Cities Seeing Falling Unemployment

story first appeared in usatoday.com

Unemployment rates declined last month in more than half of the 372 largest U.S. cities, further evidence of steady improvement in the job market.

The Labor Department said Wednesday that rates fell in 201 metro areas. They rose in 116 and were unchanged in 55. And the number of cities with unemployment below 7% rose to 180 last month, up from 107 a year ago.

Child protective services defense lawyers have found that each 1 percent increase in unemployment was associated with at least a 0.50 per 1,000 increase in confirmed child maltreatment reports one year later. In addition, higher levels of unemployment appeared to raise the likelihood of child maltreatment, as it was not only the lagged change in unemployment, but also the previous year's unemployment level that influenced the number of child abuse cases.

Nationwide, the unemployment rate ticked up to 7.9% from 7.8% in September. That was mostly because more Americans began searching for work but not all found jobs.

Employers added 171,000 jobs in October and the previous two months were revised higher.

Unlike the national data, the metro unemployment rates are not adjusted for seasonal trends, such as the hiring of many part-time retail employees for the winter holidays. So they tend to be more volatile from month to month.

The number of areas with sharply higher unemployment is declining. Thirty-five metro areas had unemployment rates of 10% or above last month. That's the same as the previous month but down from 80 a year ago.

Bismarck, N.D. once again posted the lowest unemployment rate, at 2.2%. The city is benefiting from an oil and gas drilling boom.

Yuma, Ariz. and El Centro, Calif. recorded the highest unemployment rates, at 29.8% and 28.1%, respectively. Both cities include large numbers of migrant farm workers.

Kids Starting to Feel Pinch of Parents' Unemployment

The Wall Street Journal

Bank of Mom and Dad Shuts Amid White-Collar Struggle

FAIRFIELD, Conn.—When Maurice Johnson was laid off a year ago from his six-figure salary as a managing director at GE Capital, it wasn't his future he was worried about.

It was his children's.

The family income of the Johnsons is a fifth of what it used to be. And the children are about to feel the pain. Mr. Johnson's two oldest are attending his alma mater, Johns Hopkins University, at an annual cost of $50,000 apiece. And his youngest daughter, 15 years old, recently began her own college search. Mr. Johnson isn't sure whether he'll be able to help her to go to college, or even to get the older kids to graduation.

Mr. Johnson, who watched his own father struggle as an engineer without a college degree, was determined to do better for his own children.

"We saved like crazy from the minute they were born," he says. "Then, it all fell to pieces."

Many families such as the Johnsons—upper-middle-class professionals—are suddenly downwardly mobile. For years, they used rising family wealth to help foot the bill for college, down payments for houses and start-up cash for children's careers. But pay cuts, layoffs and the decadelong flatlining of the stock market mean many families can no longer help their children.

This comes as young adults could use a financial helping hand more than ever. The unemployment rate for workers ages 16 to 29 was 15.2% in March, the highest rate since 1948, according to the Bureau of Labor Statistics.

"It's almost a double whammy," says Ann Huff Stevens, an economics professor at the University of California at Davis. "If a parent goes through a job loss, they're going to contribute less. And there's a direct effect because kids themselves are earning less, too. A recession like this might have some lasting effects for parents and kids."

In general, highly trained and educated workers are faring better than those without degrees in this labor market. The unemployment rate for college graduates is 5%, compared with 9.7% overall. In general, the employment picture is improving, with employers adding 162,000 jobs in March, the biggest monthly gain in three years.

Even so, the average length of unemployment, 31 weeks, is at its highest level since 1948. There were a total of 2.3 million unemployed college graduates in March 2010, 1.45 million more than in March 2007, with heavy layoffs in white-collar sectors such as finance.

In the long run, the drop in parental aid could make young adults a more financially resilient generation, like children of the Great Depression. But for now, economists worry that without parental cash, young adults may put off entering the housing market, settling into career paths and having families.

"Now, not only do parents no longer have the money to help their children out, but banks will no longer lend to home buyers without the income to support repayment," says Cheryl Russell, a demographer and author of "Americans and Their Homes: Demographics of Homeownership."

