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1. Job Growth Slows, Unemployment Rate Dips
2. Did the Bush Admin. Orchestrate Falling Oil Prices?
3. U.S. Pensions Lost Value in September
4. Morgan Stanley Leads Push to Buy Hedge Funds?
1. Job Growth Slows, Unemployment Rate Dips
Employers added just 51,000 jobs in September, the fewest in almost a year,
while the unemployment rate dropped down to 4.6 percent -- offering a mixed
picture of the nation's jobs climate.
Still, the new figures released by the Labor Department on Friday suggested that
although the economy has moved into a slower phase of growth, it is not in
danger of sliding into a recession, analysts said.
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The new tally of payroll jobs added to the economy fell short of the 120,000
positions analysts were expecting. However, job gains for both July and August
turned out to be bigger than previously estimated, helping to take some of the
sting out of September's tepid payroll figure.
"The report is consistent with a job market this is slowing down but is still
decent," said Stuart Hoffman, chief economist at PNC Financial Services Group.
"It does reflect that businesses have been more cautious about new hires. But
jobs are still growing and wages are still growing and that is good," Hoffman
said. "There is no sign in this report that the economy is on the edge of a
cliff."
The 51,000 jobs added in September were the fewest since last October, when the
economy was still reeling from the blows of the Gulf Coast hurricanes.
The nation's unemployment rate dropped a notch from 4.7 percent in August to 4.6
percent, matching the rate seen in June. That dip also helped to offset any
disappointment over the September payroll gain, analysts said.
Friday's snapshot is the next to the last one that Americans will get of the
labor market before Election Day.
The last one will come on Nov. 3 - just days before the November elections.
Voters' choices at the polls on Nov. 7 are likely to be shaped in part by how
they are faring economically. The administration says Americans are mostly
better off, while Democratic rivals disagree.
President Bush's approval rating on the economy is at 40 percent among all
adults surveyed in an AP-Ipsos poll. That remains near his lowest ratings. The
poll showed that people surveyed trusted Democrats to do a better job of
handling the economy than Republicans.
The payrolls figure and the unemployment rate come from two different
statistical surveys, which can provide - as in Friday's case - a somewhat mixed
picture of what is happening in the labor market.
The seasonally adjusted overall civilian unemployment rate - 4.6 percent in
September - is based on a survey of 60,000 households. It showed that 271,000
people said they found employment last month, outpacing the number of people who
couldn't find work.
Economists tend to put more stock, however, in the much broader business survey
of 400,000 work sites that is used to calculate the payroll figures.
On the payrolls front, job cuts at factories, retailers and government tempered
job gains in construction, education and health services, and elsewhere.
In August employers added 188,000 jobs, a much stronger figure than the 128,000
reported last month. In July, 123,000 positions were added, up slightly from a
previous estimate of 121,000.
Workers' average hourly earnings rose to $16.84 in September, a 0.2 percent
increase from August. Economists were forecasting a 0.3 percent gain. Economists
keep close tabs on wage growth for clues about inflation.
The Federal Reserve's next meeting is scheduled for Oct. 24-25. Many economists
believe the policymakers will leave rates unchanged for the third meeting in a
row and said Friday's report would justify such a decision.
With the economy losing speed, the central bank in August decided to halt -- for
the first time - a two-year campaign rate-raising campaign. The Fed's goal is to
slow the economy sufficiently to thwart inflation but not so much as to push it
into recession.
Policymakers suggested the cooling economy eventually would lessen inflation
pressures.
Energy prices now seem to be cooperating with this scenario. Gasoline prices,
which had topped $3 a gallon in summer, have slid and now average $2.31 a
gallon.
The economy grew at a 2.6 percent pace in the spring - less than half the pace
of the first three months of the year. Growth in the July-to-September period
could come about the same or even less - at around a 1 percent pace, according
to various projections.
© 2006 Associated Press.
Editor's Note:
2. Did the Bush Admin. Orchestrate Falling Oil Prices?
There are some conspiracy theorists out there saying that President Bush has
orchestrated lower oil prices just in time for the fall elections.
