Finance news. My opinion.

Japan must avoid delaying an overhaul of the tax system to prevent government borrowing costs from spiraling in the next decade, the new chief of the country

Alean Elston just cannot find a job.

The 26-year-old from New Jersey has tried nearly everything. She has mailed resumes, asked friends and family for leads and dropped in on retail outlets in hopes of finding work.

Applying for job after job with no luck is nothing new for the 2009 business administration graduate. And as a consequence, she lives at home with her parents. Fact is, she cannot afford a place of her own.

Elston is far from alone.

Younger workers were disproportionately affected by the recession. As a group, they had a very tough time finding work, and many highly educated graduates were forced to take menial jobs or retreat to the safety of academia.

The lack of good jobs means that young people are stuck at home — a common occurrence during tough times. While not ideal, families face no easy alternatives.

"The fact is, most young people are not so fortunate that their parents can purchase them a condominium or house just for fun," said Anthony Sanders, a senior scholar at the Mercatus Center.

In econospeak, the process of a young person finding accommodations of their own is called "household formation" — and that stalled big-time during the recession.

The trend toward staying home for longer means the economy is denied dollars that, under different circumstances, young people would have been eager to spend.

There is no student loan ‘crisis’

Beyond rent or mortgage payments, new living arrangements often require investments in furniture, flatware, appliances, plants for the yard and insurance policies. Even new car sales can be affected.

And reduced household formation can contribute to a lack of demand in the housing market. That trend was especially troublesome during the last recession, as foreclosures spiked and already high inventory levels jumped off the charts.

"We ended up with far too many [housing] units and the bubble popped with a violence that shook the entire economy," Warren Buffett wrote in his 2011 letter to Berkshire Hathaway () shareholders.

The excess inventory meant a sharp reduction in homebuilding and jobs in the construction industry.

The number of new housing starts fell from a peak annual rate of more than 2 million in some months of 2006 to a recession low of only 478,000 starts in April 2009.

Even after the recession was declared officially over, companies weren’t hiring young people. Young people weren’t moving out and soaking up excess housing inventory. And new homes weren’t being built, acting as a significant albatross around the economy’s neck.

This negative feedback loop has proven quite difficult to break.

But now, Buffett and others believe the trend might be reversing.

"The devastating supply/demand equation is now reversed," Buffett wrote to Berkshire investors in February. "Every day we are creating more households than housing units."

"People may postpone hitching up during uncertain times, but eventually hormones take over," he said. "Living with the in-laws can quickly lose its allure."

The numbers back Buffett’s hypothesis. Household formations rebounded last year, and are now closer to historical averages. And new home starts picked up steam in the final months of 2011 — momentum that has carried over into this year.

Buffett’s musings on hormones aside, there is another explanation for the uptick in household formation: More jobs.

Over the past two years, the employment population ratio, which measures the proportion of population that works, has improved more rapidly for young people than other demographic groups.

That ratio has increased almost 2 percentage points for individuals aged 20 - 24, while older workers have seen their numbers improve by only half a point.

Add that to a string of solid monthly jobs reports, and things are looking up.

White House: Jobs recovery isn’t ’statistical fluke’

Sanders agrees with Buffett in principle, but cautions against popping the champagne just yet. "The job market is still so bad," Sanders said. "Especially for college and high school grads who are not in high demand areas."

"We are seeing more and more recruiters showing up to campuses," Sanders said. "But the recruiters are coming with very specific ideas of who they want to hire."

Greg Kaplan, an economist at the University of Pennsylvania, said that there is no guarantee that more young people will move out on their own as the economy and job market improve.

"It’s possible that we look like Italy now, where housing costs are just so high that people are going to live with their parents for a longer period of time," Kaplan said.

Elston, for one, can’t wait to move out — if only that job would arrive. She said she applies for at least two positions a day, and has been working odd jobs to help her parents pay the bills.