The rate of home ownership among people ages 25 to 29 fell to 37.7% last year, from a peak of 42% in 2006, according to the U.S. Census. Home ownership for those under 25 fell to 23.3% from 26% in 2005, the lowest rate for any age group.

Indeed, the bank of Mom and Dad is closing at a time when young people are having trouble borrowing from traditional lenders. Some 22% of young people between the ages of 18 and 34 said they've been turned down for a mortgage, loan or credit card in the past year, according to a February survey from FindLaw.com, a legal marketing and information site. That's double the percentage of any other age group in its survey.

As a result, many young people are now moving home to save on rent. About 21% of young adults say they've either moved in with a friend or relative, or had a friend or relative move in with them because of the economy, according to a study from the Pew Research Center.

In past recessions, women would re-enter the work force to help prop up household income, says Katherine Newman, a Princeton University sociology professor. But now, more women are working and themselves experiencing layoffs. Before the 1990 recession, 57.4% of American women worked, and in the next two years, some 1.1 million more entered the work force. Today, it's the reverse. On the eve of the latest downturn in 2007, 59.3% were working and 2.6 million more women were unemployed. Women's overall participation rate in the work force has remained flat since then.

Many parents who were set to retire are now delaying it to compensate for battered retirement accounts, leaving even fewer openings for younger workers to fill. There are an additional 500,000 workers over the age of 65 in the work force now compared with 2007.

"We may have well given up on the idea that our kids will do better than us," Prof. Newman says. "But the idea that they should do as well, that's something we haven't given up on yet."

Before her December 2008 layoff from Bank of America Corp. as an executive recruiter, Diane Hayes bought a "dream house" for her family, which includes her three teenage daughters with disabilities, two with autism and one with Down syndrome. The 3,600-square-foot house in Orlando, Fla., had a pool in back that could be used for therapy and custom-designed rooms to accommodate five people into adulthood. "The pool was the only place we could all be together and enjoy ourselves," Mrs. Hayes says.

Her husband continues working as a writer, but without her six-figure income, the family was forced to sell the home in November. The Hayes had a $650,000 mortgage and sold the house for $375,000. Their lender forgave the difference as part of the sale, Mrs. Hayes said. But the family still has loans outstanding for $50,000.

They've since moved to a 1,200-square-foot, two-bedroom house nearby that they are renting for $1,200 a month. All three girls share one bedroom with bunk beds. The house is in the same neighborhood, so the family can use the same supermarkets and schools, hoping to ease the anxiety many autistic children face when adjusting to new environments.

The family had to cut the four different specialized summer camps that each child attended, at a cost of $1,600 for all three children per week. And they've been forced to eat into a nest egg designed to support the girls as adults.

 "With kids with disabilities, there's no cheap way out," Mrs. Hayes says. She adds: "Other people can send their kids to community college, have them get part-time jobs, and think 'maybe our son or daughter will support us'…We can't do that."

Last month, Mrs. Hayes found some temporary work as a recruiter. The income is lower than her Bank of America salary, there are no benefits and her brother has helped pitch in with day care. She says she's grateful for the opportunity, but knows it could be precarious. "We're not going to spend on anything," she says.

In other families, the gaps in financial support have become glaring between siblings. Ten years ago, when Patricia Bennett earned more than $100,000 a year selling risk-management software on Wall Street, she paid $30,000 cash for her now 28-year-old son's freshman year at Morehouse College in Atlanta with little hassle.

After being laid off in April 2009, Ms. Bennett now makes $9.75 an hour as a part-time cashier at Williams-Sonoma, in addition to doing volunteer hospice care. In January, she received a foreclosure notice on her home in Monroe, N.Y. Her youngest son is a sophomore at Lafayette College and will have to drop out next year unless he obtains more scholarships and loans.

Last year, Lafayette increased financial aid by 8.5% and cut its operating budget by 5% to keep pace with the increase in financial-aid requests and prevent students from leaving for financial reasons "There's concern about reality today and what's ahead," says Robert Massa, Lafayette's vice president of communications.

