Economic

Friday, June 5, 2009

Summary Box: Jobless claims dip, but work scarce

By The Associated Press The Associated Press – Thu Jun 4, 5:40 pm ET

JOBLESS CLAIMS EASE: The number of newly laid-off workers filing initial claims for unemployment insurance fell Thursday, and so did the total number of people on the jobless benefit rolls.

JOBS STILL SCARCE: Still, the drops were small and there is little indication companies are hiring. About 6.7 million people are receiving unemployment aid under the regular 26-week program, while 2.35 million more are receiving benefits through an emergency federal extension set up by Congress last year.

WHAT'S NEXT: The government's monthly employment report comes out Friday. Economists expect it to show that employers cut 520,000 jobs in May, sending the unemployment rate to 9.2 percent from its April level of 8.9 percent.

Tony Las Vegas development struggles in downturn

By KATHLEEN HENNESSEY, Associated Press Writer Kathleen Hennessey, Associated Press Writer – Thu Jun 4, 8:50 pm ET

LAS VEGAS – It was a symbol of Las Vegas largesse during the good times. Now it's an emblem of recession blues.

With a manmade lake in the desert, an Italian-style village beyond the suburban sprawl and neighborhoods fit for diva Celine Dion, the Lake Las Vegas resort development flouted good sense and modesty in the tradition of all great Las Vegas dreams.

But it has fast turned sour for some.

Last year, the developer, Transcontinental Corp., lost the property in foreclosure after defaulting on $540 million in loans. The new owners of Lake Las Vegas filed for Chapter 11 bankruptcy last summer. One if its anchor hotels, a Ritz-Carlton owned by Village Hotel Investors LLC, also filed bankruptcy to stave off foreclosure and has been sold to new owners. One of three premier golf courses has been abandoned.

New home construction has slowed to a crawl, though the community is far from built out. Foreclosures have spread like a virus, and home values are falling.

Even the sparking, blue lake — the jewel of the luxury haven — nearly sprung a leak, forcing engineers to rush to make repairs before it drained.

Not surprisingly, residents are jumping ship. In May, nearly 10 percent of the homes on the market at Lake Las Vegas were either bank-owned or short sales, meaning they were priced so low a sale would not satisfy the owners' debt to the bank, according Applied Analysis, a real estate research firm.

Nearly 80 percent of the homes listed were vacant.

"I thought it was a no-lose situation. It ruined me," said Ed Santacruz, a former mortgage broker and fortune seeker who let his Lake Las Vegas hotel-condominium go into foreclosure. He had planned to rent out the property to tourists, but couldn't get enough takers to cover the mortgage.

"That's where I messed up, I believed enough in the product and in Las Vegas," Santacruz said.

Lake Las Vegas' woes largely are due to now familiar problems. The community was designed as both a resort and residential destination — leaving it heavily dependent on second-home buyers and tourism. Both faltered when the economy sputtered.

"There was a point and time when the higher end of the market had been less impacted. But as the recession has run longer and deeper than initially expected..." said Brian Gordon, a principal at Applied Analysis.

The community that strove for seclusion wasn't as isolated as some thought.

The palm trees and putting greens of Lake Las Vegas emerge out of the near empty desert off a dusty suburban highway 17 miles from the Las Vegas Strip. The homes are clustered around a 2-mile-long lake that defies the scorching heat and environmentalists, alike.

A replica of Florence's Ponte Vecchio, a popular venue for weddings, crosses the water on the south end, near a tasteful, small casino.

Two of the community's three golf courses were designed by Jack Nicklaus. Promotional materials boast a seven-minute commute to the Las Vegas casinos on the horizon — by helicopter.

The idea of exclusive desert resort living originally was the brainchild of J. Carlton Adair, an actor and businessman. Adair acquired the land in 1966 in a swap with the federal government that also included the rights for 10,000-acre feet of water. Creating what he planned to call Lake Adair would require damming water destined for Lake Mead, the Colorado River reservoir that provides water to southern Nevada.

