Story Originally Appeared in Bloomberg News
Stretched budgets and sluggish growth are putting emerging-market governments on a collision course with rising pressures from recently empowered middle classes for more spending and better services.
From Jakarta to Brasilia, policy makers face the end to an era of abundant global liquidity that helped fuel the fastest expansion in three decades. In the eight weeks through July 17, investors pulled $40.3 billion from emerging-market bond and equity funds amid signs the Federal Reserve may begin reducing stimulus later this year. In 2012, $111 billion poured into these asset classes, according to EPFR Global in Cambridge, Massachusetts, which tracks money flows.
The Fed’s plans didn’t trigger the slump -- after a decade of prosperity, the BRIC economies of Brazil, Russia, India and China (SHSZ300) have been slowing since 2010. Developing nations are punished more during downturns than their European counterparts because they depend on growth to mitigate social tensions, said Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development.
“The needs are much more elementary and brutal,” said Gurria, a former Mexican finance secretary, in a July 19 interview in Moscow. Families live with “vermin because they don’t have cement on the floor, and when there’s a big wind it blows off the roof. This isn’t the problem the middle class in the Netherlands face.”
Corruption Frustration
Nomura International Plc, citing the “surprise” outbreak recently of protests in Brazil and Turkey (XU100), said 11 other countries -- including China, India and Russia as well as commodity exporters Argentina and Venezuela -- face the risk of market-moving civil unrest in the short to medium term. Frustration with corruption by a middle class that swelled during the past decade is partly fueling the angst, according to its June 27 report.
“If you lift your people out of extreme poverty, it’s not like they’re going to say ‘Great, now we’re all set, we don’t want anything else,’” said Jim Yong Kim, president of the World Bank, in a June 30 interview in Lima, Peru. “This is not going to go away. This is the most natural thing in the world.”
Investors can ride out the volatility by betting on governments that resist populist pressures for more spending and instead shore up long-term financial stability, said Ruchir Sharma, who helps manage $25 billion in emerging-market stocks at Morgan Stanley Investment Management in New York. He says his group is underweight China, Brazil and Russia and overweight Mexico and the Philippines.
Tax Overhaul
Mexico is benefiting from a stronger U.S. economy, and first-year President Enrique Pena Nieto is trying to open up the state-run oil industry. The Philippines is forecast to grow 6.2 percent this year, according to a Bloomberg survey of economists, on the back of a recent tax overhaul.
“There are positive stories as well,” said Sharma in a telephone interview from New Delhi. “The selloff has been indiscriminate, but once the dust settles, the attention will turn back.”
The MSCI Emerging Markets Index has fallen about 9 percent since May 21, the day before Fed Chairman Ben S. Bernanke said the central bank could scale back its $85 billion in monthly bond purchases if the U.S. job market keeps improving. In Brazil, stocks have slid 14 percent since then, while the real has fallen to a four-year low. Stocks in Turkey and China also have posted double-digit declines. In contrast, the MSCI World Index of advanced nations is little changed.
Social Tensions
Officials still have the ability to defuse underlying social tensions, having strengthened their finances since the last spate of emerging-markets crises toppled governments from Indonesia to Argentina starting in the late 1990s, said Alastair Newton, the London-based Nomura political analyst who wrote the bank’s report. Only now they’ll need to balance the mood in the streets with the discipline demanded by markets in the context of slowing expansions and tighter budgets.
The International Monetary Fund cut its global growth forecast on July 9 for the fifth consecutive time, saying a leveling off in China and the risk of capital outflows present new challenges to nations that have propelled the world economy. Developing countries will expand 5 percent this year, down from a 5.3 percent forecast in April and an annual average of 6.6 percent during the past decade, according to the IMF.
Finance Minister Lou Jiwei has signaled China’s economy may expand less than the government’s target of 7.5 percent. At a July 11 press briefing in Washington, he said he’s confident 7 percent can be achieved this year and growth as low as 6.5 percent may be tolerable in the future.
Stabilize Debt
One country already feeling the squeeze is Indonesia, where President Susilo Bambang Yudhoyono last month stared down demonstrations and ordered cuts to fuel subsidies. The move, which raised gasoline prices by 44 percent, recalled austerity pledges that fueled protests and led to the collapse in 1998 of Suharto’s three-decade regime. Fifteen years later, under democratic rule and with an economy still forecast to grow about 6 percent this year, reaction has been more muted even as investors have pushed the rupiah down near a four-year low.
“This is a very good example of how you don’t need to spend more money to reallocate resources better,” said Gurria in the interview on the sidelines of a Group of 20 finance-ministers meeting.
Like Indonesia, the world’s largest producer of palm oil, Brazil is another commodity exporter that stands to lose from China’s slowdown. Both countries -- along with Egypt, where Mohamed Mursi was ousted from the presidency this month amid the worst economic slump in two decades -- are raising interest rates to fight inflation, which could damp growth even further.
Street Revolt
President Dilma Rousseff, in the aftermath of Brazil’s biggest street revolt in more than 20 years, vowed to keep a lid on spending even as she addresses protesters’ demands for better schools, hospitals and public transportation. She’s also begun unwinding capital controls put in place during the past five years to protect Latin America’s biggest economy from what she’s called a “currency war” unleashed by rich countries.
The unrest and sluggish growth in emerging markets, which now account for nearly half the world’s economic output, threaten to erode company profits. Coca Cola Co. (KO) Chief Executive Officer Muhtar Kent said July 16 that the protests in Brazil and the Middle East contributed to an “unusually weak” second-quarter performance.
$10 Daily
The expansion of the middle class -- defined by the World Bank as earning more than $10 a day in Latin America -- is reshaping politics around the globe, according to South African Finance Minister Pravin Gordhan.
“It creates anger that some people are getting away with a lot of the growth process and others not so,” he said in a July 19 interview from Moscow.
About 50 million people in Latin America alone rose out of poverty during the past decade, joining a group that now accounts for 30 percent of the region’s population, the World Bank said last year.
To be sure, emerging markets aren’t heading toward another 90s-style balance-of-payments crisis, said John Williamson, who retired last year as a senior fellow at the Peterson Institute for International Economics in Washington. Two decades ago, he coined the term “Washington consensus” to praise the free-market policies then being embraced around the world.
Original Sin
Governments that committed the so-called original sin of selling bonds in dollars have reduced their external vulnerabilities by building up record currency reserves and issuing more debt locally. Most countries also have embraced free-floating exchange rates, and inflation in emerging markets, averaging 5.9 percent according to the IMF, is less than half 1995-2004’s 13.1 percent.
“These buffers are extremely important,” Williamson said in a telephone interview. “The market reaction has been exaggerated. I don’t see any major reason to expect a slowdown in growth in the long run.”
That’s small comfort to governments struggling to stay ahead of the rising expectations of disaffected young people, said George Friedman, chief executive officer of policy-risk consultant Stratfor.
“There’s a number of regimes who’ve built their legitimacy on fast growth,” Friedman said in a telephone interview from Austin, Texas, where Stratfor is based. “When they can no longer deliver, they’re setting themselves up for a huge fall.”
Social Media
Reflecting that anxiety, Turkish Prime Minister Recep Tayyip Erdogan blamed social media for fueling protests against his government’s plans to build a shopping mall in an Istanbul park.
“Right now, the same game is being played in Brazil,” Erdogan told supporters in the northern province of Samsun on June 22. “The symbols are the same, the posters are the same. Same Twitter, same Facebook, same international media. They are being controlled by the same center.”
If turmoil does spread around the world, leaders who have held power longer could be voted out of office or see support plunge, Sharma said. These include Vladimir Putin in Russia, Prime Minister Manmohan Singh’s nine-year government in India and the decade-long run for Rousseff’s Workers’ Party in Brazil, he said.
In the wake of Brazil’s protests, approval of Rousseff’s government plunged to 30 percent from 57 percent in June, putting at risk an expected re-election bid next year.
Electorate Wrath
“The same incumbents who benefited from the boom are now facing the wrath of the electorate,” said Sharma, whose 2012 book “Breakout Nations” criticizes the BRICs for not investing wisely during the boom years. “Leaders didn’t fully realize how much was due to global factors and not their governance.”
While an anti-incumbent wave may be gaining momentum around the world, not all governments will face rejection just because growth disappoints, Gordhan said.