Ms. Bennett's husband, William, was unemployed as a salesman for two years before he started selling cars on commission in July of 2009.  Before they became eligible for health insurance with his new job, the family went without it for months at a time so that they could contribute around $1,000 for pocket money and bus tickets for their son to visit home.

The gap between their two sons' experiences is particularly frustrating for her. "It's a bitter pill to swallow," Ms. Bennett says.

Many parents are less able to help their children after graduation as well. Angelica Hoyos, a 26-year-old living in Los Angeles, has put her photography and sculpture career on hold since her parents pulled the financial plug earlier this year after the family's granite-countertop business suffered. Ms. Hoyos has moved in with her boyfriend, cut spending and earns about $1,000 a month doing free-lance design work and baby-sitting.

"My artistic career is put on the side because I have to make a living," she says.

For Mr. Johnson, the former GE Capital executive, not being able to see his children through college is particularly painful. Both he and his wife attended Johns Hopkins in Baltimore. When he decided to earn his masters in finance there decades ago, he says he had little doubt about it being "a good value proposition."

The Johnson children always had part-time jobs in high school. But in college, they struggled for months to find part-time and summer work over the past two years. Finally, one landed a seasonal job folding clothes at Old Navy. Last year, the Johnsons didn't qualify for work study because the household income was too high. Since resubmitting their aid application, they have qualified. Their son got a work-study gig at a university office.

Johns Hopkins last year added $2 million in financial aid just to accommodate the surge of additional aid requests for its 5,000 undergrads. Some 61% of higher-education institutions reported an increase of 10% or more in financial-aid applications than the previous year, according to a September 2009 survey from the National Association of Student Financial Aid Administrators. More than a million more federal financial-aid applications were filed during the beginning of 2009 than in the beginning of 2008, with a 16.3% increase among dependent students.

"We had folks who never needed aid before and now they have one, two parents unemployed," says Vincent Amoroso, the school's director of student financial services. "And these are folks who used to make $100,000 or $200,000 a year who are coming to see us."

Mr. Johnson made up to $550,000 a year, including bonuses, before losing his job in March 2009. The Johnsons had stashed $250,000 away for college.

If that money isn't tapped sooner for household expenses, it might buy two years of schooling for each of his children, Mr. Johnson calculates.  Further expenses such as first homes and weddings are out of the question. "They're going to have to elope," he says.

In the summer of 2007, the Johnsons paid $1.5 million for their Fairfield home and took out a mortgage of $852,000. Mr. Johnson figures it could realistically sell for $800,000 today. Given the numbers, the family is trying to avoid moving and recently refinanced their house at a lower interest rate.

"It's emasculating," Mr. Johnson says. "I'm supposed to be providing for them, but I can't."

The children haven't talked about transferring to less expensive colleges yet. "I'm going to take it all day by day," says Kristian Johnson, 20, the oldest of the Johnson siblings. Now a sophomore, he says he's prepared to take out loans to finish.

Margot Johnson, 18, says her father's career experience has affected her goal as an economics major. "I want to study economics," she says, "but not something in the corporate world."

Mr. Johnson concedes that Elsa Johnson, the youngest, is "getting the raw end of the deal." By the time the 15-year-old daughter starts looking at colleges, most of the savings set aside for school could be gone.

Already passionate about fashion and design, Elsa says she'll opt for the least-expensive design school she can get into and is looking into paying for school herself. Until then, she's cut back on shopping trips and food and coffee spending with friends. She no longer asks for weekly allowances. "My parents are already stressed out enough," she says.

Meanwhile, Mr. Johnson continues to look for work and crunch numbers of the new household-budget reality. 

"I know, I know—cry me a river and then build a bridge and get over it, right?" Mr. Johnson says. "Still, there was a set of expectations we established, consciously or not, and they are not being met any more."

Consumer Credit Suffers Biggest Monthly Decline On Record

Bloomberg

Consumer credit in the U.S. dropped a record $17.5 billion in November as unemployment close to a 26- year high discouraged borrowing and banks limited access to loans.

