August 10, 2009
Economic Outlook: A laborious turnaround
Asian markets were mixed Monday while European markets fell slightly with investors in export markets digesting last week's U.S. employment news.
The U.S. Labor Department said Friday the unemployment rate dropped to 9.4 percent, a turnaround few expected, although White House officials quickly proclaimed the $787 billion recovery act partly responsible for the improvement.
Labor Secretary Hilda Solis and President Obama quickly said there was more work needed to keep employment headed in the right direction. Estimates, until Friday, pegged unemployment as rising to 10.5 percent or higher by the end of the year.
Obama said the numerous interventions had rescued the economy from
catastrophe and pointed out the third act of the Recovery Act, was geared toward hiring. The first, a middle class tax cut, and the second, extensions of safety nets, have already begun.
U.S. senators extended the Cash For Clunkers program last week, dropping amendments that would have required a review in the House and delayed a presidential signature. Senators added $2 billion to the program that burned through much the first $1 billion within a week. The extension is projected to keep the option open for car buyers through Labor Day.
In Washington, Treasury consultant Kenneth Feinberg, frequently called the
pay czar is working in stages to align pay structures at bailed out firms with political expectations, The New York Times reported Monday.
The first step is for Feinberg is to review the top 25 salaries at companies that received more than one government bailout, a step that could set the tone for the second step, which is to extend the review to the next highest 75 compensation packages.
The issue is complicated by the new wrinkle of firms now leaning more toward guaranteed bonuses, the Times said.
Although the concept of guarantees seems to negate the concept of a bonus, the issue shows firms may be ready to sidestep the rules to maintain top talent.
Currently, Feinberg has 60 days after plans are submitted to rule on the pay packages of the first 25, which are due in his office by Thursday.
In Japan Monday, the Nikkei 225 rose 1.08 percent, while the Hang Seng index in Hong Kong jumped 2.72 percent. The Singapore Straits Times index fell 2 percent, while the S&P/ASX in Australia rose 0.11 percent.
In midday trading in Europe, the FTSE 100 in London fell 0.62 percent, while the DAX 30 in Frankfurt dropped 0.96 percent. The CAC 40 in Paris slid 0.91 percent, while the broader DJStoxx 600 fell 0.73 percent.