But Adair went bankrupt before his dream was realized and a subsequent group of investors also failed to raise the necessary money.

Transcontinental took up the mantle in 1990, a year before the dam was completed. The city of Henderson, a bedroom community next to Las Vegas, was attracted by the promise of a new solid tax base. It agreed to sell the community the water it would need to replenish the evaporation under the scorching sun. The community pays a water bill of about $2 million a year.

The decision was blasted by environmentalists, who now see a bit of karma in Lake Las Vegas' recent troubles.

"This was the height of the gilded age of excess in the 1990s and 2000s. It was a community built on the idea that there were no limits to natural resources or to the number of millionaires willing to invest in a project," said Launce Rake, a spokesman for the Progressive Leadership Alliance of Nevada, a liberal government watchdog group.

"I don't know if Lake Las Vegas is sustainable in the long term. Does it turn into a ghost town?"

This dire notion is dismissed as hyperbole by many residents and the current owner of much of the land and amenities, Atalon Group.

"Like many large-scale second home and resort communities throughout the country, Lake Las Vegas has had to adjust to the decreased demand for property and pricing of investments," Frederick Chin, president of Atalon-subsidiary LLV Holdco LLC, said in a statement.

"Atalon's goal for Lake Las Vegas is to reset and reposition the community to flourish as market conditions improve, thereby achieving what is in the best interests of homeowners and stakeholders alike."

After the development filed for bankruptcy in July 2008, corporate officials won approval to pay for urgent repairs to prevent the premature deterioration of two pipes underneath the lake. They argued the damaged pipes threatened to drain the lake like water from a bathtub.

There are plenty of residents with ample resources working to hold Atalon to its commitment. A savvy and heavily invested group, some are banding together to protect their homes and their amenities. One group is trying to arrange to buy the private SouthShore Golf Club now tied up in the bankruptcy.

Others are ready to move to less remote pastures.

To her own disbelief, resident and real estate agent Lynne Hoffman has had her Lake Las Vegas home on the market for three years with an eye toward moving to a community closer to more ordinary comforts — supermarkets, clothing stores, a bank.

She's dropped the price to $488,000 — $40,000 less than she paid in 2001. She gets offers from potential buyers, she says, but they lowball her lowball price.

"It's insane! I'm like, what do you want people? You want this house for a penny? I have to pay the bank," she said.

There are plenty of properties that have fallen much further from the height of southern Nevada's real estate bubble, one of the most inflated in the nation.

Real estate listings show a 4,000-square-foot mansion that sold in 2005 for $2.7 million was marked down to $1.2 million in May. A 1,700-square-foot condominium that sold for $1.2 million in 2004 is now listed for $389,000.

Celine Dion and her husband Rene Angelil bought a home on the lake's south shore for $1.2 million in 2002, as the Canadian songstress began what became a five-year run at Caesars Palace on the Las Vegas Strip. Since then, Dion has moved on to other gigs and the home has only sunk in value to about $795,000, according to estimates on Zillow.com.

"Deals" like these are drawing a new breed of potential home buyers to the lake. One agent and resident, who asked not to be named to protect her business, described her new clients this way: "It was the Lexus or the Mercedes, we're down to now pickup trucks."

However, it's not likely that this tony retreat will soon become a favorite for young families or middle-class homeowners. Although home values have dropped to affordable levels, homeowners association fees that go to pay for upkeep of common areas have not. Some residents pay three such fees, adding more than $500 to a monthly housing bill.

Santacruz, who now lives in Chicago, laughed a pained chuckle when told the current listing price for the condominium he let go to foreclosure. He paid $359,000 for the 630-square-foot unit in 2004. It's listed for $76,900.

He thought for a minute and said, "At that price, someone could make some money."