The slump in credit to $2.46 trillion was more than anticipated and followed a revised $4.2 billion drop in October, Federal Reserve figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease of $5 billion. The figures track credit card debt and non-revolving loans, such as those to buy autos.

A labor market that’s shed 7.2 million jobs since the recession started in December 2007 is restraining consumer spending that accounts for about 70 percent of the economy. Fed policy makers have said tighter bank lending standards and reductions in credit lines are hampering the recovery.

“Double-digit unemployment is eroding consumer confidence and the uncertainty is prompting consumers to pay down their credit card debts,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We have not seen such a wholesale reduction in consumer credit since the last time we had double-digit unemployment rate following the early ‘80s recessions.”

The series of 10 straight declines in consumer credit was the longest since record-keeping began in 1943.

Treasury two-year notes gained the most in three weeks after the Labor Department said today that companies reduced payrolls in December by 85,000 workers after adding 4,000 a month earlier. The unemployment rate held at 10 percent.

Stocks, Yields

Two-year Treasury yields dropped below 1 percent, to 0.97 percent at 4:52 p.m. in New York, from 1.02 percent late yesterday.

Consumer credit in October was revised from a previously reported $3.5 billion decline, and the forecast for November was based on the median of 32 estimates in a Bloomberg News survey. Projections ranged from decreases of $2 billion to $10 billion. Credit dropped at an 8.5 percent annual rate in November.

Revolving debt, such as credit cards, plunged by a record $13.7 billion in November, the Fed’s statistics showed. Non- revolving debt, including loans for autos and mobile homes, declined by $3.8 billion. The Fed’s report doesn’t cover borrowing secured by real estate.

Auto sales in the U.S. climbed in November to a seasonally adjusted annual rate of 10.92 million, up from 10.45 million in October. The pace increased to 11.23 million in December, the strongest since 14.09 million in August, when Americans took advantage of government incentives.

Consumer Spending

Consumer spending increased in November for the sixth time in seven months as Americans took advantage of discounts during the holidays, Commerce Department figures showed Dec. 23. Faster growth in sales and improvement in households’ balance sheets depends on job creation.

“U.S. consumer credit quality remains under considerable stress due to persistently weak labor market conditions,” said Michael Dean, managing director at Fitch Ratings. A report from Fitch on Jan. 5 showed delinquent balances on credit cards at a record level.

At American Express Co., defaults and delinquencies fell to 2009 lows. AmEx was the only one of the “Big 6” credit-card issuers to post November declines in write-offs and delinquencies, the New York-based lender said in a Dec. 15 regulatory filing.

Bank of America Corp. Chief Executive Officer Brian T. Moynihan has said the largest U.S. lender needs to reduce the loss rate on credit cards, which ranked highest among the nation’s six biggest card companies in November. Bank of America’s card defaults are “still very high,” Moynihan, 50, said.

‘Significant Bubble’

“As an industry, we over-lent and customers over-borrowed, and that led to a fairly significant bubble,” Moynihan said Jan. 4 in an interview on Bloomberg Television in Raleigh, North Carolina. “We have to help lead the economic recovery. At the same time, we have to be responsible lenders.”

Banks have responded by tightening credit standards, for consumers and companies. Fed Governor Elizabeth Duke said in a Jan. 4 speech that total loans on banks’ books fell at an annual rate of more than 11 percent in the third quarter. While banks are reducing lines of credit and tightening lending standards, small businesses are also losing their business relationships with banks as firms fail, merge or reduce their loan portfolios, Duke said.

Broken Relationships

“When existing lending relationships are broken, time may be required for other banks to establish and build such relationships, allowing lending to resume,” Duke said.

Britt Beemer, chairman of consumer polling firm America’s Research Group, said in a Dec. 21 interview that if lenders weren’t cutting customer spending limits and rejecting more credit-card applications, holiday sales would have been stronger.