“Governments have different levels of legitimacy and connectivity with their population,” he said, citing as examples the current leadership in South Africa and Brazil, both of which have dramatically reduced poverty during the past decade. The South African government’s original 2.7 percent growth forecast for 2013 is unlikely to be met, he added.
In India -- swept by anti-corruption protests in 2011 -- Singh unveiled a program of food subsidies for the poor after growth slowed in the first quarter to the weakest since 2003.
Financial Strains
The $21 billion-a-year effort adds to fiscal strains after the rupee touched a record low July 8, making it harder for the government, which is gearing up for elections next year, to boost infrastructure spending while cutting a deficit almost twice that of Greece as a share of GDP, according to IMF data.
China’s slowdown is being domestically engineered, as the government attempts to rein in speculative lending and real-estate prices. If the clean-up fails, jobs will be lost, adding to social tensions that are increasingly apparent online where dissent is widespread, said Nomura’s Newton.
The number of so-called mass incidents -- strikes, riots, protests and other disturbances to social order -- doubled to 180,000 a year in 2010 from 2006 levels, Tsinghua University sociologist Sun Liping wrote in 2010. The government no longer makes such figures public.
“What nobody knows is what it takes to get people tapping away on cyber space to go out on streets,” he said.
Other emerging markets should also be on the alert.
“When people are disappointed, they go to the streets,” said Michael Shaoul, chairman and chief executive officer in New York of Marketfield Asset Management, which oversees more than $11 billion. “They haven’t given that up just because they’ve had a good decade.”
Thursday, July 25, 2013
Tuesday, July 23, 2013
Recession takes toll on parents' ability to pay for college
Story Originally Appeared on USA TODAY
As families continue to recover from the recession, they're relying less on their own income and savings and more on grants and scholarships to finance a college education than in previous years, according to Sallie Mae's How America Pays for College study to be released Tuesday.
The study, which surveyed a group of 1,602 undergraduates and parents of undergraduates earlier this year, shows that grants and scholarships are used more than any other type of funding, covering 30% of total college costs for a typical family. Five years ago, only half of families reported using grants and scholarships to pay for college. This year, two-thirds of families did, the study shows.
Meanwhile, parents are contributing less of their income and savings toward college costs, covering 27% of college costs compared with 37% in 2010, the study shows.
"The post-recession reality is (parents) don't have the income and savings," says Sarah Ducich, senior vice president of public policy at Sallie Mae. "It's not that they're not willing to stretch. It's that they don't think they have the money to do that."
Parents have developed a more cost-conscious mentality, with more families than ever eliminating colleges their kids were considering for being too expensive. Nearly 70% of families eliminated schools because of costs at some point during the application process, according to the report, compared with 58% who did so in 2008, when the study was first issued.
Student borrowing has been increasing, contributing to 18% of the total cost of college compared with 14% in 2008 and 2009.
But more families will also rely on college savings plans this year than any other year, according to the study. Low-income, middle-income and high-income families have all increased their use of state 529 plans, and the report states that 17% of families used 529 college savings plans to pay for college in 2013, up from 12% the previous year.
Lorrie Ortega, mother of an upcoming senior at Texas A&M University and a 13-year-old son in San Antonio, knows the importance of college savings plans. Thanks to the Texas Guaranteed Tuition Plan, she has been able to pay college tuition for both of her sons to attend state universities in advance of entering school.
She says that without the plan, which has been closed to new enrollment since 2001, her family probably wouldn't have been able to afford tuition and would have had to take out student loans — and she didn't want her sons finishing college with debt.
Ducich worries, though, that still not enough families are planning for the cost of college. Even though the study reports that parents are less worried about increasing tuition and their own economic circumstances than they were in 2010, six out of 10 still don't have a financial plan for all years of college, the study says.
"We're just not seeing enough families plan," Ducich says. "There's a red flag that says some of these families are going to be surprised by the extra cost it's going to take to finish that degree. They're going to have to spend more and finance it in some way."
As families continue to recover from the recession, they're relying less on their own income and savings and more on grants and scholarships to finance a college education than in previous years, according to Sallie Mae's How America Pays for College study to be released Tuesday.
The study, which surveyed a group of 1,602 undergraduates and parents of undergraduates earlier this year, shows that grants and scholarships are used more than any other type of funding, covering 30% of total college costs for a typical family. Five years ago, only half of families reported using grants and scholarships to pay for college. This year, two-thirds of families did, the study shows.
Meanwhile, parents are contributing less of their income and savings toward college costs, covering 27% of college costs compared with 37% in 2010, the study shows.
"The post-recession reality is (parents) don't have the income and savings," says Sarah Ducich, senior vice president of public policy at Sallie Mae. "It's not that they're not willing to stretch. It's that they don't think they have the money to do that."
Parents have developed a more cost-conscious mentality, with more families than ever eliminating colleges their kids were considering for being too expensive. Nearly 70% of families eliminated schools because of costs at some point during the application process, according to the report, compared with 58% who did so in 2008, when the study was first issued.
Student borrowing has been increasing, contributing to 18% of the total cost of college compared with 14% in 2008 and 2009.
But more families will also rely on college savings plans this year than any other year, according to the study. Low-income, middle-income and high-income families have all increased their use of state 529 plans, and the report states that 17% of families used 529 college savings plans to pay for college in 2013, up from 12% the previous year.
Lorrie Ortega, mother of an upcoming senior at Texas A&M University and a 13-year-old son in San Antonio, knows the importance of college savings plans. Thanks to the Texas Guaranteed Tuition Plan, she has been able to pay college tuition for both of her sons to attend state universities in advance of entering school.
She says that without the plan, which has been closed to new enrollment since 2001, her family probably wouldn't have been able to afford tuition and would have had to take out student loans — and she didn't want her sons finishing college with debt.
Ducich worries, though, that still not enough families are planning for the cost of college. Even though the study reports that parents are less worried about increasing tuition and their own economic circumstances than they were in 2010, six out of 10 still don't have a financial plan for all years of college, the study says.
"We're just not seeing enough families plan," Ducich says. "There's a red flag that says some of these families are going to be surprised by the extra cost it's going to take to finish that degree. They're going to have to spend more and finance it in some way."
Monday, July 22, 2013
Bankruptcy won't impact major Detroit downtown projects
Story Originally Appeared in The Detroit News
Detroit Business leaders say the city’s bankruptcy filing won’t have an impact on downtown development projects like the new home of the Detroit Red Wings, but it has already caused concern among the city’s convention clients.
Officials from the Detroit Economic Growth Corporation, Michigan Regional Chamber and others gathered for a Friday press conference to discuss bankruptcy, calling it the first step toward creating a place that’s attractive to outside investment and business.
"It's a new day for the city of Detroit," said Larry Alexander, president and CEO of the Detroit Metro Convention and Visitors Bureau.
Others aren’t as optimistic.
Alexander admitted the bureau has received "quite a few phone calls" from conventions expressing concerns over Detroit's financial troubles, but, for now, no one has backed out of bringing events to the city.
Pat O’Keefe, a financial turnaround expert with Bloomfield Hills-based O’Keefe, said the conventions’ leaders concerns are very real.
“When you’re hosting a convention for thousands you have to wonder how the city’s going to operate,” he said. “These are people who don’t really have their hand on the pulse of the city. They’re asking intelligent questions.”
Officials from some conventions slated for Cobo Center promised Friday their shows will go on.
Rod Alberts, executive director of the North American International Auto Show, said Detroit’s bankruptcy has no impact on the city’s signature car show, and called it a “good decision.”
“The 2014 NAIAS will be as sensational as ever, and we look forward to boosting the region with $350 million of annual economic impact once again,” he said in a statement.
Dearborn-based Society of Manufacturing Engineers — the largest event-producing manufacturing organization in the country — will host a manufacturing event June 9-12 in 2014 that’s expected to draw 7,000 people from around the nation despite the bankruptcy filing, said Debbie Holton, director of events.
“We feel business is going to continue in the downtown corridor,” Holton said. “We understand bankruptcy is a part of business restructuring and we hope it’s a positive sign.”
Brian Holdwick, executive vice president of business development at the DEGC, said other big projects shouldn’t be impacted by the bankruptcy filing.