The Washington Post takes a look at the theories.
The Post points out that most Americans don't believe that there is a
conspiracy. "This has been huge fodder for talk radio," says Tyson Slocum,
director of energy programs at Public Citizen, who's appeared on 15 radio shows
to talk about it. "I don't think the influence is as explicit as some people out
there are alleging. But all markets are susceptible to politics, and oil is no
exception."
CNN anchor Miles O'Brien said of the talk, "Some bloggers are putting those two
things together and, you know, this is the grassy knoll group."
And according to Chas W. Freeman, former U.S. ambassador to Saudi Arabia,
"Paranoia is as American as apple pie. This is all Michael Moore on steroids."
But could there be a reason beyond the geopolitical and weather ones generally
cited by experts.
There's a theory that the Saudi government is doing a favor for President Bush
by bringing down prices before the election. They point to a long-standing
relationship between the Bush family and the Saudi government.
The 2004 Bob Woodward book "Plan of Attack" alleged that then-Saudi ambassador
to the U.S., Prince Bandar bin Sultan, promised to keep "oil production high
enough to moderate fuel prices and bolster the U.S. economy during the
presidential election year."
And OPEC oil ministers, led by Saudi Arabia, are saying that they won't consider
cutting production until they meet in December. The conspiracy theorists point
to recent remarks made by the Saudi ambassador to the U.S., Prince Turki
al-Faisal, "OPEC will be meeting I think within a month or two to review these
factors, and we will discuss these things with countries like Venezuela and
Nigeria."
But those who disagree argue that Saudi Arabia generally tries to appease the
U.S. no matter what party is in charge. Also, some say that Saudi Arabia,
despite the remarks made by its ambassador, had already cut oil production in a
bid to drive up prices.
Some conspiracy theorists are also pointing the finger at Treasury Secretary
Henry Paulson. They say that Paulson's partners at Goldman Sachs are dumping
gasoline futures to drive down prices and help the GOP.
"Goldman has been liquidating its gasoline position, and that's put a lot of
pressure on prices," Citigroup oil analyst Doug Leggate tells the Post. "It's a
very large part of why gasoline has fallen."
"Goldman has issued three press releases about its sales," reports the Post. "In
June, it said that because of U.S. government regulations it would replace
unleaded gasoline futures, which will be terminated, to futures in reformulated
gasoline used in blending with ethanol. But then on Aug. 9, Goldman said it
would reduce the gasoline portion of its index, sparking a steep one-day plunge
in prices on the New York Mercantile Exchange. Goldman sources said yesterday
that the proportion of gasoline in the index has been reduced by two-thirds."
Another theory says that Big Oil is lowering prices to help the Republicans. As
evidence, theorists point to the fact that 81 percent of the $63 million donated
to politicians since 2001 were awarded to Republicans. In addition, BP's
indictment for trying to corner the market for propane shows that companies can
manipulate prices.
"Politicians will fulminate about things, but it's the market that sets the
price," argues John Felmy, chief economist of the American Petroleum Institute.
"Do I think Karl Rove or George Bush is whispering in the ears of oil companies?
No. That's silly," says Slocum. But some folks in the government sent strong
signals to speculators. Was that related to the elections? I don't know.
Editor's Note:
3. U.S. Pensions Lost Value in September
The average U.S. pension fund continued deteriorating in September as
liabilities increased because of lower interest rates, according to a Mellon
Financial Corp. report released Friday.
The funded status, or ratio of assets to liabilities, of the average pension
plan fell 0.2 percent during the month, the report said. Liabilities rose an
average of 1.7 percent, the report said, outpacing asset growth of 1.5 percent.
Lower interest rates hurt pension plans by raising liabilities because the funds
earn less off their assets but still must pay out the same amount to retirees.
U.S. pension plans' funded status has worsened since June, Mellon said.
The average pension plan in the U.S. is still more than 6 percent better-funded
now than it was at the beginning of the year, the report said, because interest
rates rose during the first five months of 2006.
Mellon Financial said pension plans' funded status worsened despite a
record-breaking stock market, buoyed by lower energy prices and the Federal
Reserve's halt in raising short-term interest rate targets.