December same-store sales climbed 3 percent, the biggest gain since April 2008, Retail Metrics Inc. said yesterday in an e-mailed statement.

Silicon Valley's Jobless Unplug From Tech

Published in The Wallstreet Journal

SUNNYVALE, Calif. -- Jobless workers in Silicon Valley are giving up on the region's dominant technology industry and trying to switch to other fields, as the area's unemployment rate spikes above the national and state average.

Job centers and community colleges across the region are reporting a surge in enrollment of out-of-work techies, with many looking to move into other industries, such as business voip service, organic baby clothing and mechanical engineers on Alaska Cruises. While data on the shift are scarce, the trend is evident at ProMatch, a government-funded organization in Sunnyvale, Calif., that helps unemployed professionals network, retrain and land new jobs.

Since the start of the year, ProMatch has seen its ranks swell from 180 attendees to its maximum capacity of 225. Of those, about 80% are from the tech industry, and a third are seeking to transition to nontech jobs. An additional 450 people have signed up for the waiting list to use ProMatch's services since January.

Many of the jobless techies are going back to school to pursue a bachelor degree nursing or they're targeting new gigs in the clean-energy or health-care industries. Some techies have gone as far as relocating to other states to pursue jobs such as health insurance Michigan. Some are shifting even further afield, looking for jobs at a keynote speaker bureau or as a alternative student loans agent. People are leaving tech as more tech companies are offshoring and some are shrinking, plus people are burned out and tired from having been there and done that.

The activity at ProMatch illustrates how even workers in stronger pockets of the economy -- such as tech -- are having to adjust in the recession. For much of last year, unemployment in Silicon Valley remained under control as the tech industry initially held up in the downturn. But by late last year, tech spending had weakened, and companies such as eBay Inc. were announcing layoffs.

As a result, Silicon Valley's unemployment rate -- which was below California's average and largely tracked the national average last year -- has soared, surpassing the state average in May. By June, the area's unadjusted unemployment rate was 11.8%, worse than California's 11.6% and the national rate of 9.7%, according to the latest figures from California's Employment Development Department. The rate of job losses was particularly steep in sectors such as semiconductor manufacturing, where employment dropped more than 13% in June from a year earlier.

Only a few segments of Silicon Valley's economy are now showing growth. Employment in the local health-care sector rose 4.2% in June from a year ago, according to the EDD. The clean-technology industry -- which covers energy efficiency and alternative energy, such as solar and wind power -- is also still attracting investment, pulling in $1.2 billion in venture-capital funding in the second quarter, up 12% from the first quarter.

For other Silicon Valley jobless workers, remaining in tech is often the first choice. Most unemployed techies want to stick with what they know. But with tech hiring so slow, some have little choice but to broaden their horizons.

Labor Relations - French Style
Or, Viva La Revolucion!
Story Originally Posted to the Wall Street Journal

PARIS -- Of the 22,000 workers Caterpillar Inc. plans to lay off this year, the French ones have perhaps the most radical tactic for negotiating their severance deals.

In an aggressive, and peculiarly French, negotiating strategy, they held their managers hostage. The workers detained the director of their plant and four other managers for about 24 hours this week. Workers released them only after the company agreed to resume talks with unions and a government mediator on how to improve compensation for workers who are being laid off.

Protest is "inscribed in the genes of French culture," said Maurice Lévy, chairman and CEO of advertising company Publicis Groupe. "In the past peasants protested against their lords. Today the difference is that the lords are chief executives."

Caterpillar declined repeated requests to comment.

The Caterpillar executive-hostage taking is the third in two weeks in France. The incidents, which were all peacefully resolved, revived fears that the economic downturn may fuel violent forms of protest in France by workers who feel they have nothing to lose.

German tire maker Continental AG, which is planning to close a factory in eastern France, this week moved the site of a meeting with unions to a hotel 500 miles away to avoid a repeat of tense protests last month when executives were pelted with eggs. Continental confirmed the move grew out of security concerns, but said it wanted to "stay in dialogue with employees."