___

On the Net: Lake Las Vegas: http://www.lakelasvegas.com/

Washington commemoration of Tiananmen overshadowed

AP – FILE -- In this June 5, 1989 file photo, a Chinese man stands alone to block a line of tanks heading …

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By FOSTER KLUG, Associated Press Writer Foster Klug, Associated Press Writer – Thu Jun 4, 8:54 pm ET

WASHINGTON – Activists and U.S. lawmakers looking to highlight the 20th anniversary of China's bloody crackdown at Tiananmen Square are finding their efforts overshadowed by the emergence of a China crucial to U.S. economic and diplomatic efforts around the world.

Washington has seen daily activities this week related to June 4, 1989, when China sent tanks and troops to crush demonstrations and shoot protesters seeking to remake the authoritarian Chinese system. There have been congressional hearings, appearances by the "Three Heroes of Tiananmen" and other activists, photo exhibits and candlelight vigils. On Thursday, dissidents and lawmakers rallied in front of the Capitol, calling on the U.S. government to provide more support for pro-democracy efforts in China.

Secretary of State Hillary Rodham Clinton said in a statement that China, as an emerging global power, "should examine openly the darker events of its past and provide a public accounting of those killed, detained or missing, both to learn and to heal."

But none of the commemorations of Tiananmen has demanded as much attention as Treasury Secretary Timothy Geithner's trip to China this week to secure economic cooperation from the single-biggest holder of U.S. debt.

Republican Rep. Chris Smith of New Jersey criticized President Barack Obama for choosing the Tiananmen anniversary to make a major speech in Cairo meant as an outreach to Muslims. Obama and his administration should have been concentrating Thursday on sending China a forceful message on human rights and on the Tiananmen crackdown, Smith said at the Capitol rally.

"We should be talking about human rights," Smith said. "That should be our priority; after that comes the trade and the economic issues."

Beijing's importance to America was further underscored this week by a Chinese company's purchase of the unit of bankrupt General Motors Corp. that makes Hummer sport utility vehicles and by worsening tensions with North Korea, where Chinese leverage is seen as key to getting the North to return to nuclear disarmament talks.

As the United States works to secure cooperation from a powerful, economically dynamic China, it has become difficult for activists and lawmakers to draw attention to Tiananmen and to complaints that China abuses its citizens' rights.

Harry Wu, who spent 19 years in China's "laogai" labor camp system, said the Obama administration's position on China is understandable but frustrating.

The reason that events on Tiananmen are overshadowed, he said, is clear: "Because China is holding so much bonds. Because China became a major producer of the United States."

China holds an estimated $1 trillion in U.S. government debt.

Clinton has called the U.S.-China relationship the world's most important. In February, she angered activists and delighted China by saying during a trip to Beijing that the United States would not let its human rights concerns interfere with cooperation with Beijing on global crises.

State Department spokesman P.J. Crowley, facing questions Wednesday about Clinton's comments in February, said human rights are "paramount on our list."

But Clinton is "communicating that we're not going to take a cookie-cutter approach to human rights," Crowley said. "She is interested in making sure that we address this in a way that is going to be most effective. In some cases, that will be public. In some cases, that will be private. In some cases, that will be both."

Beijing has never allowed an independent investigation into the military's crushing of the 1989 protests, in which possibly thousands of students, activists and ordinary citizens were killed.

Prison blues: States slimming down inmate meals

By SHANNON McCAFFREY, Associated Press Writer Shannon Mccaffrey, Associated Press Writer – 2 hrs 15 mins ago

ATLANTA – The recession is hitting home for inmates, too: Some cash-strapped states are taking aim at prison menus.

Georgia prisoners already didn't get lunch on the weekends, and the Department of Corrections recently eliminated the midday meal on Fridays, too. Ohio may drop weekend breakfasts and offer brunch instead. Other states are cutting back on milk and fresh fruit.

Officials say prisoners are still getting enough calories, but family members and critics say the changes could make prisoners irritable and food a valuable commodity, increasing the possibility of violence.

In Georgia, inmates are still getting the same number of daily calories: 2,800 for men and 2,300 for women. The portions at breakfast and dinner are bigger on days only two meals are served.

Almost 5 percent of the state's 58,295 prisoners still get three meals every day because they are diabetic, pregnant or have other special health needs.