But the Red Wings arena project may come before the bankruptcy judge because some of the development is slated to be built on city-owned land. In theory, the judge may have to approve the land so it can be used for the project.
The Downtown Development Authority, a regional entity that uses taxes to fund major projects, is listed as one of Detroit’s major creditors and is owed about $34 million, which Holdwick said came from old debts related to the People Mover and Cobo.
Chamber President and CEO Sandy Baruah called bankruptcy a tool to moving forward.
"We are now solving the problem,” he said.
Detroit Business leaders say the city’s bankruptcy filing won’t have an impact on downtown development projects like the new home of the Detroit Red Wings, but it has already caused concern among the city’s convention clients.
Officials from the Detroit Economic Growth Corporation, Michigan Regional Chamber and others gathered for a Friday press conference to discuss bankruptcy, calling it the first step toward creating a place that’s attractive to outside investment and business.
"It's a new day for the city of Detroit," said Larry Alexander, president and CEO of the Detroit Metro Convention and Visitors Bureau.
Others aren’t as optimistic.
Alexander admitted the bureau has received "quite a few phone calls" from conventions expressing concerns over Detroit's financial troubles, but, for now, no one has backed out of bringing events to the city.
Pat O’Keefe, a financial turnaround expert with Bloomfield Hills-based O’Keefe, said the conventions’ leaders concerns are very real.
“When you’re hosting a convention for thousands you have to wonder how the city’s going to operate,” he said. “These are people who don’t really have their hand on the pulse of the city. They’re asking intelligent questions.”
Officials from some conventions slated for Cobo Center promised Friday their shows will go on.
Rod Alberts, executive director of the North American International Auto Show, said Detroit’s bankruptcy has no impact on the city’s signature car show, and called it a “good decision.”
“The 2014 NAIAS will be as sensational as ever, and we look forward to boosting the region with $350 million of annual economic impact once again,” he said in a statement.
Dearborn-based Society of Manufacturing Engineers — the largest event-producing manufacturing organization in the country — will host a manufacturing event June 9-12 in 2014 that’s expected to draw 7,000 people from around the nation despite the bankruptcy filing, said Debbie Holton, director of events.
“We feel business is going to continue in the downtown corridor,” Holton said. “We understand bankruptcy is a part of business restructuring and we hope it’s a positive sign.”
Brian Holdwick, executive vice president of business development at the DEGC, said other big projects shouldn’t be impacted by the bankruptcy filing.
But the Red Wings arena project may come before the bankruptcy judge because some of the development is slated to be built on city-owned land. In theory, the judge may have to approve the land so it can be used for the project.
The Downtown Development Authority, a regional entity that uses taxes to fund major projects, is listed as one of Detroit’s major creditors and is owed about $34 million, which Holdwick said came from old debts related to the People Mover and Cobo.
Chamber President and CEO Sandy Baruah called bankruptcy a tool to moving forward.
"We are now solving the problem,” he said.
Wednesday, July 10, 2013
CNBC top states for business: The winner is . . .
Originally Appeared in USA TODAY
We have a winner -- and a new champion!
South Dakota has climbed to the top of America's Top States for Business for 2013.
It is the best finish yet for the Mount Rushmore State, which has always been a quiet contender in our annual study, rarely finishing outside the Top 10. But more impressive, South Dakota's point total this year—1,639 out of a possible 2,500—is the highest logged by any state since we began keeping score in 2007.
Each year, we rate all 50 states on more than 50 metrics in 10 categories of competitiveness. We weight the categories based on how frequently they appear as selling points in state economic development marketing materials. That way, we hold the states to their own standards. You can read more about our methodology here.
This year's categories and point values are:
Cost of Doing Business (450 points)
Economy (375 points)
Infrastructure (350 points)
Workforce (300 points)
Quality of Life (300 points)
Technology & Innovation (300 points)
Business Friendliness (200 points)
Education (150 points)
Cost of Living (50 points)
Access to Capital (25 points)
In many ways, the competitive landscape—and our study—shifted in South Dakota's direction this year. A wave of tax cutting following the 2010 Republican sweep of statehouses across the country has led to a wave of states touting their low costs of doing business. This is more than just politics, and claims about low costs are hardly limited to Republican administrations. After all, the message falls on very receptive ears. Business leaders and groups we consult for our study consistently put cost at the top of their criteria.
As a result, Cost of Doing Business carries more weight than ever in our study.
And no state delivers the goods on low business costs the way South Dakota does.
South Dakota not only offers one of the lowest tax burdens in the country—no individual or corporate income taxes and low sales and property taxes—but it also has among the nation's lowest utility rates, wages and commercial rent costs.
The state is not a one-trick pony, however.
In Business Friendliness, which measures the state's legal and regulatory climate, South Dakota finishes No. 2 this year, to perennial favorite Delaware.
With a pristine environment, relatively low crime, and some of America's most stunning natural beauty, South Dakota finishes seventh in Quality of Life.
And South Dakota's economy, while often overshadowed by its oil-booming neighbor to the north, finishes a solid sixth. State finances are strong, the housing market is recovering, and the unemployment rate is among the nation's lowest.
That low unemployment hurts South Dakota in the Workforce category, where it finishes 11th -- in part due to the short supply of available workers. It is a problem Gov. Dennis Daugaard is not taking lying down.
In May, Daugaard traveled to neighboring Minnesota to open a kiosk in the Mall of America to attract workers to his state.
"I like to think of South Dakota is not stealing employees, but providing refuge," Daugaard said.
But he has other issues to deal with beyond a worker shortage.
South Dakota finishes near the bottom, 48th, in the Technology & Innovation. It is among the least Internet-connected states, and research dollars largely bypass the state. Venture capital funding also steers clear, with a 39th-place finish in Access to Capital. And the state lags in Education, where it finishes 30th.
Still, South Dakota overcomes all of that to come out on top overall.
New order
Rounding out this year's Top Five are some old favorites and a new entry.
Texas, which has never finished below second place in our study, keeps the streak alive in 2013. America's Top State for Business last year (and in 2008 and 2010) slips to runner-up this year, but still logs a solid 1,593 points, with first-place rankings in our Economy and Infrastructure categories. Texas' point total slips a bit from last year, though, and it has an economic upstart nipping closely at its heels.
North Dakota, a historic economic success story, improves on last year's fifth place finish to come in third this year with 1,592 points. The Peace Garden State ranks second—just behind Texas—in Economy and in Infrastructure. But North Dakota is, in some ways, held back by its own prosperity. With the nation's lowest unemployment rate, workers are in short supply. That raises wage costs. And North Dakota's growing pains leave the state with some of the most expensive rental costs in the country for industrial space. North Dakota finishes 12th in Cost of Doing Business, and near the bottom—46th—for Technology & Innovation.
Nebraska cracks our Top Five for the first time, after just missing last year. The Cornhusker State finishes fourth with 1,575 points, up from sixth place last year. Nebraska shines in Business Friendliness, where it finishes third, as well as Economy and Quality of Life, where it comes in fourth. Tax reform has been a major priority in the state, which comes in 10th for Cost of Doing Business.
We have never had a tie in our Top Five, until now. Utah and Virginia, last year's Nos. 2 and 3 states respectively, tie for fifth place this year. While they come in dead even at 1,542 points, each takes a different route to the Top Five.
Utah's strongest category is Business Friendliness, where it finishes fourth. The Beehive State is attracting lots of investment, finishing seventh for Access to Capital.
Virginia brings the sixth-best Workforce to the table, and finishes eighth in Education.
The two states tie for 10th place in the Economy category.
Broken pattern
Our 2013 study marks the first year in which neither Texas nor Virginia comes out on top. A major reason is the increasing focus on costs.
Texas in particular makes a big deal about low costs, and with no individual or corporate income tax, the Lone Star State does offer one of the most favorable tax burdens in the country, despite higher-than-average sales and property taxes. But Cost of Doing Business measures more than just taxes. For example, Texas has some of the highest electricity costs in the country, and office and retail rent is on the high side as well.
Texas also suffers in our Quality of Life category, falling to 41st (tied with South Carolina) from 35th in the category last year. The state's air and water quality rank poorly, and Texas leads the nation in residents without health insurance. However,Gov. Rick Perry has defended that statistic as emblematic of the state's freedom of choice.
