which opened higher, slid about 80 points by midmorning.
The Federal Reserve is expected to hold rates steady next week as it tries to grapple with dueling concerns — weak economic activity and inflation.
In June, the Fed halted a nearly yearlong rate-cutting campaign to shore up the economy because lower rates would aggravate inflation. On the other hand, boosting rates too soon to fend off inflation could hurt the economy.
GM's Decision to Cut Pensions Accelerates Broad Corporate Shift
By David Wessel, Ellen E. Schultz, and Laurie McGinley,
the Wall Street Journal
February 8, 2006
General Motors Corp.'s move to dilute salaried workers' pensions and make them shoulder more medical bills in retirement is a milestone in the erosion of a deal big American companies struck in the prosperous years following World War II: They promised to provide loyal employees with a comfortable retirement free of worry about running out of savings due to old age or ill health.
"Our employer-based social-welfare system is collapsing," says Alicia Munnell, director of Boston College's Center for Retirement Research. "GM itself is not a big deal. It's GM on top of Verizon and IBM" -- which both recently froze some of their pension plans -- "and then there's everything that's happening in weak companies like airlines."
GM, which previously had stopped offering retiree health coverage to salaried workers hired after Jan. 1, 1993, said it would cap health-care spending for all other salaried retirees and their families at 2006 levels, forcing them to shoulder all future increases in health costs. The company said the move will save it $900 million a year, before taxes. It follows an agreement last year with the United Auto Workers to pare union workers' health benefits.
Although it offered few details, the auto maker also said it would "substantially alter pension benefits" for salaried workers to "reduce the financial risks to GM." It said the moves would include freezing benefits in its defined-benefit pension plan -- a type of plan that promises a monthly check based on years of service and wages -- and introducing one in which more of the financial risks are borne by workers. The company is likely to press the UAW to move its pension plans in the same direction, predicted Fitch Ratings, a credit-rating provider.
GM is hardly alone, and the trend isn't limited to financially weak companies. This week, the North American arm of Japanese auto maker Nissan Motor Co., which currently has only 500 retirees but expects to have 3,500 within a decade, said it would limit its share of retiree health costs to $2,500 a year, plus a 3% annual allowance for inflation.
International Business Machines Corp. last month told 117,000 workers in U.S. defined-benefit pension plans that they will stop earning additional benefits after 2007, saving the Armonk, N.Y., company more than $2.5 billion over five years. And in December, Verizon Communications Inc., New York, announced it was freezing the pensions of 50,500 managers, saving $3 billion in the coming decade. Workers at both companies still will get pensions at retirement but won't accrue benefits with additional years on the job. Circuit City Stores Inc. and Sears Holdings Corp. have done the same.
A larger number of companies are closing pension plans to new hires or to younger workers, including Motorola Inc., Lockheed Martin Corp., Hewlett-Packard Co., Aon Corp. and NCR Corp. Many have, at the same time, expanded defined-contribution retirement plans, such as 401(k) plans. In such plans, employees themselves contribute to retirement investment pools -- often supplemented by employer contributions -- and elect how to invest these savings. Employees, not employers, bear the risk of inflation, sour markets or outliving their savings. Total assets in private-sector defined-contribution plans first exceeded those of defined-benefit plans in 1997.
Then there are other companies that have turned to bankruptcy court in industries such as steel, auto parts, airlines and others. Many of them essentially have walked away from their retirement plans, turning over obligations to pay pensions -- often less than promised -- to the government's Pension Benefit Guaranty Corp., which has warned that its resources are billions of dollars short of its future obligations.
The changes are particularly wrenching for midcareer workers, who don't have enough time left in their working lives to save for retirements that now look very different than the ones many had imagined.
Overall, the portion of the U.S. work force without any job-based retirement plan is growing. At last tally, 42.4% of private-sector workers age 21 or older lacked any retirement plan at work, up from 38.5% in 1999, according to the Employee Benefit Research Institute, a Washington think tank.