Barbara Helie, whose 25-year-old son Nicholas is serving time for armed robbery in Valdosta State Prison, said he would go hungry without the roughly $60 a week she puts into his account to buy instant soups, cheese, beef sticks and other snacks at the prison commissary.

"I don't know how the guys who don't have someone on the outside helping out handle it," Helie said. "Food has been an ongoing issue for him ... He's hungry a lot."

Georgia's fast-growing prison system — the fifth-largest in the nation — has been hit hard by the same budget woes plaguing other states. For the current fiscal year, the state has slashed almost 10 percent from the state Department of Corrections' $1.1 billion budget.

Friday lunches were a casualty of the department's decision to save money on gas and other costs by scaling back the prisoner work week from five eight-hour days to four 10-hour days, said Calvin Brown, Georgia Department of Corrections Deputy Director of Facility Operations. He couldn't say how much the state is saving.

For years now, Georgia prisoners have received only two meals a day on weekends because they don't work, so now the same holds true on Fridays. They get three meals on work days because they are exerting themselves on road crews and litter pick up.

There are no federal minimum caloric standards for state prison systems, though they are encouraged to adhere to guidelines established by the Institute of Medicine of the National Academies Food and Nutrition Board. Georgia officials say they follow those guidelines, and Brown said there have been some complaints from inmates and family members but no lawsuits.

In Ohio, prisons director Terry Collins said eliminating breakfast on the weekends and replacing it with brunch "could save us some real dollars when it comes to staffing and food costs."

He said the move would not upset prisoners because it would not sacrifice quality.

"I don't expect them to be as good as mom's home cooking, but the food should be cooked and presented properly," Collins said.

Other states have kept three meals but are scaling back menus. Earlier this month, Alabama reduced the milk and fresh fruit it serves to save $700,000. Alabama inmates now receive an apple or an orange once a week, down from twice a week. Milk has been reduced from seven servings per week to three. Tennessee has also cut back on milk portions for men — from two servings a day to one — to save $600,000.

Gordon Crews, a professor at Marshall University in West Virginia, wrote a book looking at correctional violence and said historically there have been links between food and problems behind bars. He pointed to a February riot at the Reeves County Detention Center in Texas caused in part by poor food quality.

"A lot of prisoners will see something like that as some kind of retribution against them or some kind of mistreatment," Crews said. "It'll be something that the correctional staff will pay the price for ... another reason (for inmates) to argue and fight back."

In Georgia, reports of inmate assaults — on both staff and other inmates — are up substantially for fiscal year 2009 over the year before, according to data obtained by The Associated Press through an open records request.

Prison officials deny the increase has anything to do with the shrinking menu but didn't provide an explanation.

Sara Totonchi, of the Southern Center for Human Rights, called the elimination of Friday lunch part of a troubling trend of budget cuts in Georgia's correctional system.

"We don't think this is a good idea," she said. "It destabilizes things inside the prison and that is not good for any of the inmates or staff."

___

Associated Press writers Phillip Rawls in Montgomery, Ala., and Erik Schelzig in Nashville, Tenn., contributed to this report.

___

On the Net:

Georgia Department of Corrections: http://www.dcor.state.ga.us

American Civil Liberties Union National Prison Project: http://www.aclu.org/prison

National Institute of Corrections: http://www.nicic.org

Temp work helps mask joblessness among Americans

By FRANK BASS, Associated Press Writer Frank Bass, Associated Press Writer – 1 hr 28 mins ago

TOWNSHEND, Vt. – For weeks, Greg Noel roamed the spine of the Green Mountains with a handheld GPS unit, walking dirt roads and chatting with people as he helped create a map of every housing unit in the United States.

Work was good: The sun was out, the snow was gone and the blackflies hadn't begun to hatch. But now that work is over and Noel, 60, and more than 60,000 other Americans hired in April to help with the 2010 census are out of work once more.

It's a familiar predicament in today's economy, in which some 2 million people searching for full-time work have had to settle for less, and unemployment is much higher than the official rate when all the Americans who gave up looking for jobs are counted, too.