"Texas decided a long time ago that we weren't going to burden people and force them to buy insurance," Perry told CNBC in 2012.
That may be, but for a business considering locating or expanding in Texas, the large number of uninsured—and the impact on overall health care costs—becomes a factor.
For Virginia, which took the Top State title in 2007, 2009 and 2011, cost has never been its biggest selling point. But with Cost of Doing Business playing such an important role in our rankings, the fact that the commonwealth drops to 38th place in the category -- down six spots from last year -- definitely hurts.
What had been Virginia's greatest built-in advantage—proximity to the nation's capital—has come back to haunt the state in recent years. Virginia's fortunes are so tied to those of the federal government that Moody's slapped a negative outlook on the state's otherwise sterling bond rating in 2011. That hurts the state in our Economy category, but Virginia still finishes a respectable 10th.
Virginia has also been tackling troubles with its infrastructure. In fact, Gov. Bob McDonnell used the state's precipitous drop in our Infrastructure category last year -- which he called "unacceptable"—to push through a landmark $6 billion transportation bill in February. While the bill probably came too late to affect our rankings, Virginia does improve to 21st in the category (tied with Utah), up from 33rd last year.
Biggest pop and biggest drop
This year's most improved states each move up 12 spots from 2012.Massachusetts climbs to 16th place from 28th a year ago, and Delaware moves up to 31st from 43rd.
Massachusetts has had a rocky road in recent years. The Bay State made it into our elite Top Five in 2010, finishing fifth. Then it slipped to sixth in 2011, before plummeting to 28th last year because of drops in Economy, Infrastructure, and in Massachusetts' usual strong suit, Technology & Innovation.
Massachusetts improves in most categories this year, most notably Economy, where the state jumps to third place from 21st. The state is experiencing solid economic growth, state finances are improving, and so is the housing market. Massachusetts does drop to seventh for Education, however, a category where it is typically at or near the top.
Delaware had fallen to 43rd in 2012 because of a rare stumble in our Business Friendliness category. Yes, Delaware is the corporate address for more than half the nation's publicly traded companies, and accommodative business regulations are the key reason. But the First State has been embroiled in controversy over its unclaimed property laws, which some have called a "stealth tax" on business. The state has raked in millions year after year by assessing businesses penalties and fees for property they hold but no longer own.
Last year, the state introduced some business-friendly reforms to the program, including allowing some businesses to self-report their holdings. While critics say the changes do not go far enough, Delaware is back on top for Business Friendliness this year, and up overall -- though still in the bottom tier of states.
Illinois posts the biggest decline in our rankings this year, falling 11 spots to 37th, from 26th in 2012. With a heavy tax burden including among the highest gasoline taxes in the country, as well as high utility costs and relatively high wages, Illinois ties for 44th place (with Pennsylvania and Washington) for Cost of Doing Business. With the worst bond rating in the country, high unemployment and a lackluster housing market, Illinois finishes 45th in the crucial Economy category. But the Land of Lincoln does manage top five finishes in Infrastructure and Technology & Innovation.
We have a winner -- and a new champion!
South Dakota has climbed to the top of America's Top States for Business for 2013.
It is the best finish yet for the Mount Rushmore State, which has always been a quiet contender in our annual study, rarely finishing outside the Top 10. But more impressive, South Dakota's point total this year—1,639 out of a possible 2,500—is the highest logged by any state since we began keeping score in 2007.
Each year, we rate all 50 states on more than 50 metrics in 10 categories of competitiveness. We weight the categories based on how frequently they appear as selling points in state economic development marketing materials. That way, we hold the states to their own standards. You can read more about our methodology here.
This year's categories and point values are:
Cost of Doing Business (450 points)
Economy (375 points)
Infrastructure (350 points)
Workforce (300 points)
Quality of Life (300 points)
Technology & Innovation (300 points)
Business Friendliness (200 points)
Education (150 points)
Cost of Living (50 points)
Access to Capital (25 points)
In many ways, the competitive landscape—and our study—shifted in South Dakota's direction this year. A wave of tax cutting following the 2010 Republican sweep of statehouses across the country has led to a wave of states touting their low costs of doing business. This is more than just politics, and claims about low costs are hardly limited to Republican administrations. After all, the message falls on very receptive ears. Business leaders and groups we consult for our study consistently put cost at the top of their criteria.
As a result, Cost of Doing Business carries more weight than ever in our study.
And no state delivers the goods on low business costs the way South Dakota does.
South Dakota not only offers one of the lowest tax burdens in the country—no individual or corporate income taxes and low sales and property taxes—but it also has among the nation's lowest utility rates, wages and commercial rent costs.
The state is not a one-trick pony, however.
In Business Friendliness, which measures the state's legal and regulatory climate, South Dakota finishes No. 2 this year, to perennial favorite Delaware.
With a pristine environment, relatively low crime, and some of America's most stunning natural beauty, South Dakota finishes seventh in Quality of Life.
And South Dakota's economy, while often overshadowed by its oil-booming neighbor to the north, finishes a solid sixth. State finances are strong, the housing market is recovering, and the unemployment rate is among the nation's lowest.
That low unemployment hurts South Dakota in the Workforce category, where it finishes 11th -- in part due to the short supply of available workers. It is a problem Gov. Dennis Daugaard is not taking lying down.
In May, Daugaard traveled to neighboring Minnesota to open a kiosk in the Mall of America to attract workers to his state.
"I like to think of South Dakota is not stealing employees, but providing refuge," Daugaard said.
But he has other issues to deal with beyond a worker shortage.
South Dakota finishes near the bottom, 48th, in the Technology & Innovation. It is among the least Internet-connected states, and research dollars largely bypass the state. Venture capital funding also steers clear, with a 39th-place finish in Access to Capital. And the state lags in Education, where it finishes 30th.
Still, South Dakota overcomes all of that to come out on top overall.
New order
Rounding out this year's Top Five are some old favorites and a new entry.
Texas, which has never finished below second place in our study, keeps the streak alive in 2013. America's Top State for Business last year (and in 2008 and 2010) slips to runner-up this year, but still logs a solid 1,593 points, with first-place rankings in our Economy and Infrastructure categories. Texas' point total slips a bit from last year, though, and it has an economic upstart nipping closely at its heels.
North Dakota, a historic economic success story, improves on last year's fifth place finish to come in third this year with 1,592 points. The Peace Garden State ranks second—just behind Texas—in Economy and in Infrastructure. But North Dakota is, in some ways, held back by its own prosperity. With the nation's lowest unemployment rate, workers are in short supply. That raises wage costs. And North Dakota's growing pains leave the state with some of the most expensive rental costs in the country for industrial space. North Dakota finishes 12th in Cost of Doing Business, and near the bottom—46th—for Technology & Innovation.
Nebraska cracks our Top Five for the first time, after just missing last year. The Cornhusker State finishes fourth with 1,575 points, up from sixth place last year. Nebraska shines in Business Friendliness, where it finishes third, as well as Economy and Quality of Life, where it comes in fourth. Tax reform has been a major priority in the state, which comes in 10th for Cost of Doing Business.
We have never had a tie in our Top Five, until now. Utah and Virginia, last year's Nos. 2 and 3 states respectively, tie for fifth place this year. While they come in dead even at 1,542 points, each takes a different route to the Top Five.
Utah's strongest category is Business Friendliness, where it finishes fourth. The Beehive State is attracting lots of investment, finishing seventh for Access to Capital.
Virginia brings the sixth-best Workforce to the table, and finishes eighth in Education.
The two states tie for 10th place in the Economy category.
Broken pattern
Our 2013 study marks the first year in which neither Texas nor Virginia comes out on top. A major reason is the increasing focus on costs.
Texas in particular makes a big deal about low costs, and with no individual or corporate income tax, the Lone Star State does offer one of the most favorable tax burdens in the country, despite higher-than-average sales and property taxes. But Cost of Doing Business measures more than just taxes. For example, Texas has some of the highest electricity costs in the country, and office and retail rent is on the high side as well.
Texas also suffers in our Quality of Life category, falling to 41st (tied with South Carolina) from 35th in the category last year. The state's air and water quality rank poorly, and Texas leads the nation in residents without health insurance. However,Gov. Rick Perry has defended that statistic as emblematic of the state's freedom of choice.