"It just feels like an endless cycle," she said. "It seems like I’m the perfect candidate for some of these jobs, so why not me? Why not?"  

Source

Spanish Prime Minister Mariano Rajoy will today face down the first general strike against his three-month old government as pressure from investors and European peers trumps demands from unions.

Auto workers at factories of Volkswagen AG (VOW3) and Renault SA followed the strike during the nightshift and 100 percent of miners also joined the walkout, union Comisiones Obreras said in a statement. Power demand was 22 percent below that of a typical day, grid operator Red Electrica Corp SA data showed.

The People

Federal Reserve Chairman Ben S. Bernanke said while he

The new debt-slashing budget plan pushed by House Republicans heated up as a presidential campaign issue Sunday as the proposal’s architect, Rep. Paul Ryan of Wisconsin, sparred with top Democrats over its political fallout and downplayed the possibility he could be tapped as a vice presidential candidate.

Senior White House adviser David Plouffe dismissed the GOP plan Sunday as “a lot of candy, not a lot of vegetables,” and charged that it would be “rubber-stamped” as law if leading Republican presidential hopeful Mitt Romney is elected.

“This is really the Romney-Ryan plan,” Plouffe said, adding that its mix of across-the-board tax cuts and stiff budget cuts “showers huge tax cuts on millionaires and billionaires paid for by senior and veterans.”

Ryan tried to tamp down speculation that he could be tapped for the No. 2 spot on the GOP ticket, although who will be the nominee is far from settled.

“I would have to consider it, but it’s not something I’m even thinking about right now because right _ I think our job in Congress is pretty important,” Ryan said. “And what we believe we owe the country is, if we don’t like the direction the president is taking us, which we don’t, we owe them a specific sharp contrast and a different path that they can select in November. And doing this in Congress is really important.”

The House GOP debt-reduction plan, unveiled last week with minimal Democratic congressional support, is quickly sharpening as a line of division for the fall campaign, pitting GOP and tea party pressure for a reined-in budget against White House and Democratic party alarms about a weakened Medicare system and tax relief for the wealthy.

“This is a sharp, clear difference with two different futures,” Ryan said. Despite growing signs that the U.S economy is struggling back to life, Ryan threw down a marker for the fall national election, saying that the GOP plan is the only alternative to a looming debt crisis versus Obama’s “path of debt and decline payday loan lenders.”

The GOP proposal _ endorsed by Romney last week during a meeting with GOP congressional leaders _ would slice $5.3 trillion from President Barack Obama’s budget over the coming decade through tax reforms and sweeping program cuts. The plan aims to shrink U.S. deficits by $3.1 trillion over the next decade, reducing tax burdens while cutting Medicaid payments and shifting oversight to states and sharply cutting other domestic programs.

House Budget Committee chairman Ryan, who authored a similar plan last year sunk by White House and Democratic congressional opposition, agreed that Romney backed his plan generally. But he said the former Massachusetts governor might not be in complete lockstep with his vision.

“I’m not expecting everyone to enact every little piece,” Ryan said, adding that he expects Romney will back the plan’s main planks.

Sen. Charles Schumer, D-N.Y., cautioned that his party would blunt the Ryan plan again as it did last year, also noting the election year “contrast with Democrats.” He said Senate Democrats would offer up a rival tax reform plan on tax day, April 15, calling for increased taxes on wealthy Americans along the lines of the “Buffett Rule” acclaimed by billionaire Nebraska investor Warren Buffett.

“Let’s be fair, you should pay more than your secretary,” Schumer said, echoing Buffett’s complaint that the current tax system allows the megarich to pay at lower tax rates than many of those who work for them.

Ryan and Plouffe spoke on “Fox News Sunday,” while Ryan and Schumer went on CBS’ “Face the Nation.”