Because of the surge of hiring for the census, April unemployment only rose to 8.9 percent — a much slower increase than had been feared.

But consider these numbers:

_The 8.9 percent April unemployment rate was based on 13.7 million Americans out of work. But that number doesn't include discouraged workers or people who gave up looking for work after four weeks. Add those 700,000 people, and the unemployment rate would be 9.3 percent.

_The official rate also doesn't include "marginally attached workers," or people who have looked for work in the past year but stopped searching in the past month because of barriers to employment such as child care, poor health or lack of transportation. Add those 1.4 million people, and the unemployment rate would be 10.1 percent.

_The official rate also doesn't include "involuntary part-time workers," or the 2 million people like Noel who took a part-time job because that's all they could get, plus those whose work hours dropped below the full-time level. Once those 9 million workers are added to the unemployment mix, the rate would be 15.8 percent.

All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in April.

The ranks of involuntary part-timers has increased by 4.9 million in the past year, according to a May study by the Federal Reserve Bank of Cleveland. Many economists now predict unemployment won't peak until 2010. And since employers generally increase the hours of existing workers before hiring new ones, workers could be looking for full-time jobs for some time.

Even so, one economist said the increase in involuntary part-timers might have a silver lining. Gary Burtless, a senior fellow in economic studies at the Brookings Institute, said employers are likely cutting back everyone's hours instead of laying off people.

"In many countries, it's regarded as a good thing," he said.

For tens of thousands of people like Noel, a part-time job isn't their dream, but it beats the alternative. A Pennsylvania native and veteran of the Silicon Valley boom-and-bust cycle, Noel settled in southern Vermont in 2003. He'd worked a series of jobs, commuting to his latest position as an auditor for a family owned food and beverage distributor in Brattleboro before being laid off in early spring.

Vermont is in better shape than most states — but not by much. Real estate and tourism, pillars of the state's economy over the past decade, are staggering.

Many parents who were frantic last year about sons and daughters serving in Iraq and Afghanistan — the state has sent a disproportionate share of its young people overseas — now are relieved their children have a steady job with benefits. Financial jobs are few. "The economy?" Noel asks between bites of a bison burger in a tiny diner. "You just don't know if it's ever going to come back. We may never have it so good again."

When the Census Bureau offered him a part-time job mapping houses nearly an hour from his Windham home, Noel jumped at it. The money, $10 to $25 an hour plus 55 cents per mile, was a big factor. But Noel said he also wanted to be part of a larger community effort, and the 2010 census is nothing if not a large community effort.

When the first numbers are released in December 2010, the Census Bureau will have spent more than $11 billion and hired about 1.2 million temporary employees. The government conducts its census every decade to determine the number of congressional seats assigned to each state, but the figures collected also help the government decide where to spend billions of dollars for the poor and disabled, where to build new schools and prisons and how state legislative boundaries should be designed.

It hasn't been the perfect job — that would be a full-time position with benefits — but Noel says the census job worked out well. It eased the pain of being unemployed, giving him something to do and made him realize his entire life doesn't have to be about financial management.

"It's just statistics," said Noel, "but it's important."

But last week, he was unemployed again, a victim of the Census Bureau's efficiency. Since the government was able to draw from a well-qualified but mostly out-of-work pool of applicants, the work done by more than 140,000 field employees went far more quickly than expected.

"We've always done well, but this time around was amazing," said Stephen L. Buckner, a Census Bureau spokesman. "It's a tough economic time."

For some temporary workers, the outlook is brighter. Ian Gunn spent five weeks "being paid to hike. It was great." Gunn, an 18-year-old high school senior heading to Renssalaer Polytechnic Institute next year to study computer science, hopes for a better economy when he graduates, one that offers more security than a series of part-time jobs.

"It's going to take time," he said, "but I've got four more years."

Noel, though, is uncertain about the future. It's possible he'll be called back to work later in the fall for the final push. The Census Bureau expects to send roughly 1.2 million workers out to count people who don't return their questionnaires; the hiring will push down unemployment numbers for several months during that period.