"Texas decided a long time ago that we weren't going to burden people and force them to buy insurance," Perry told CNBC in 2012.
That may be, but for a business considering locating or expanding in Texas, the large number of uninsured—and the impact on overall health care costs—becomes a factor.
For Virginia, which took the Top State title in 2007, 2009 and 2011, cost has never been its biggest selling point. But with Cost of Doing Business playing such an important role in our rankings, the fact that the commonwealth drops to 38th place in the category -- down six spots from last year -- definitely hurts.
What had been Virginia's greatest built-in advantage—proximity to the nation's capital—has come back to haunt the state in recent years. Virginia's fortunes are so tied to those of the federal government that Moody's slapped a negative outlook on the state's otherwise sterling bond rating in 2011. That hurts the state in our Economy category, but Virginia still finishes a respectable 10th.
Virginia has also been tackling troubles with its infrastructure. In fact, Gov. Bob McDonnell used the state's precipitous drop in our Infrastructure category last year -- which he called "unacceptable"—to push through a landmark $6 billion transportation bill in February. While the bill probably came too late to affect our rankings, Virginia does improve to 21st in the category (tied with Utah), up from 33rd last year.
Biggest pop and biggest drop
This year's most improved states each move up 12 spots from 2012.Massachusetts climbs to 16th place from 28th a year ago, and Delaware moves up to 31st from 43rd.
Massachusetts has had a rocky road in recent years. The Bay State made it into our elite Top Five in 2010, finishing fifth. Then it slipped to sixth in 2011, before plummeting to 28th last year because of drops in Economy, Infrastructure, and in Massachusetts' usual strong suit, Technology & Innovation.
Massachusetts improves in most categories this year, most notably Economy, where the state jumps to third place from 21st. The state is experiencing solid economic growth, state finances are improving, and so is the housing market. Massachusetts does drop to seventh for Education, however, a category where it is typically at or near the top.
Delaware had fallen to 43rd in 2012 because of a rare stumble in our Business Friendliness category. Yes, Delaware is the corporate address for more than half the nation's publicly traded companies, and accommodative business regulations are the key reason. But the First State has been embroiled in controversy over its unclaimed property laws, which some have called a "stealth tax" on business. The state has raked in millions year after year by assessing businesses penalties and fees for property they hold but no longer own.
Last year, the state introduced some business-friendly reforms to the program, including allowing some businesses to self-report their holdings. While critics say the changes do not go far enough, Delaware is back on top for Business Friendliness this year, and up overall -- though still in the bottom tier of states.
Illinois posts the biggest decline in our rankings this year, falling 11 spots to 37th, from 26th in 2012. With a heavy tax burden including among the highest gasoline taxes in the country, as well as high utility costs and relatively high wages, Illinois ties for 44th place (with Pennsylvania and Washington) for Cost of Doing Business. With the worst bond rating in the country, high unemployment and a lackluster housing market, Illinois finishes 45th in the crucial Economy category. But the Land of Lincoln does manage top five finishes in Infrastructure and Technology & Innovation.
Kroger to buy Harris Teeter chain in $2.4B deal
Originally Appeared in USA TODAY
Kroger,
second in retail sales in the U.S., is buying Harris Teeter
Supermarkets. A look at the states with Kroger stores and Harris Teeter
stores and their place among the top retailers and wholesalers.
The nation's largest grocery store chain is getting even bigger -- and possibly, tonier.
Kroger said Tuesday it's buying Harris Teeter Supermarkets in a $2.4 billion deal, which will increase by three the number of states in which it operates to 34.
The deal will be the fourth-largest acquisition of a North American food retailer in the past decade. It also would be Kroger's biggest takeover since 1998, when it bought the Fred Meyer food and merchandise store chain in the Northwest for more than $12 billion, according to financial data service Bloomberg.
Kroger is getting a group of good-quality stores in good locations with little overlap. Matthews, N.C.-based Harris Teeter has 212 stores in what Kroger called attractive, high-growth markets in the eight Southeast and Mid-Atlantic states and Washington, D.C., and about $4.5 billion in revenue for fiscal 2012.
The two grocery chains are very different, but Kroger CFO Michael Schlotman said in a conference call early Tuesday that they should be complementary. Kroger will learn a lot about fresh food categories, which are more profitable, he said. Harris Teeter will benefit from Kroger's purchasing power, information systems and loyalty programs.
Many people shop at Kroger stores and may not know it. The company has 2,419 stores in 31 states. In addition to its flagship brand of supermarkets, it operates under a number of brands, including Ralphs, Fry's, King Soopers and Food 4 Less.
Together, the companies will employ more than 368,300 people in 34 states and Washington, D.C.
Judi Niedercorn, who grew up shopping at Kroger stores in Ohio and now lives in McLean, Va., says the deal should "bring a bit of a higher level of gourmet sophistication and quality to the Kroger store family."
Harris Teeter stores, at least in the Washington, area, are more "high end" than the typical Kroger store she shops in when she visits family back in Ohio.
Schlotman acknowledges Harris Teeter is "slightly more upscale operator" than the Kroger brand.
The merger better positions both companies in the competitive grocery space, but the huge Kroger may not benefit as much as Harris Teeter, says Ken Nisch, chairman of brand strategy and retail design firm JGA.
"If they can execute the delicate dance of being enormous and local at the same time, then they've got a winning formula," says Nisch, whose firm designed the new Whole Foods Market in downtown Detroit. "But history would suggest local is much harder to execute with all the growth in local, regional and specialty stores."
Kroger is No. 2 only to Wal-Mart in U.S. retail sales, bigger than Target, Home Depot and CVS. It also is more than a grocery store chain, with a growing number of supercenter-style merchandise and food stores, including the Fred Meyer chain in the Northwest and its Marketplace stores under several of its brands.
Kroger remains based in Cincinnati, where the company was founded in the 19th century.
Kroger will pay $49.38 each for Harris Teeter shares, about 2% above their Monday close and 33.7% higher than the Jan. 18. closing price, when the company disclosed it was evaluating strategic alternatives. Kroger says that Harris Teeter management will continue to operate the stores as a subsidiary of Kroger, which will then have 9% market share nationwide.
Harris Teeter CEO Thomas Dickson called Kroger "one of the best food retailers in the U.S." and said the company's plans for growth will continue.
Kroger says it expects the deal to result in cost savings of $40 million to $50 million in the next three to four years. It will finance the deal with debt and plans to assume Harris Teeter's outstanding debt of about $100 million.
Shares of Kroger jumped 96 cents, or 2.7%, to close Tuesday at $37.15. Harris Teeter shares rose 74 cents, or 1.5% to $49.26.
Contributing: Megan Kowalski, Associated Press. Tweh also reports for the Cincinnati Enquirer
Tuesday, July 9, 2013
Shell Picks New Chief Executive
Story Originally Appeared in The New York Times
LONDON — Royal Dutch Shell, Europe’s largest oil company, surprised markets on Tuesday by naming Ben van Beurden to succeed Peter Voser as chief executive on Jan. 1.
Mr. van Beurden, a Dutch national who is 55, has headed Shell’s large marketing and refining business since January and has been a key player in its liquefied natural gas business, in which Shell is the world leader among publicly traded oil companies.
He was chosen by Shell’s board over better-known candidates including Andrew Brown, head of exploration and production; Marvin Odum, head of the company’s Americas business; and Simon Henry, the chief financial officer, well-known to investors.
“This will be something of a surprise to analysts who widely expected” Mr. Henry to be chosen, said Peter Hutton, an analyst at RBC Capital Markets in London. “However, it was always clear that Shell would appoint the person it felt had the best combination of skills for the job, not necessarily the best known to the external community.”
Shell shares rose Tuesday in London..
Mr. Voser had said in May that he would step down next year after less than five years in the top job, news that also surprised the markets. He said he wanted to spend more time with his family, which had remained in his native Switzerland while he worked at Shell headquarters in London.
Previously chief financial officer, Mr. Voser had helped stabilize Shell after a scandal over misstating oil and gas reserves. While uncomfortable in the limelight, he is thought to have improved the implementation of big projects like the $20 billion Pearl gas-to-liquids plant in Qatar that have come to distinguish Shell.
The standard spot for chief executives-in-waiting at major oil companies is the exploration and production division, which is usually the big profit earner.