Source

French business confidence increased for the second time in nine months, suggesting growth is recovering as European Central Bank liquidity calms the region

The International Monetary Fund wants measures attached to a potential loan to Egypt to have

Oil prices rose to near $107 a barrel Wednesday in Asia after a report showed U.S. crude supplies fell unexpectedly, a sign demand may be improving.

Benchmark oil for May delivery was up 52 cents to $106.59 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $2.49 to settle at $106.07 per barrel in New York on Tuesday after Saudi Arabia said it could pump more oil to cover any shortages.

Brent crude for May delivery was up 12 cents at $124.24 a barrel in London.

The American Petroleum Institute said late Tuesday that crude inventories fell 1.4 million barrels last week, breaking a two-month trend of growing supplies. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.1 million barrels.

Inventories of gasoline fell 1.4 million barrels last week while distillates rose 600,000 barrels, the API said.

The Energy Department’s Energy Information Administration reports its weekly supply data later Wednesday.

Saudi Arabia, the world’s largest crude producer, said Tuesday it can quickly boost output by 25 percent if there is a sudden disruption in global supplies instant payday loans. Crude has jumped from $75 in October as traders worry a military conflict over Iran’s nuclear program could cut that country’s crude exports.

The European Union and the U.S. have imposed sanctions that make it tougher for Iran to sell its oil. In response, Iran has threatened to block oil shipments in the Strait of Hormuz, through which a fifth of world’s oil supplies pass.

Kuwait said Tuesday it is increasing crude production and that Iran has assured its neighbors that it won’t block the vital waterway.

“The Saudis have been cranking up output, presumably in an attempt to dampen further price increases,” energy consultant and trader Ritterbusch and Associates said in a report. However, “increased output won’t necessarily reduce the Iranian risk premium.”

In other energy trading, heating oil was up 0.7 cent at $3.26 per gallon and gasoline futures gained 0.5 cent at $3.36 per gallon. Natural gas fell 0.3 cent at $2.33 per 1,000 cubic feet.

Source

The Federal Reserve has not yet decided whether to embark on a third round of quantitative easing, or QE3, though it remains an option, an influential Fed official said on Monday.

New York Fed President William Dudley, a close ally of Chairman Ben Bernanke, painted a mixed picture of the economy, tempering recent signs the recovery is gaining speed with warnings that it could just as easily stall out.

“Nothing has been decided,” he said of QE3, in which the Fed would make large-scale asset purchases in an attempt to lower rates and give the economy another controversial shot of adrenaline.

“It all depends on how the economy evolves,” Dudley added. “It’s about costs and benefits, and if we get to a point where we think the benefits of another program of QE outweighs the costs, then we’ll certainly do so.”

Dudley, like Bernanke in recent testimony to Congress, defended the central bank’s ultra-easy policy stance but seemed to temper any talk of exactly what more it was prepared to do to help along the recovery and ratchet down the unemployment rate, which remains high 8.3 percent.

After a meeting in Washington last week, the Fed’s policy-setting committee made no policy change and gave few clues how it interpreted some recent jobs growth, coupled as it has been with worries over GDP growth and oil price-driven inflation.

Dudley said U.S. economic activity is not yet strong or sustained enough to put a dent in the economy’s “slack,” which is keeping many Americans out of work some three years after the deep recession ended.

“The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be finally establishing a somewhat firmer footing,” Dudley said, citing expanding GDP late last year, payrolls, sales of motor vehicles, and somewhat firmer housing starts.

“While these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods,” Dudley, a policy dove with a permanent vote on the Fed’s policy-setting committee, told a gathering of the Long Island Association no fax payday loan.

GASOLINE AND OTHER HEADWINDS

The U.S. central bank has kept interest rates near zero since late 2008 and bought $2.3 trillion in long-term securities to help revive the economy after the 2007-2009 recession.

Upbeat data so far this year has tempted some, including some Fed policymakers, to say the recovery is well underway and that the Fed will take no further steps.