About two-thirds of companies in the Standard & Poor's 500-stock index and 55% of companies employing more than 5,000 people still offer retiree health benefits. Smaller companies are much less likely to do so. Among all companies with more than 200 employees, about one-third offer retiree health benefits, according to surveys from the Kaiser Family Foundation and others. That is down from 40% in 1999 and 66% in 1988, a change exacerbated by a 1990 Financial Accounting Standards Board rule that forced companies to record the cost of unfunded retiree health liabilities on their books. Of the 300 largest companies surveyed by Kaiser, almost two-thirds have put caps on contributions to retiree health plans.
Powerful Forces
All these actions spell the end of retirement as generations have known it. Behind them is a confluence of powerful forces. When they were very profitable, companies with stable, often unionized, work forces promised pensions. When markets turned, it became clear that some hadn't set aside enough money to fulfill those promises. With profits squeezed by competition from home and abroad, or by changing technology, even companies with well-funded pension plans now are looking for ways to cut costs. Cutting benefits is often slightly more palatable than cutting wages. "It's driven by economics, not ideology," Ms. Munnell says. "GM needs the money.
Employers want to get out of the business of providing fringe benefits."
Promises to cover retiree health costs not covered by Medicare were made when health care was much less expensive and less effective at prolonging the lifespans of older people.
"Most of the companies we compete with...have a different benefits structure. A significantly greater portion of their retirement [cost] is funded by a national system," GM Chairman Rick Wagoner said at a news conference yesterday. GM's pension and health-care safety net was designed "in the '50s," he said, when GM dominated the U.S. and world auto industries. "We're now subject to global competition," Mr. Wagoner said. "We're running against people who do not have these costs, because they are funded by the government."
There is some truth in that. Employer pension plans are far less significant in continental Europe, and health-care costs are lower in nearly every other country. "The most often-cited example: some of the car makers have shifted to Canada -- just a few miles away from Detroit -- because they benefit from the lower health-care costs that Canada provides," says DalmerHoskins, former general secretary of the International Social Security Association and now managing director for policy at AARP, the senior citizens' lobby in Washington.
Health-care systems in some countries, such as the United Kingdom and Canada, are financed through general tax revenue. In Germany and several other European countries, all employers and employees pay for health care through a payroll tax. The per-person health-care tab is smaller, and the systems provide universal coverage. "Retirees aren't singled out as a separate category," Mr. Hoskins says. "They are part of the pool of workers. That provides certain advantages, because you can spread the cost between the active and inactive, and the sick and the healthy. You are spreading the risk so it doesn't fall so heavily on any one employer."
Significant Shift
The cost-cutting pressures at big companies come as, in many spheres of economic life, Americans are embracing or are being forced to embrace what President Bush calls, approvingly, an "ownership society." The basic notion is that the economy functions best when individuals assume more financial responsibility -- and risks -- now shouldered by government or employers. In exchange, they get both real and intangible benefits: owning their own homes rather than renting; controlling their own retirement accounts instead of relying on sometimes-hollow employer promises; and shopping for the health-care or mutual-fund investments that they want, rather than those chosen by employers or government.
It is a significant shift away from a system in which risks -- of illness or other bad fortune -- were pooled and shared among the entire population. The American tradition of employer-provided health care dates largely to wage and price controls of World War II, which encouraged companies that couldn't offer raises to offer insurance instead. But that system left many Americans without health insurance. When these uninsured are unable to pay for care, the cost passes to the government and sometimes to the health-care providers who care for them, who recoup their losses by charging higher prices. Today, nearly one-third of Americans get their insurance from government programs such as Medicare and Medicaid. Even among those with jobs, nearly one in five doesn't get job-based health insurance.
Employer coverage is particularly important for early retirees not yet eligible for Medicare -- about 3.5 million in all, according to the Urban Institute and the Kaiser Foundation. According to a 2002 Medicare survey, about 14.7 million Medicare beneficiaries also had employer-sponsored coverage, including 2.1 million who were still working. Those people generally rely on Medicare for basic coverage, and employer-subsidized Medigap insurance to pick up some costs Medicare doesn't.