Shell differs from other major oil major companies like BP by stressing big long-term projects that lack the tremendous potential financial rewards of oil exploration but produce steady returns with lower risk.
Liquefied natural gas tends to earn returns in the relatively modest 10 percent to 15 percent range, analysts say, but it produces steady cash flows for decades with little additional capital expenditure.
Shell has invested around $40 billion in the business in recent years. It hopes to cash in on growing use of gas in China and other developing countries.
It is also one of the few companies that is investing large sums in gas-to-liquids plants, the monster installations required to transform natural gas into fuels like diesel. And it is the leader in the still-unproven technology of building gigantic floating vessels to process liquefied natural gas in remote locations.
Mr. van Beurden was involved in the floating vessels at the early stages and is also credited by some with turning around the now-profitable chemicals business when he headed it from 2006 to 2012. He reconfigured Shell’s American chemical plants to use low-priced gas feedstock rather than oil.
In an industry where access to oil and gas is increasingly competitive, Shell hopes a demonstrated ability to design and manage megaprojects will give it a competitive advantage.
Mr. van Beurden’s experience appears tailored to Shell’s strategy. For instance, he has 10 years in Shell’s liquefied natural gas business. That business, along with gas-to-liquids, earned Shell $9.4 billion of its $25.1 billion in profit last year.
“Ben will continue to drive and further develop the strategic agenda that we have set out, to generate competitive returns for our shareholders,” Shell’s chairman, Jorma Ollila, said in a statement Tuesday.
LONDON — Royal Dutch Shell, Europe’s largest oil company, surprised markets on Tuesday by naming Ben van Beurden to succeed Peter Voser as chief executive on Jan. 1.
Mr. van Beurden, a Dutch national who is 55, has headed Shell’s large marketing and refining business since January and has been a key player in its liquefied natural gas business, in which Shell is the world leader among publicly traded oil companies.
He was chosen by Shell’s board over better-known candidates including Andrew Brown, head of exploration and production; Marvin Odum, head of the company’s Americas business; and Simon Henry, the chief financial officer, well-known to investors.
“This will be something of a surprise to analysts who widely expected” Mr. Henry to be chosen, said Peter Hutton, an analyst at RBC Capital Markets in London. “However, it was always clear that Shell would appoint the person it felt had the best combination of skills for the job, not necessarily the best known to the external community.”
Shell shares rose Tuesday in London..
Mr. Voser had said in May that he would step down next year after less than five years in the top job, news that also surprised the markets. He said he wanted to spend more time with his family, which had remained in his native Switzerland while he worked at Shell headquarters in London.
Previously chief financial officer, Mr. Voser had helped stabilize Shell after a scandal over misstating oil and gas reserves. While uncomfortable in the limelight, he is thought to have improved the implementation of big projects like the $20 billion Pearl gas-to-liquids plant in Qatar that have come to distinguish Shell.
The standard spot for chief executives-in-waiting at major oil companies is the exploration and production division, which is usually the big profit earner.
Shell differs from other major oil major companies like BP by stressing big long-term projects that lack the tremendous potential financial rewards of oil exploration but produce steady returns with lower risk.
Liquefied natural gas tends to earn returns in the relatively modest 10 percent to 15 percent range, analysts say, but it produces steady cash flows for decades with little additional capital expenditure.
Shell has invested around $40 billion in the business in recent years. It hopes to cash in on growing use of gas in China and other developing countries.
It is also one of the few companies that is investing large sums in gas-to-liquids plants, the monster installations required to transform natural gas into fuels like diesel. And it is the leader in the still-unproven technology of building gigantic floating vessels to process liquefied natural gas in remote locations.
Mr. van Beurden was involved in the floating vessels at the early stages and is also credited by some with turning around the now-profitable chemicals business when he headed it from 2006 to 2012. He reconfigured Shell’s American chemical plants to use low-priced gas feedstock rather than oil.
In an industry where access to oil and gas is increasingly competitive, Shell hopes a demonstrated ability to design and manage megaprojects will give it a competitive advantage.
Mr. van Beurden’s experience appears tailored to Shell’s strategy. For instance, he has 10 years in Shell’s liquefied natural gas business. That business, along with gas-to-liquids, earned Shell $9.4 billion of its $25.1 billion in profit last year.
“Ben will continue to drive and further develop the strategic agenda that we have set out, to generate competitive returns for our shareholders,” Shell’s chairman, Jorma Ollila, said in a statement Tuesday.
Barnes & Noble chief executive William Lynch resigns
Originally Appeared on BBC News Business
The chief executive of US bookstore chain Barnes & Noble, William Lynch, has resigned amid a continued drop in sales of its Nook e-books and devices.
His resignation comes just days after the firm reported that sales in the Nook business fell 34% in the fourth quarter, from a year earlier.
That saw its overall losses more than double to $118.6m (£77m) in the period.
The Nook e-reader was launched in 2009, but has failed to take on the Amazon Kindle in the growing e-books market.
"Lynch was highly instrumental in making Nook a centrepiece in Barnes & Noble's broader operational strategy," said Alan Rifkin, an analyst at Barclays.
"With this announcement, Barnes & Noble is, in our view, signalling that it is attempting to reduce its dependence upon the Nook."
Uncertain future?
The decline in sales of the Nook business has raised concerns over the future of the division and the direction that the firm may take going forward.
It said that while it will continue to develop its e-readers in-house, its tablet line will be produced and marketed with a consumer electronics manufacturer. But it did not identify the manufacturer.
Meanwhile, there have also been reports that Microsoft, which already owns 17% of Nook Media, was planning to buy the division outright.
Earlier this year, Leonard Riggio, the company's founder, chairman and largest shareholder, said he wanted to buy back the company's retail operations, but not its Nook e-reader.
Analysts said that whatever decision Mr Riggio takes about buying back the retail operations will be key to shaping the firm's future.
"The next step is Chairman Leonard Riggio deciding if he's going to bid to buy the retail division and from that they'll then decide what to do with the Nook," said John Tinker a media analyst with Maxim Group.
"Do they close it down? Do they reintegrate it back in the company? What happens to minority investors, Microsoft and Pearson?
"It all can be driven by the Chairman," he added.
The chief executive of US bookstore chain Barnes & Noble, William Lynch, has resigned amid a continued drop in sales of its Nook e-books and devices.
His resignation comes just days after the firm reported that sales in the Nook business fell 34% in the fourth quarter, from a year earlier.
That saw its overall losses more than double to $118.6m (£77m) in the period.
The Nook e-reader was launched in 2009, but has failed to take on the Amazon Kindle in the growing e-books market.
"Lynch was highly instrumental in making Nook a centrepiece in Barnes & Noble's broader operational strategy," said Alan Rifkin, an analyst at Barclays.
"With this announcement, Barnes & Noble is, in our view, signalling that it is attempting to reduce its dependence upon the Nook."
Uncertain future?
The decline in sales of the Nook business has raised concerns over the future of the division and the direction that the firm may take going forward.
It said that while it will continue to develop its e-readers in-house, its tablet line will be produced and marketed with a consumer electronics manufacturer. But it did not identify the manufacturer.
Meanwhile, there have also been reports that Microsoft, which already owns 17% of Nook Media, was planning to buy the division outright.
Earlier this year, Leonard Riggio, the company's founder, chairman and largest shareholder, said he wanted to buy back the company's retail operations, but not its Nook e-reader.
Analysts said that whatever decision Mr Riggio takes about buying back the retail operations will be key to shaping the firm's future.
"The next step is Chairman Leonard Riggio deciding if he's going to bid to buy the retail division and from that they'll then decide what to do with the Nook," said John Tinker a media analyst with Maxim Group.
"Do they close it down? Do they reintegrate it back in the company? What happens to minority investors, Microsoft and Pearson?
"It all can be driven by the Chairman," he added.
Monday, July 1, 2013
North Carolina Unemployment Laws Changing
Originally Appeared in The Washington Post
RALEIGH, N.C. — With changes to its unemployment law taking effect this weekend, North Carolina not only is cutting benefits for those who file new claims, it will become the first state disqualified from a federal compensation program for the long-term jobless.