For now, Noel says, he and his wife are living without frills. He looks for another job and she runs Green Mountain Chef, a catering business near Stratton Mountain. Demand has slowed dramatically since the economic meltdown began, as it has for most tourism-dependent businesses in Vermont.

Noel hopes to avoid being a statistic for too long. Unemployment insurance will give him about $425 a week — enough to pay the mortgage and maybe the health insurance bill. Right now, the couple pays about $280 a month, but that will climb to $850 in September, when his government-subsidized COBRA policy expires.

"I hope something comes up," he says. "But there's not an awful lot out there."

___

On the Net:

Census Bureau: http://www.census.gov

Bureau of Labor Statistics: http://www.bls.gov

Despite fewer cuts, May jobless rate seen rising

By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer – 28 mins ago

WASHINGTON – With companies in no mood to hire, the unemployment rate is still rising. But the furious pace of layoffs is easing as the recession loosens its hold on the country.

The Labor Department on Friday is slated to release a report expected to show that a net total of 520,000 jobs were lost in May. If economists are right, the figure would mark the second straight month that job losses slowed. It also would be the fewest job reductions since October.

"A loss of that many jobs is bad, but would be taken as a sign that the heavy weights on the economy and the labor market seem to be diminishing a bit," said Steven Cochrane, managing director of Moody's Economy.com.

The deepest job cuts of the recession came in January when 741,000 jobs disappeared, the most since 1949.

Job losses averaged 700,000 a month in the first quarter but dropped to 539,000 in April. They should average around 500,000 in the current quarter and taper off to 250,000 per month in the final quarter of this year, according to some projections.

Even if job losses do let up, companies will be reluctant to hire until they feel certain any economic recovery will last. That's why economists predict the unemployment rate will climb to 9.2 percent in May, from 8.9 percent in April. If that happens, it would be the highest since September 1983, when the U.S. was recovering from a severe recession that had driven unemployment past 10 percent.

As the recession — which started in December 2007 and is now the longest since World War II — bites into sales and profits, companies have turned to layoffs and other cost-cutting measures to survive the fallout. Those include holding down workers' hours and freezing or cutting pay.

Federal Reserve Chairman Ben Bernanke repeated his prediction this week that the recession will end this year, but again warned that any recovery will be gradual.

Many economists believe the jobless rate will hit 10 percent by the end of this year. Some think it could rise as high as 10.7 percent by the second quarter of next year before it starts to make a slow descent. The post-World War II high was 10.8 percent at the end of 1982.

The Fed says unemployment will remain elevated into 2011 given the expectation of tepid recovery. Economists say the job market may not get back to normal — meaning a 5 percent unemployment rate — until 2013. Economic recoveries after financial crises tend to be slower, economists say.

Evidence has been mounting that the recession is letting up, with fresh signs emerging earlier this week.

The number of people continuing to draw unemployment benefits dipped for the first time in 20 weeks, and first-time claims also fell. Manufacturing's slide is slowing. Builders are boosting spending on construction projects and a barometer of home sales firmed.

Although shoppers remain cautious according to sales results from major retailers, Bernanke and other economists are hopeful that consumers won't return to the deep hibernation seen at the end of last year.

That's when the recession hit with brutal force, causing the economy to contract at a 6.3 percent pace, the most in 25 years. Consumers cut their spending at the time by the most in nearly three decades. Economic activity shrank at a 5.7 percent pace in the first three months of this year, despite a rebound by consumers.

Many analysts believe the economy is shrinking at about a 2 percent pace in the current quarter, and that the economy could return to growth as soon as the third quarter.

Ripple-effects from General Motors Corp.'s filing for bankruptcy protection — the fourth largest in U.S. history — could muddy the outlook, some analysts said. GM said earlier this week it will close nine factories and idle three others indefinitely as part of its restructuring. The closings, which will take place through the end of 2010, will cost up to 20,000 workers their jobs.

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