The detention of the Caterpillar boss followed incidents at the French plants of Sony Corp. and 3M Co., where managers were held captive by workers angry at being laid off. In those cases, as with Caterpillar, unions and companies resumed talks on severance pay. Sony France's chief executive didn't return calls and emails, and 3M France declined to comment.

Jérôme Pélisse, a sociologist, surveyed 3,000 companies in 2004 and found that 18 of them had experienced an executive detention in the prior three years. "Kidnapping your boss is not legal," says Mr. Pélisse. "But it's a way workers have found to make their voices heard."

French Caterpillar executive Nicolas Polutnik, center,
with workers after his release Wednesday.

Taking the boss hostage is a way to stop the clock and reach out to those who made the decision to cut jobs -- especially when the decision comes from the remote headquarters of a foreign company, Mr. Pélisse said.

In the U.S. and most other countries, abducting a boss wouldn't be tolerated. In France, however, people have sympathy for those who take to the barricades -- as long as no one gets hurt. In the wake of the May 1968 cultural revolution, taking one's boss hostage became a popular form of protest.

One of the longest boss kidnappings in recent years took place at the Paris headquarters of bank Crédit Foncier de France in 1997. Even though he was detained for five days, Chairman Jérôme Meyssonier said there was "perfect respect" between him and employees.

With the recent public outcry over bonuses and stock options, executives are even more unpopular than usual in France. This week the government banned companies that get state funding from issuing stock options to top managers and limited some other forms of compensation.

"In the U.S., people accept getting fired on the spot, without complaining," says Michel Laboisseret, a CGT union delegate who took part in the Caterpillar protest. "We are more willing to pick a fight."

Even President Nicolas Sarkozy -- known for his pro-business views and policies -- said he supported the Caterpillar workers. "I will meet with the unions because they asked for my help, and I won't let them down," he said on the radio Wednesday.

Executive hostage-takings are deemed acceptable as long as some informal rules are obeyed. The workers must refrain from outright violence, and the executive must not be detained for more than a couple of days. Workers don't usually face criminal charges.

"Boss-napping falls into a particular category," says French police spokesman Laurent Bischoff. "Technically, it amounts to kidnapping, but it's not regarded as an offense." Police rarely intervene. "Our role is to stay within distance and let negotiations between unions and executives roll out quietly," Mr. Bischoff said. "Sending in troops would only help fan the flames."

Security firms and public-relations experts that help companies deal with these situations usually advise managers not to call the police. "That's the last thing they should do" said Yves Jambu-Merlin, who specializes in crisis communication at advertising firm Euro RSCG SA, because it could touch off violence or cause workers to trash the plant, he explains.

Mr. Jambu-Merlin advised one of the companies where the boss recently was taken hostage but declined to say which one.

Riot police did turn up in Paris on Tuesday when angry employees of luxury-goods company PPR SA besieged a taxi carrying CEO François-Henri Pinault. Police dispersed the workers, but Mr. Bischoff says that was "because they blocked traffic."

Caterpillar in January said it would shed 733 jobs out of 2,800 employees at its two factories in Grenoble in the French Alps. Legally, it must negotiate a "social plan" with the unions, which could include lump-sum payments, training or help finding new jobs.

After talks with unions, Caterpillar increased its package to €47 million ($62 million) from €37 million. But workers felt it still wasn't enough. On Monday they went on strike, and on Tuesday they began holding the executives. "We let them call their families," says Mr. Laboisseret, the union delegate. "We are not beasts."

Nicolas Polutnik, the plant director who was held hostage, didn't return calls seeking comment, but his wife confirmed she got a call from him while he was detained aimed at comforting her and his boys.

Albert Dupuy, the highest government official in Grenoble, said he spent Tuesday juggling phone calls from the Caterpillar union representatives and managers, including those at its European headquarters in Geneva. On Tuesday night, he persuaded the workers to release the human-resources director, who suffers from a heart condition. The other managers spent the night in the offices, sleeping on the floor, according to workers present.