Yet Bernanke and others have said more bond purchases remain an option. Last year, Dudley was among the most vocal about the efficacy of buying mortgage-based securities to help revive that sector of the economy.

Dudley warned that higher gasoline prices are “definitely” a risk to the world’s largest economy, which is heavily dependent on consumption.

“The upward pressure on prices caused by rising gasoline are offset by downward pressure on prices caused by all the excess slack in the U.S. economy,” he said. “It’s very hard to have an inflation problem when compensation costs are rising quite slowly.”

The annual rate of core inflation, Dudley argued, “has peaked and we expect it to begin to decline later this year.” He added that inflation expectations “remain well anchored.”

Besides gas, other headwinds include impediments to the housing sector, fiscal drags at the federal and state levels, and risks that foreign growth is weaker than expected, Dudley said.

Asked about a Fed expectation to keep rates low through late 2014, Dudley said: “We view this as the best path to an early-as-possible economic recovery … and the earliest normalization in short term rates.”

Bernanke, who along with Dudley spear headed the Fed’s unprecedented and easy policy steps, is set to deliver a public lecture on Tuesday.

Read more

Former Gannett Co. CEO Craig Dubow’s received a severance package valued at about $32 million after chronic health problems prompted his resignation from the largest U.S. newspaper publisher.

The owner of USA Today and more than 80 other U.S. newspapers disclosed the details of Dubow’s compensation in a regulatory filing late Friday. A contract that Dubow signed in February 2007 guaranteed he would receive his full pension, stock awards, a severance payment and other benefits if he became disabled.

Dubow resigned last October after six years as CEO and 30 years with the company. He stepped down after taking two medical leaves during 2010 and 2011 to deal with hip and back ailments.

Dubow’s final compensation package includes $12.8 million in retirement benefits, $6.2 million in disability benefits and a $5.9 million severance payment, according to the filing. Gannett stock options and restricted stock, which Dubow had accrued during his years of employment with the company, were also part of the package. Those stock awards are valued at nearly $7 million.

Separately, Gannett will pay $25,000 to $50,000 annually for a $6.2 million life insurance policy covering Dubow and another $70,000 annually for benefits such as health insurance, home computer and secretarial assistance and financial counseling. He will receive most of these benefits for three years unless he goes to work for a competitor, according to the filing.

Dubow’s tenure as Gannett’s CEO coincided with deep cutbacks in staff, triggered by a sharp decline in print advertising, the main source of revenue in the company’s publishing division. Gannett’s revenue from print advertising plunged from $5.2 billion in 2005 to $2.5 billion last year no fax pay day loan. Gannett’s stock price plummeted by 86 percent while Dubow was CEO, dropping from $72.69 to $10.45.

The shares have rallied under Dubow’s successor, Gracia Martore, amid hope by investors that a recently introduced program to charge readers for online access to most of Gannett’s newspapers will boost profits. Gannett’s stock ended the week at $15.21, a 46 percent gain since Dubow’s resignation. The Standard & Poor’s 500 index is up nearly 21 percent during the same stretch.

Martore was Gannett’s chief operating officer before Dubow’s departure. Martore declined a raise when she became CEO last year, according to Gannett’s filing. Instead, she agreed to maintain her salary of $900,000, the same amount that she had been receiving as Gannett’s chief operating officer. Even before she was named CEO, Martore was working under a contract that entitled her to a $950,000 salary, but she voluntarily lowered it to $900,000 beginning in 2010 in recognition of the tough times facing Gannett.

Martore’s compensation, including a bonus and the estimated value of stock options, totaled $4.7 million last year.

Gannett is the second major newspaper publisher in a week to disclose a large severance payment to a former CEO. The New York Times Co. said its former CEO, Janet Robinson, got a package valued at about $23 million after she retired at the end of last year.

Dubow, who was 56 at the time he resigned from Gannett, is a member of The Associated Press’ board of directors. His term ends in April.

Source