"A good month in the stock market was not enough to keep up with the growth of
pension liabilities," said Peter Austin, executive director of Mellon Pension
Services. "Lower interest rates helped to boost the outstanding liabilities that
pension plans face."
© 2006 Associated Press.
Editor's Note:
4. Morgan Stanley Leads Push to Buy Hedge Funds?
Wall Street firms may be making a new push to acquire hedge funds, the must-have
assets for rich investors, to keep both their clients and top talent from
straying to other managers, analysts and investors said.
"There is clearly an aggressive movement among firms to either buy or build
hedge funds because this is where people feel they need to be," said Justin Dew,
senior hedge fund analyst at Standard & Poor's.
The trend has been visible since firms like Legg Mason Inc. snapped up the
Permal Group last year and JPMorgan Chase & Co. took a stake in Highbridge
Capital Management in 2004.
This week Merrill Lynch and asset manager BlackRock Inc., traditionally known
for its long-only funds but also recognized for its sizable hedge fund
offerings, completed their link-up in which BlackRock took over Merrill's asset
management arm.
The trend appears to be heating up even further as Morgan Stanley, the largest
U.S. securities brokerage, is courting prominent hedge fund FrontPoint, whose
chairman Phil Duff is a former Morgan Stanley chief financial officer and is
said to be close with Morgan's top manager, a source familiar with the matter
said.
Morgan Stanley already has a sizable hedge fund operation but chief executive
John Mack seems to be shopping aggressively to keep up with competitors on Wall
Street, analysts and hedge fund investors said.
"It is not that Morgan Stanley is behind in the hedge fund business," said Tom
Whelan, chief executive of Greenwich-Van, an adviser on hedge fund strategies
and performance. "It is that John Mack is clearly trying to grow the business."
Rival Goldman Sachs Group Inc. ranked as the world's and the United States'
biggest hedge fund manager and J.P. Morgan Chase comes in as the second-largest
U.S. hedge fund manager, according to industry magazines Alpha and Absolute
Return.
And Morgan Stanley is not alone in its push, said analysts, noting that smaller
firms are also putting out feelers to buy hedge fund players.
Morgan Stanley's Coup
The reasons for the moves are the same among all competitors: to keep wealthy
individual and institutional clients happy at the firm with enough product
options.
At the same time, they also want to hold onto top traders and managers who might
otherwise be tempted to quit for better pay and opportunities at an external
hedge fund.
"It has really hurt Wall Street firms to lose top traders they have cultivated
on their prop desks to hedge funds," Standard & Poor's Dew said, referring to
those who sustain the firms' proprietary trading operations. "It is their bread
and butter."
Morgan Stanley, meanwhile, scored a coup this week when it wooed Stuart Hendel
back from $5.5 billion hedge fund Eton Park Capital Management to run the firm's
global prime-brokerage business. These units help finance and clear trades for
hedge funds and are huge money makers for many Wall Street firms.
And Wall Street firms are said to be eager to lure back other executives who
wandered away during the height of the hedge fund craze with promises of more
stable salaries at a time hedge fund performance has leveled off.
In the first eight months of 2006, the average hedge fund has returned 7
percent, according to data from Hedge Fund Research, compared with the
double-digit gains that were common after the technology bubble burst in 2000
and many traditional asset classes were nursing heavy losses.
Wall Street firms are also eager to acquire hedge funds because they stand to
earn significantly more income from relatively smaller amounts of invested
capital as hedge funds, unlike traditional mutual funds, charge a performance
fee on top of a management fee.
"Wall Street firms want hedge funds for breadth of product and they are
especially attractive because they offer a very different return profile,"
Greenwich-Van's Whelan said.
And as firms scout around for possible takeover targets, hedge fund managers are
saying many more companies are up for sale - at the right price.
Several interviewed managers who left established firms with a great deal of
enthusiasm are now quietly saying that they would entertain the proposition of a
takeover.
"It is easier to concentrate on making investments instead of running a
business," one manager who asked not to be named said.
© 2006 Reuters.
Editor's Note:
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