Early Wednesday morning, Mr. Dupuy said both sides agreed to a 10-day schedule of negotiations on severance packages, and Caterpillar also agreed to pay the workers' wages for the three days they had been on strike. Midmorning, the workers let their bosses go.

French Bosses Besieged As Worker Anger Rises
As Originally Posted to The Wall Street Journal

PARIS -- French workers besieged bosses, including luxury and retail tycoon François-Henri Pinault, as anger at proposed layoffs generated more forceful protests.

Mr. Pinault, the son of François Pinault, is chief executive officer of PPR SA, which controls exclusive brands such as Gucci and Yves Saint Laurent. Employees surrounded his car as he left a meeting in Paris early Tuesday evening and refused to let him leave for nearly an hour. Eventually riot police dispersed the protesters.

Separately, workers facing layoffs at a Caterpillar Inc. factory in the French Alps detained four of their bosses Tuesday in a bid to secure better severance packages.

The incidents followed several others in France in recent weeks, and show how social unrest is mounting as the economic downturn deepens.

In France, companies can't lay off workers as easily as in the U.S. When a firm wants to cut workers, it must negotiate what is known as a "social plan" with local unions, often including a lump-sum payment, trainingand help in finding new jobs.

Trying to negotiate better severance packages, workers at a 3M Co. factory south of Paris held their boss captive last week, as did employees at Sony Corp.'s France unit earlier in March. Top managers at bank Société Générale SA awarded themselves stock-option packages two weeks ago, but then renounced them due to public anger.

And unions staged nationwide protests in January and March to demand concessions from high-earning business leaders and help for victims of the recession.

France isn't suffering more than other big economies. But the country's tradition of egalitarianism triggers strong reactions when people think they are being mistreated, or when better-off people appear to flaunt their wealth at a time of general hardship. Demonstrations have been peaceful, with the executives being held largely as a symbolic protest. There haven't been any flare-ups in the rough neighborhoods on the outskirts of major French cities, which exploded in riots in 2005 after an accidental police shooting of two young people.

Mr. Pinault, 46, has long been a symbol of France's monied elite. He attended one of France's top business schools and in 2005 inherited control of his father's fashion and retail empire.

The employees who surrounded him Tuesday work for two retailers in the PPR group: Fnac, which sells books and music, and Conforama, which sells furniture. Mr. Pinault announced a restructuring plan for these in February that could lead to 1,200 job losses in France. Protesters blocked a car Mr. Pinault was riding in as it was trying to leave the company's head office, said Boucherit Aziz, a Conforama union representative.

"Mr. Pinault squeezed all the cash he could from Conforama and now he wants to throw us away," said Mr. Aziz, who participated in the protest.

Through the window of his car, Mr. Pinault told workers that the company was doing its best to avoid abrupt layoffs, according to Mr. Aziz. Police didn't arrest any of the protesters, he said.

Mr. Pinault wasn't immediately available to comment.

The problems at Caterpillar followed a recently announced plan to lay off about 730 people from its factory near Grenoble, which employs about 2,700. The company had been negotiating with the unions for several weeks, but workers went on strike on Monday to protest what they saw as poor terms.

On Tuesday employees occupied the management offices and wouldn't allow four executives to leave, according to union representative Bernard Patrick. It wasn't clear when the executives would be allowed to leave.

Caterpillar said it hoped to resolve the matter quickly. "The actions that are taking place today, led by a small minority of individuals, are not helping as we work for a positive resolution of this situation," said Chris Schena, vice president for European and Asian manufacturing, in a statement. "The best way to resolve this matter is to continue the negotiations."

Banks to Post a Rare Quarterly Loss

As posted by: Wall Street Journal

Banks and savings institutions in the U.S. appear headed for their first overall quarterly loss since 1990, as troubled loans pile up faster than the federal government's unprecedented efforts to aid the battered industry.

Since posting combined profit of $1.7 billion in the third quarter, already a 94% plunge from a year earlier, life has gotten even worse for the roughly 8,300 financial institutions with deposits backed by the Federal Deposit Insurance Corp. Rising unemployment is causing more agony from old problems such as shaky mortgages and credit cards, and losses now are spreading to commercial real-estate loans.