The Medicare prescription-drug benefit is an exception to this rule. To discourage companies from abandoning prescription-drug coverage, it offers subsidies to employers to continue to pick up the tab. A survey of 300 large employers by Hewitt Associates and Kaiser found that nearly 80% said they plan to continue to offer existing drug coverage for now, though a significant minority said it was likely they would drop coverage by the end of the decade.
Employer pensions in the U.S. began in the early 20th century with the railroads, and then spread to other big employers, according to economist Steven Sass. The plans became firmly established after World War II as part of a postwar effort to establish labor peace with unions.
Railroads were the first industry to renege on the promises. The government took over their pensions in 1934. Forty years later, Congress created the Pension Benefit Guaranty Corp. to insure defined-benefit pension plans, after a long campaign spurred by the 1963 closing of Studebaker-Packard Corp., which left 4,000 auto workers without pensions. The wrenching recession of the 1980s, coupled with the woes of the steel industry, exposed weaknesses in pension funding. That led to new laws to force companies to set aside more money.
The strong stock market of the 1990s pumped up the assets of corporate pension plans, easing concerns. But the bursting of the bubble shrank those portfolios.
Contentious Legislation
Congress currently is contemplating contentious legislation to force some companies, particularly financially weak ones, to put more money aside for defined-benefit pensions and to pay more to support the PBGC. The House and Senate are expected to reconcile competing versions of the legislation in the next couple of months. The auto industries' woes are likely to make key congressional negotiators, and the Bush administration, more open to arguments made by GM and the UAW. GM, for instance, objects to a provision that would require companies with junk-bond status to put more into pension plans.
In Detroit, William Smith, who retired as an engineering-center supervisor 13 years ago, said he understands that GM needs to save money. "I don't want to see them going into bankruptcy, so I'd rather pay a little bit more now and see them keep going," he says. Mr. Smith currently pays about $50 a month for a Medigap policy that supplements his Medicare, twice what he paid a year ago.
That will rise under the new GM policy. "The immediate impact might not be an awful lot, but if you keep going incrementally, it'll keep going up and up and up," Mr. Smith says. And while top GM officials are taking pay cuts, Mr. Smith says, they'll make up the difference should the company's fortunes improve. By contrast, Mr. Smith says, "whatever we lose is lost forever."
--Theo Francis contributed to this article.
Write to David Wessel at david.wessel@wsj.com, Ellen E. Schultz at ellen.schultz@wsj.com and Laurie McGinley at laurie.mcginley@wsj.co
| |
2008-07-07
Chevrolet Drives GM's Growth in China in 2008 Automaker Sells 590,126 Vehicles in First Half
Shanghai – The growing strength of the Chevrolet brand helped General Motors and its domestic joint ventures in
Sales of Chevrolet, one of GM’s two foundational brands in
Shanghai GM also continued to enjoy strong demand for its flagship Buick brand, with sales in the first half reaching 146,321 units. The Buick Excelle once again led the way in
SAIC-GM-Wuling sold 349,871 vehicles in the first half. Its Wuling brand remained the leader in the mini-commercial vehicle segment, with sales rising 17.9 percent on an annual basis to 329,842 units. The Wuling Sunshine minivan was the industry’s best-selling model in the first six months, with sales of 235,700 units.
“The Chinese vehicle market has continued to grow in 2008, setting a new first half sales record,” according to Kevin Wale, President and Managing Director of the GM China Group. “GM remained the market leader among global automakers. We benefited from the ongoing popularity of our existing lineup and the introduction of new and upgraded models such as the new Buick Excelle.”
General Motors Corp. (NYSE: GM), the world's largest automaker, has been the annual global industry sales leader for 77 years. Founded in 1908, GM today employs about 266,000 people around the world. With global headquarters in
# # #
CONTACT(S):
Contact: Sophia Luan
General Motors China
(21) 2898-7631
1390 183 4073
No comments:
Post a Comment