July 9th, 2009
12:42 PM ET

Financial Dispatch: Fewer than expected file for unemployment

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/07/09/art.job.seekers.jpg caption="New claims for jobless benefits fell 52,000 last week."]
Andrew Torgan
CNN Financial News Producer

The number of Americans filing new claims for unemployment benefits last week fell to lowest level since early January, while continuing claims jumped to a record-high.

New claims for jobless benefits tumbled by 52,000 to 565,000 - well below analysts' expectations.

However, analysts said last week's drop was distorted by a change in the pattern of seasonal layoffs in the automotive industry. Initial claims typically spike in July as automakers idle certain manufacturing plants, and the Labor Department adjusts its data for such seasonal factors.

Meanwhile, the number of people continuing to receive unemployment insurance for one week or more unexpectedly jumped by 159,000 to 6.88 million, an indication that the labor market remains weak.

Govt. watchdog: Stimulus spending short-sighted

Fiscally-stressed states trying to survive one of the worst economic downturns since the Great Depression are using their stimulus dollars to satisfy immediate needs rather than undertake longer-term reforms, according to a government report released Wednesday.

For example, states are spending education funds to prevent layoffs and maintain programs, a Government Accountability Office report found.

State and school district officials say they don't have the money to undertake projects such as building new schools and expanding early-childhood education.

Similarly, states are using nearly half their infrastructure funds for pavement improvements, which can be implemented quickly and don't require environmental clearances and in-depth design work.

Wall Street wavers

Stocks on Wall Street opened higher, boosted by Alcoa's smaller-than-expected quarterly loss that the aluminum giant posted after Wednesday’s closing bell.

But the blue chips soon began to struggle on weakness in biotechs and financials.

Stocks fought off losses to end mostly higher Wednesday, but the trend has remained downward since mid-June as investors have stepped back after a 40% rally off the March 9 lows.

Nine firms to run ‘toxic asset’ program

The government on Wednesday tapped nine financial firms to manage a scaled-down program aimed at helping the nation's banks shed their “toxic assets” and said it would invest up to $30 billion to get it started.

Among those selected to serve as asset managers of the so-called “Public-Private Investment Program” were BlackRock, AllianceBernstein, Oaktree Capital Management, Invesco, Angelo, Gordon & Co., Marathon Asset Management, RLJ Western Asset Management, The TCW Group and Wellington Management Company.

The firms, selected from a pool of more than 100 applicants, will have 12 weeks to raise $500 million of capital each from private investors willing to invest in toxic securities held on banks' books. Those investments will be matched by the Treasury Department and supplemented with debt financing from the agency.

Consumers trim borrowing

Consumer debt fell in May for the fourth straight month, a government report said Wednesday.

The reduced borrowing comes as job losses and pay cuts have limited consumer spending power. At the same time, banks have tightened lending standards due to growing concerns about default risks in a battered economy.

Total consumer borrowing fell by a seasonally-adjusted $3.22 billion, or a 1.5% annual rate, to $2.52 trillion in May, according to the Federal Reserve. The report measures how much debt consumers have outstanding.

Gas prices down for 18th straight day

Gas prices dropped 1.3 cents overnight to $2.580 - the 18th straight day of declines.

In the last 18 days, the average price has decreased 11.3 cents, or 4.1 percent. The average price of a gallon of gas is also down $1.534, or 37.2 percent, from the record high price of $4.114 that AAA reported on July 17, 2008.

The highest gas prices are in Hawaii ($3.299). The cheapest are in Missouri ($2.349).

Can't pay your doctor? Charge it

Finally, as medical bills pile up, more Americans are paying their doctors with plastic.

CNNMoney.com has the story of what consumer advocates warn is a dangerous trend, but industry watchers see a multi-billion dollar opportunity for lenders to offer specialized “medical” credit cards.

Americans spend an estimated $294 billion on annual out-of-pocket medical costs annually, to cover everything from doctor's office co-payments to surgeries and prescription medications.

About 25% of that - around $74 billion - is already being charged to regular standard credit cards. And one consulting firm expects that $150 billion worth of health care expenses will go on credit cards by 2015.

Filed under: 360° Radar • Andrew Torgan • Finance • Gas Prices • Wall St.
soundoff (11 Responses)
  1. Annie Kate

    There may not be as many newly laid off employees this week but no one is getting a job either as a rule. Outsourcing for both blue and white collar jobs has been and continues to be a disaster. I can't think of any company that hasn't outsourced/offshored some part of their business. Since it would be almost impossible to boycott all of them we ought to demand that our congress people pass a tax on the companies for all the offshored work. My state taxes me each year on what I bought in other states since they didn't get any sales tax from it – if they can do that why can't we tax those companies who are trying to sell Americans goods made by outsourced hands. Pretty soon their domestic US market will dry up because we will all be on the unemployment line or on the dole.

    July 9, 2009 at 10:32 pm |
  2. Larry

    What was that saying; there are lies, big lies, really big lies, enormous lies, and then there is statistics.

    July 9, 2009 at 5:04 pm |
  3. earle,florida

    PS. I'm talking about Black Rock Financial! The shawdow business of the underworld,...where,and how they came from in such timeliness should give us all pulse to do some research.