State officials adopted the package of benefit cuts and increased taxes for businesses in February, a plan designed to accelerate repayment of a $2.5 billion federal debt. Like many states, North Carolina had racked up the debt by borrowing from Washington after its unemployment fund was drained by jobless benefits during the Great Recession.
The changes go into effect Sunday for North Carolina, which has the country’s fifth-worst jobless rate. The cuts on those who make unemployment claims on or after that day will disqualify the state from receiving federally funded Emergency Unemployment Compensation. That money kicks in after the state’s period of unemployment compensation — now shortened from up to six months to no more than five — runs out. The EUC program is available to long-term jobless in all states. But keeping the money flowing includes a requirement that states can’t cut average weekly benefits.
Because North Carolina leaders cut average weekly benefits for new claims, about 170,000 workers whose state benefits expire this year will lose more than $700 million in EUC payments, the U.S. Labor Department said.
Lee Creighton, 45, of Cary, said he’s been unemployed since October, and this is the last week for which he’ll get nearly $500 in unemployment aid. He said he was laid off from a position managing statisticians and writers amid the recession’s worst days in 2009 and has landed and lost a series of government and teaching jobs since then — work that paid less half as much. His parents help him buy groceries to get by.
“I’m just not sure what I’m going to do,” said Creighton, who has a doctorate. “What are we to do? Is the state prepared to have this many people with no source of income?”
With the changes to North Carolina law, state benefits will last three to five months — at the longer end when unemployment rates are higher. Qualifying for benefits becomes more difficult. Weekly payments for those collecting the current maximum benefit of $535 drop to $350, falling from the highest in the Southeast to comparable with neighboring states.
Republican leaders who control the General Assembly sought an exception to the federal law two months before voting to change unemployment benefits. Congress last year allowed Pennsylvania, Indiana, Arkansas and Rhode Island to proceed with cuts to weekly benefits that their legislatures had approved for after the expected expiration of federal benefits, which later were extended.
North Carolina’s request was never acted on.
Other states this year cut unemployment benefits and restricted eligibility, but none included drops in weekly benefits, said George Wentworth of the National Employment Law Project, a worker-advocacy group.
All states are aware of the no-reduction provision, said Doug Holmes, who heads the National Foundation for Unemployment Compensation & Workers’ Compensation, which represents businesses on unemployment insurance issues.
RALEIGH, N.C. — With changes to its unemployment law taking effect this weekend, North Carolina not only is cutting benefits for those who file new claims, it will become the first state disqualified from a federal compensation program for the long-term jobless.
State officials adopted the package of benefit cuts and increased taxes for businesses in February, a plan designed to accelerate repayment of a $2.5 billion federal debt. Like many states, North Carolina had racked up the debt by borrowing from Washington after its unemployment fund was drained by jobless benefits during the Great Recession.
The changes go into effect Sunday for North Carolina, which has the country’s fifth-worst jobless rate. The cuts on those who make unemployment claims on or after that day will disqualify the state from receiving federally funded Emergency Unemployment Compensation. That money kicks in after the state’s period of unemployment compensation — now shortened from up to six months to no more than five — runs out. The EUC program is available to long-term jobless in all states. But keeping the money flowing includes a requirement that states can’t cut average weekly benefits.
Because North Carolina leaders cut average weekly benefits for new claims, about 170,000 workers whose state benefits expire this year will lose more than $700 million in EUC payments, the U.S. Labor Department said.
Lee Creighton, 45, of Cary, said he’s been unemployed since October, and this is the last week for which he’ll get nearly $500 in unemployment aid. He said he was laid off from a position managing statisticians and writers amid the recession’s worst days in 2009 and has landed and lost a series of government and teaching jobs since then — work that paid less half as much. His parents help him buy groceries to get by.
“I’m just not sure what I’m going to do,” said Creighton, who has a doctorate. “What are we to do? Is the state prepared to have this many people with no source of income?”
With the changes to North Carolina law, state benefits will last three to five months — at the longer end when unemployment rates are higher. Qualifying for benefits becomes more difficult. Weekly payments for those collecting the current maximum benefit of $535 drop to $350, falling from the highest in the Southeast to comparable with neighboring states.
Republican leaders who control the General Assembly sought an exception to the federal law two months before voting to change unemployment benefits. Congress last year allowed Pennsylvania, Indiana, Arkansas and Rhode Island to proceed with cuts to weekly benefits that their legislatures had approved for after the expected expiration of federal benefits, which later were extended.
North Carolina’s request was never acted on.
Other states this year cut unemployment benefits and restricted eligibility, but none included drops in weekly benefits, said George Wentworth of the National Employment Law Project, a worker-advocacy group.
All states are aware of the no-reduction provision, said Doug Holmes, who heads the National Foundation for Unemployment Compensation & Workers’ Compensation, which represents businesses on unemployment insurance issues.
N.J.'s largest newspaper may close
Originally Appeared in USA TODAY
NEWARK, N.J. (AP) — The owners of The Star-Ledger plan to close New Jersey's largest newspaper by year's end if its production unions don't make concessions in contract negotiations, the publisher said Wednesday.
In a letter to staff, publisher Richard Vezza said the company felt "pushed into a corner" by the unions, whose contracts expire in July. Vezza said the unions have until Sept. 27 to make compromises or else the paper will shut down.
"This is not a threat. This is reality," Vezza said in an interview with The Associated Press.
The paper's website, nj.com, is owned by a separate company and will continue to publish "no matter what happens with the Ledger," Vezza said.
The unions issued a joint statement saying their studies of the paper's ad revenues came up with different figures than the company's, and accusing the Ledger of trying to force the press workers, drivers and other production employees to accept a steep wage cut.
"Vezza's announcement that he will cease publication unless a settlement is reached with all the unions is another sad and pathetic attempt to pound all of our union brothers and sisters into a state of submission," said Ed Shown, president of the Council of Star-Ledger Unions and one of the Teamsters locals.
Vezza said the unions had shown little interest in "meaningful negotiations." Shown said the Ledger demanded a 55% cut in the entire wage package, which he said showed a lack of meaningful negotiation on the part of the company.
He said the unions are willing to "do whatever we have to so that the Star-Ledger may remain a thriving newspaper in these challenging economic times."
In his letter, Vezza said the paper lost $19.8 million last year, and is on track to do the same in 2013. The Star-Ledger lost $12 million in 2011.
In January, the paper laid off 34 employees from its newsroom, which is not unionized. In recent years, wages and benefits have been cut and staff members have been forced to take unpaid furlough days.
Vezza said the paper asked the unions to negotiate in December over the possibility of outsourcing production, a move he said could save $9 million a year. He said outsourcing without a union agreement would likely lead to a protracted court fight.
Shown said the unions do not believe the company was ever serious about outsourcing production but still wants the $9 million the company says it would save by doing so.
"This is a very serious and painful situation," Vezza told the AP. "It is certainly something we wouldn't have done unless we felt that we really sort of had our backs to the wall on this."
This is not the first time the Star-Ledger has threatened to shut down. In 2008, the then-publisher said the paper would cease to print if union concessions weren't met. The two sides reached an agreement a few months later.
"I am optimistic that we're going to be able to strike a deal with the union," Vezza said.
Shown said the unions "look forward to settling their differences with the company so the Star-Ledger will remain a vital resource providing valuable news coverage to our state."
The Star-Ledger is part of Advance Publications, a privately held company owned by the Newhouse family.
Unlike some of its sister papers, the Star-Ledger has no plans to reduce its print edition to three days a week, Vezza said. The company has said the market is too competitive to make that a cost-cutting option.
The Star-Ledger has 771 employees, 240 on the production staff and 170 in the newsroom.
NEWARK, N.J. (AP) — The owners of The Star-Ledger plan to close New Jersey's largest newspaper by year's end if its production unions don't make concessions in contract negotiations, the publisher said Wednesday.
In a letter to staff, publisher Richard Vezza said the company felt "pushed into a corner" by the unions, whose contracts expire in July. Vezza said the unions have until Sept. 27 to make compromises or else the paper will shut down.
"This is not a threat. This is reality," Vezza said in an interview with The Associated Press.
The paper's website, nj.com, is owned by a separate company and will continue to publish "no matter what happens with the Ledger," Vezza said.
The unions issued a joint statement saying their studies of the paper's ad revenues came up with different figures than the company's, and accusing the Ledger of trying to force the press workers, drivers and other production employees to accept a steep wage cut.
