December 18th, 2008
10:44 AM ET

Financial Dispatch: Jobless claims ease

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/18/art.gaspump.jpg caption="Gas prices are up 0.3 cents to $1.670 a gallon, but the national average is still well below where it was this summer."]

Andrew Torgan
CNN Financial News Producer

The number of Americans filing new claims for unemployment benefits fell last week to 554,000. That’s a decline of 21,000 from the 26-year high of 575,000 claims the previous week. Another slight improvement was seen in the number of people who continue to receive jobless benefits, which declined to 4.38 million from 4.43 million the prior week. Claims climbed the most in Tennessee, up 12,170, due to layoffs in the manufacturing industry. Wisconsin saw jobless claims fall the most, by 8,593, due to fewer layoffs in the construction, manufacturing and service industries.

New rules to shield credit card holders from increases in interest rates on existing account balances are expected to be approved today by the Federal Reserve and other banking regulators. The changes - part of the most sweeping clampdown on the industry in decades - will allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances.

Chrysler is shutting down all vehicle production in the United States starting tomorrow for at least a month – a move that will affect some 46,000 workers. All 30 of the carmaker's plants will close after the last shift on Friday, and employees will not be asked to return to work before Jan. 19. Chrysler blamed the "continued lack of consumer credit for the American car buyer" for the slow-down in sales that forced the move. Chrysler is the last of the Big Three to suspend operations for January. Last week, General Motors said it was idling 30% of its North American manufacturing capacity during the first quarter of 2009. And Ford is adding a week to its normal two-week seasonal shutdown at a number of its plants.

FedEx - a company considered a barometer for the overall economy - says it’s instituting a hiring freeze and will cut salaries as part of a plan to reduce costs. Effective Jan. 1, FedEx CEO Frederick Smith will receive a 20% pay cut. Other senior execs will get 7.5%-10% cuts. And as a number of other companies have done in recent weeks, FedEx will also suspend company matching of 401(k) plan contributions.

Gas prices are up 0.3 cents to $1.670 a gallon. The current national average is now $2.444 below the record high price of $4.114 that AAA reported on July 17, 2008. Two states have regular unleaded gas prices of $2 and higher. 48 states and the District of Columbia have regular unleaded gas prices below $2. The highest gas prices are in Alaska ($2.629). The cheapest gas prices are in Utah ($1.495).

Oil prices are down nearly $2 to $38 a barrel. Crude dropped below $40 a barrel Wednesday for the first time in more than 4 years.

Stocks on Wall Street are off to a slow start today as investors weigh a better-than-expected report on the job market and the lowest oil prices since 2004 against the fate of the American auto industry.

Electric cars may be the future, but they need lithium-ion batteries to run - and the United States is far behind its Asian rivals when it comes to making them. Now, 14 U.S. technology companies are joining forces. They plan to ask the incoming Obama Administration for $1 billion in federal aid to build a battery manufacturing plant.

There’s no question the United States is playing catch-up here … more than four dozen advanced battery factories are being built in China, but not one in the U.S. Reversing course could have major long-term implications as many experts believe battery technology and the capacity to make them could eventually become as strategically important as oil is today. That’s today’s Energy Fix.

Filed under: Andrew Torgan • auto bailout • Bailout Turmoil • Economy • Finance • Oil
soundoff (4 Responses)
  1. John McNicol

    Hi Anderson,

    Greetings from the cold Canadian north.
    The current approach to bailing out the car industry is not dealing with the problem head on. What the industry needs is consumers buying cars not bridge loans to pay for overhead and idle plants.The $17 billion proposed by the U.S. and Canadian governments should be distributed as a 30% rebate for North American consumers who step up and buy a car in 2009.

    The rebate should be made available to all car companies who build cars in the U.S. and Canada (not just the big three), allocated between the companies based on total jobs or capacity ( ie they all get a fair share). To qualify for the program the companies must commit to acheiving cost reductions and green technology investments in line with standards proposed by the government.

    If the average price of a car is $30,000, the $9,000 rebate would enable nearly 19,000,000 cars to be purchased which would prevent massive layoffs. Otherwise the bridge loan will delay the gradual dismantling of the industry and don't forget 3.6 million jobs equals more than $60 billion a year of lost tax revenues.

    Your Canadian friend,

    Johnny Mac

    December 18, 2008 at 6:15 pm |
  2. Jodi

    I don't understand the auto bailout. We are in a recession, people are not buying cars thus production is going to have to slow down, people will get laid off and the company's will still lose money. So can someone explain the economics of the auto bail-out. I believe it is just prolonging the inevitable.
    During this bail-out legislative process, there should be no "piggy backing" on the bills trying to be passed. Why did we give a tax break to a toy wooden arrow making company? How does that help the American people?

    December 18, 2008 at 5:28 pm |
  3. Anne

    Glad to here the Fed are stepping in – but I'm affraid it's a little to late!
    I have been following the story on the massive increases by CC companies to cover their losses! It's great that the Fed are stepping in – but that only will apply to the future. These companies should not be allowed to do what they are doing period! By raising the interest rates to outrageously high amounts they are only contributing to the economic crisis! If the consumer can't pay there bills as a result they will default. Default mean $0 for the CC companies...
    I am afraid the new laws are coming a day late and a dollar short... what about those of us whose interest rates have already been raised! What about those of us who have already fallen to massive increases in our interest rates! WAMU is charging me 31.99% interest! Guess what – I am now default on an account that I have never been default on... B of A 24.74% Chase 19.99%.... and the list goes on!
    Just watch the banckruptcy numbers go up!!!!
    Why are we bailing out these banks... that's what I would like to know!!!

    December 18, 2008 at 2:23 pm |
  4. Annie Kate

    On the number of Americans who are still receiving unemployment – you say it dropped – did it drop because those people got jobs or because they exhausted their benefits? If its because they exhausted their benefits then our unemployment rate will be understated.

    I'm glad the Fed is putting out those new rules on credit cards. I can't count how many times I have had a credit card with a good rate and its interest rate goes up (and not for anything I have done either) on both new purchases and any balances carried forward. I wish they would also make places like Citibank not upgrade your card by just sending you a new one that they say is so much better without contacting you beforehand – on the phone – and explaining the card to you. I have gotten several like that and I always call and cancel them because the interest rate is either variable or high or it has a fee. The good features of the card turn out to be only good for the credit card company don't you know!

    December 18, 2008 at 11:34 am |