    July 9, 2009 at 4:32 pm |
  4. earle,florida

    Excuse me, but this "Public-Private Investment Programs",is very similar to the "Government Stimulus Program",where we now see the states shoring up their own budgets,with very little, if any of the stimulus money, actually going to where it was designated. The arbitrarial $30bn to jump-start this debacle,is just a speck of dust that will eventually accumulate into the size of a basketball (let's say approx. $800bn/$900bn) ,and once again put the burden of payment,on "Joe Public, Citizen"! How can I make this statement? Simple,follow the money. I won't go any futher than ,Barclays Global Investor,(BGI) the largest (British) in the world "Exchange Traded Funds"(ETF) ,whom by the way in 2008 swollowed up a third of the now defunct Lehman Brothers! Now,guess who bought the other two-thirds? Bank of America(BAC),and Goldman Sachs(GS),all with the same proportion! Coincidence? These toxic assets are being sliced ,and diced by the same financial,and banking houses that got us (financial crises meltdown) here in the first place (the fox guarding the chicken coop)! They will cherry-pick,and they will push the CDS's,MBS's,CDO's,Tier #3,etc., which happen to be the most toxic onto the "Government Sponsered Enterprises"(GSE's) balnace sheets,which by the way is completely financed by the US. Government! Pathetic,and by the the way ,check out where Barclays Owners,and management first got their leap to fame? That's right they created/structured/implemented,and were the masterminds to the "Mortgage Back Securities"(MBS's), the adjustable rate mortgage,no-doc's, no money down,and I be remiss the"Balloon Mortgage"!

    July 9, 2009 at 4:26 pm |
  5. Joanne Pacicca

    To Julie, thank you for further elaboration of the point. I do think we should go back further, also to Clinton and NAFTA; and...we should point a finger at "the people"...we used to love our muscle cars..traded them in for gas guzzling SUV's and forgot apple pie and chevrolet.

    Truly, Julie, you are right, the outsourcing of jobs to India, Mexico and elsewhere in order avoid unionism, benefits and other social responsibility that historically was considered the corporate brand of patriotism and is now a component of the desperate times and stranded people that are rapidly becoming the majority of the sinking middle class America.

    July 9, 2009 at 3:44 pm |
  6. Lisa in CA

    Or some people who did find employment only to be laid don't really qualify for unemployment (as is my case) since they look at the previous quarter's earnings. No point in filing for $300/month. Also, a lot of companies have reduced hours and if one is even working part-time, they don't get unemployment. And for many, part-time earnings are still more than unemployment.

    Gotta love the banks. Because of previous unemployment, my credit is in the tank and a possible bankruptcy is looming closer than ever, yet I have received TWO pre-approved credit card offerings. Do these folks even bother to check the credit scores? Apparently, some old dogs just cannot be taught new tricks.

    July 9, 2009 at 3:05 pm |
  7. psn

    In most accounts you are an outstanding reporter, but I am always amused when you report about the continent of Africa. You would not say the president is going to South America if he visits Argentina or Brazil; but what you would say is "The president is visiting Argentina or Brazil" right? Now listen to this "The first African-American president visits Africa" How that Sound to you? I am sure this is not ignorance that you choose to treat Africa not as a Continent but Purposely as a nation; or what is it ? "Mr. Anderson". What you fail to understand is that a visit by the president to one African nation has nothing to do with the other nations. It's like that with journalist and the stars. I will take my answer off the air and or through my email.
    Thank you.

    July 9, 2009 at 1:59 pm |
  8. Julie

    The statistics on unemployment don't even begin to address the fact that a high percentage of the technical workforce (whose jobs are still being outsourced to India and Asia) have had to resort to "contract" work. What this means is that these people don't show up on the radar because when your contract ends and you can't find another, you don't qualify for unemployment benefits.

    There's millions of these people in the United States. For every 10 permanent technical employees (i.e. someone who is eligible for unemployment and health insurance), I would estimate that there are 3-4 contract employees. This is an unofficial guess on my part, but is consistent with what I've seen. These people pay their own health insurance (or go without) and they don't see an unemployment check if their job goes away.

    Joanne, you're correct about the fact that businesses are shirking what some feel is a duty to pay benefits. But if we're going to get to the root of the problem, we have to look further – the finger needs to be pointed at the Bush administration whose policies didn't enforce mandatory benefits for employees and condoned tax benefits for corporations who outsource. Outsourcing has destroyed our economy. Blue collar factory workers saw their jobs disappear as factories relocated overseas. White collar technical professionals have been forced to accept what amounts to temp work, with no benefits and no hope of career advancement. My background is technical and I'd advise high school grads to stay away from the tech fields. Become a nurse. The bozos can't outsource that occupation.

    July 9, 2009 at 1:39 pm |
  9. joanne mark

    4 years ago my son-in-law died from an accidental overdose of a pain medication. when will these doctors and pain clinics start to get punished for the abuse of pain meds just handed out like candy. most patients feel it is o.k. if the doctor recomends them. i guess the deaths of all the celebrity people has still not awakend the government to do something about this.

    July 9, 2009 at 1:16 pm |
  10. Joanne Pacicca

    Nothing as crazy as the statisticians and the knee-jerk reaction reflected by Wall Street and the unethical banking practices...what a sad state of affairs!

    Also, as an "insured person" , I'm not so keen on paying the bill though taxation of my benefits for those without insurance. The problem lies with temporary employment agencies and big business not offering benefits.

    July 9, 2009 at 12:47 pm |
  11. Larry

    It was a short week. Next week more people will be filing to make up for it.

    July 9, 2009 at 12:44 pm |