"Vezza's announcement that he will cease publication unless a settlement is reached with all the unions is another sad and pathetic attempt to pound all of our union brothers and sisters into a state of submission," said Ed Shown, president of the Council of Star-Ledger Unions and one of the Teamsters locals.
Vezza said the unions had shown little interest in "meaningful negotiations." Shown said the Ledger demanded a 55% cut in the entire wage package, which he said showed a lack of meaningful negotiation on the part of the company.
He said the unions are willing to "do whatever we have to so that the Star-Ledger may remain a thriving newspaper in these challenging economic times."
In his letter, Vezza said the paper lost $19.8 million last year, and is on track to do the same in 2013. The Star-Ledger lost $12 million in 2011.
In January, the paper laid off 34 employees from its newsroom, which is not unionized. In recent years, wages and benefits have been cut and staff members have been forced to take unpaid furlough days.
Vezza said the paper asked the unions to negotiate in December over the possibility of outsourcing production, a move he said could save $9 million a year. He said outsourcing without a union agreement would likely lead to a protracted court fight.
Shown said the unions do not believe the company was ever serious about outsourcing production but still wants the $9 million the company says it would save by doing so.
"This is a very serious and painful situation," Vezza told the AP. "It is certainly something we wouldn't have done unless we felt that we really sort of had our backs to the wall on this."
This is not the first time the Star-Ledger has threatened to shut down. In 2008, the then-publisher said the paper would cease to print if union concessions weren't met. The two sides reached an agreement a few months later.
"I am optimistic that we're going to be able to strike a deal with the union," Vezza said.
Shown said the unions "look forward to settling their differences with the company so the Star-Ledger will remain a vital resource providing valuable news coverage to our state."
The Star-Ledger is part of Advance Publications, a privately held company owned by the Newhouse family.
Unlike some of its sister papers, the Star-Ledger has no plans to reduce its print edition to three days a week, Vezza said. The company has said the market is too competitive to make that a cost-cutting option.
The Star-Ledger has 771 employees, 240 on the production staff and 170 in the newsroom.
Many cities far from getting jobs back
Originally Appeared in USA TODAY
Most U.S. cities won't regain all the local jobs lost in the recession until 2015 or later. Top performers: College towns, oil centers, military base communities.
More than half of all U.S. metro areas won't regain the jobs lost in the recession until the second half of 2015 or later, an analysis for the U.S. Conference of Mayors says.
Less than a third of U.S. cities and their surrounding suburbs have recovered all the jobs lost since the arrival of the financial crisis. Of 363 U.S. metros, 98 now have more workers than at their pre-recession peak, with an additional 11 slated to join them by the end of the year, according to projections by IHS Global Insight, which compiled the data.
The data highlight how slowly most of the U.S. continues to recover from the economic crisis, said Bob Tomarelli, regional economist at IHS. Cities that recouped jobs fastest typically had universities or health care industry concentrations, major federal-agency or military employers, or exploited newly commercialized shale oil and gas, he said.
"The biggest takeaway is that you still have a large number of metropolitan areas that have not gotten back to pre-recession levels,'' Tomarelli said. "It's not a great environment. It's improving but it's very slow."
The recession started in December 2007 and ended four years ago this month.
Nationwide, the 135.1 million U.S. jobs during this year's first quarter are still 2.9 million below the peak, reached in early 2008, according to the Bureau of Labor Statistics. The nation's unemployment rate has jumped to 7.6% from an average of 5% during 2008's first quarter.
Two dozen cities, including major metro areas such as New York, have scrambled back to pre-recession employment levels in the last six to nine months, the report shows.
San Jose, New York, Denver, Indianapolis and Durham, N.C., all recovered to pre-recession employment levels as of the first quarter. Boston and Baltimore got there during the fourth quarter of 2012.
"As long as we have anyone unemployed, we're going to be working hard, but we're making progress,'' said Deron Kintner, deputy mayor for economic development in Indianapolis. He credited stable taxes, aggressive business recruiting and the city's presence in the health care industry for rekindling growth.
Many areas that will recover jobs most slowly had especially severe booms and busts in housing, and others lost large numbers of hard-to-replace manufacturing jobs, Tomarelli said. Even if manufacturing companies regain pre-recession stock prices and profitability, they are unlikely to employ as many U.S. workers as before, he said.
The housing bust will hurt areas such as Los Angeles and Las Vegas, which won't recover all of their lost jobs until 2017, in Tomarelli's forecast. Tallahassee won't recover all of its jobs until 2019, but still has 5.6% regional unemployment, well below the national average, thanks to 30,000 or more government jobs, including Florida State University workers, Mayor John Marks said.
"We're going to be fully employed within the next year or two," he said.
Manufacturing losses will hurt cities such as Detroit and Flint, Mich., which are among 50-plus areas not expected to recover all of their lost jobs by 2023, the analysis says.
Manufacturing has also been a major issue in smaller cities. In Florence, S.C., an area IHS says won't get back to peak employment until 2019, unemployment reached 13% in 2010 and has recovered to 8.5% in April as companies such as Johnson Controls and Honda expanded locally.
"2009 and 2010 were some hard damn years,'' Florence Mayor Stephen Wukela said.
Most U.S. cities won't regain all the local jobs lost in the recession until 2015 or later. Top performers: College towns, oil centers, military base communities.
More than half of all U.S. metro areas won't regain the jobs lost in the recession until the second half of 2015 or later, an analysis for the U.S. Conference of Mayors says.
Less than a third of U.S. cities and their surrounding suburbs have recovered all the jobs lost since the arrival of the financial crisis. Of 363 U.S. metros, 98 now have more workers than at their pre-recession peak, with an additional 11 slated to join them by the end of the year, according to projections by IHS Global Insight, which compiled the data.
The data highlight how slowly most of the U.S. continues to recover from the economic crisis, said Bob Tomarelli, regional economist at IHS. Cities that recouped jobs fastest typically had universities or health care industry concentrations, major federal-agency or military employers, or exploited newly commercialized shale oil and gas, he said.
"The biggest takeaway is that you still have a large number of metropolitan areas that have not gotten back to pre-recession levels,'' Tomarelli said. "It's not a great environment. It's improving but it's very slow."
The recession started in December 2007 and ended four years ago this month.
Nationwide, the 135.1 million U.S. jobs during this year's first quarter are still 2.9 million below the peak, reached in early 2008, according to the Bureau of Labor Statistics. The nation's unemployment rate has jumped to 7.6% from an average of 5% during 2008's first quarter.
Two dozen cities, including major metro areas such as New York, have scrambled back to pre-recession employment levels in the last six to nine months, the report shows.
San Jose, New York, Denver, Indianapolis and Durham, N.C., all recovered to pre-recession employment levels as of the first quarter. Boston and Baltimore got there during the fourth quarter of 2012.
"As long as we have anyone unemployed, we're going to be working hard, but we're making progress,'' said Deron Kintner, deputy mayor for economic development in Indianapolis. He credited stable taxes, aggressive business recruiting and the city's presence in the health care industry for rekindling growth.
Many areas that will recover jobs most slowly had especially severe booms and busts in housing, and others lost large numbers of hard-to-replace manufacturing jobs, Tomarelli said. Even if manufacturing companies regain pre-recession stock prices and profitability, they are unlikely to employ as many U.S. workers as before, he said.
The housing bust will hurt areas such as Los Angeles and Las Vegas, which won't recover all of their lost jobs until 2017, in Tomarelli's forecast. Tallahassee won't recover all of its jobs until 2019, but still has 5.6% regional unemployment, well below the national average, thanks to 30,000 or more government jobs, including Florida State University workers, Mayor John Marks said.
"We're going to be fully employed within the next year or two," he said.
Manufacturing losses will hurt cities such as Detroit and Flint, Mich., which are among 50-plus areas not expected to recover all of their lost jobs by 2023, the analysis says.
Manufacturing has also been a major issue in smaller cities. In Florence, S.C., an area IHS says won't get back to peak employment until 2019, unemployment reached 13% in 2010 and has recovered to 8.5% in April as companies such as Johnson Controls and Honda expanded locally.
"2009 and 2010 were some hard damn years,'' Florence Mayor Stephen Wukela said.
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