"The earnings power for this industry has absolutely collapsed," says Eric Hovde, chief executive of Hovde Capital Advisors LLC, a money-management firm in Washington that specializes in financial services.

Nearly a quarter of U.S. financial institutions reported a net loss for the quarter ended Sept. 30. The percentage is likely to climb when fourth-quarter results are announced in January, with some analysts predicting that even stalwarts like J.P. Morgan Chase & Co. could tumble into the red.

Earnings estimates for the New York company, ranked No. 1 in stock-market value among U.S. banks, range from a loss of 20 cents a share to profit of 71 cents a share, according to Thomson Reuters. Hitting the average analyst estimate of 11 cents a share in net income would translate into about $410 million, down 86% from the $2.97 billion profit the firm churned out in last year's fourth quarter.

A J.P. Morgan spokesman declined to comment.

The glum fourth quarter is an ominous sign for 2009. The U.S. government so far has poured $169 billion into more than 130 financial institutions through its Troubled Asset Relief Program, according to Keefe, Bruyette & Woods Inc. But some banks already are looking for more money or hoarding their existing capital in expectation of another awful year.

Fifth Third Bancorp, which got $3.45 billion from the federal government, two weeks ago slashed its quarterly dividend to a penny a share from 15 cents a share. In June, the Cincinnati regional bank cut its dividend for the first time in three decades.

Kevin Kabat, Fifth Third's chairman, president and CEO, cited the recession and job losses as contributors to the industry's "very difficult environment," adding that "we do not expect improvement in the near term."

Horizon Financial Corp., a Bellingham, Wash., bank with fewer than two dozen branches, last week suspended its dividend entirely "due to the current uncertainty in our markets." Horizon also announced plans to close one of its branches.

In the past few weeks, some analysts have cut 2009 earnings forecasts and stock-price targets for a slew of big and small banks. These analysts expect rising unemployment to trigger deeper losses on credit cards, mortgages and home-equity loans as more consumers fall behind on their bills. Combined with newer problems rippling through commercial real-estate and other types of loans, many banks will need to bolster loan-loss provisions, eroding profits further.

"We believe that deteriorating economic conditions will cause asset quality to get worse in 2009, revealing the inadequacy of loan-loss reserves and impairing profitability," Jonathan Glionna, an analyst at Barclays Capital, said in a report earlier this month. Nonperforming assets among the 27 financial institutions he covers will rise to $125 billion in the fourth quarter from $43 billion a year earlier, he estimates.

By the end of next year, the figure could top $200 billion, he said. Financial institutions consider loans to be nonperforming assets when the borrower is behind on payments and it appears that default is likely.

The U.S. banking industry last reported a combined net loss in the fourth quarter of 1990, according to the FDIC. The $2.3 billion net loss came near the end of the savings-and-loan crisis, which included failures of more than 1,000 U.S. banks and cost taxpayers about $130 billion.

So far this year, 25 banks have failed, but regulators are worried that at least another 200 banks may be at risk of collapsing. The potential fourth-quarter loss is a far cry from the record $38 billion in profits posted by the U.S. banking industry during the third quarter of 2006.

As conditions worsen, struggling banks are expected to turn to private-equity firms and other outside investors for capital. Even some of those getting a government infusion may need more capital, analysts warn. Interest in shoring up financial institutions is rebounding as regulators warm up to granting bank charters to nonbank investors.

Mr. Hovde, the money manager, says he has been approached recently by some banks and is considering taking stakes in some institutions. Such infusions typically dilute existing shareholders.

"The common shareholder is still at risk," says Brian Klock, an analyst at Keefe, Bruyette & Woods in San Francisco. The firm, which specializes in financial services, expects per-share earnings at large U.S. banks to fall 6.8% in 2009 from this year.

The best-case scenario is that banks will bottom out in the middle of 2009 if the economy starts to rebound. Far more likely as the U.S. recession spreads around the world, analysts and bank executives predict, is additional pain for bank profits and investors.