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The word recession has been emblazoned in the psyche of most Americans over the past few months. The term has become ubiquitous (although most people probably don’t know the true definition), and you can’t escape it these days. It seems that all this talk of recession has forced employers to cut 80,000 jobs in March, the highest job loss in five years, according to an AP article. An array of industries, including construction, manufacturing, retailing, and financial services, were all hit, outpacing gains in a few industries, such as government and education. This stands as the third straight month of losses this year, pushing the unemployment rate to 5.1% from 4.8%–the highest since September 2005, when Hurricanes Katrina and Rita dealt a deadly blow to the U.S. economy. According to the article: The economy is suffering the effects of a housing collapse, a credit crunch and a financial system in turmoil. That’s causing people and businesses to hunker down, crimping spending, capital investment and hiring. Those things in turn further weaken the economy in what has become a vicious cycle. For the first time, Federal Reserve Chairman Ben Bernanke acknowledged Wednesday that the country could be heading toward a recession, saying federal policymakers are “fighting against the wind” in combating it. Many other economists and the public believe the recession already has arrived. Bernanke wouldn’t tip his hand about the Fed’s next move. However, many economists believe the central bank will lower interest rates again when they meet later this month. So, it seems that there is still some time to avert a true recession, which is generally defined as a decline in real gross domestic product for two consecutive quarters (6 months). It is hoped that the government’s latest $168 billion stimulus package of tax rebates for individuals and businesses will help revive consumer confidence and the economy, although some analysts feel the gesture is a little too late to stave off the impending recession. I, for one, plan to do my part to help ward off a recession by using the funds to purchase a brand new Macbook! On a side note: The National Bureau of Economic Research’sframework for judging recessions: A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and […]
For years now—probably since after the 9/11 attacks, understandably—I’ve noticed the media paying a lot of attention to the troubles of the airline industry. People’s fear of flying, the popularity of e-tickets, and the trimming of airline’s costs (from eliminating meal service to reducing baggage limits) are just a few issues that have dominated headlines. More recently, articles discussing the soaring costs of jet fuel have been largely unavoidable. But in the last few weeks, I’ve really been stunned by the multitude of airline death blows. Just today, Alitalia swerved closer to bankruptcy as talks with Air France/KLM folded, while ATA abruptly shut down, stranding thousands of passengers and firing over 2,000 employees. On Monday, Hawaii’s Aloha Airlines said farewell to its last passenger; the airline shut down its 61-year-old operations by letting go of 2,000 to 4,000 employees. And last month, Delta announced that it would offer buyouts to over half its workforce, a whopping 30,000 employees, and United said it would ground about 15 to 20 jets, 4% of its fleet. While industry experts claim most larger carriers are safe, for now, from closing shop, they expect to see a stream of smaller operations to continue going under. This is a really serious trend that seems to be coming to a head. Tens of thousands of jobs have already been lost, with more to come.
Apparently the emerging ethanol industry is wreaking havoc on the chicken industry. So, you might ask: what does an alternative energy fuel source have to do with chickens? The answer is *insert drum roll here* … a lot … so much so that the world’s largest poultry processor, Pilgrim’s Pride Corp., is blaming the ethanol industry and recently passed legislation supporting it for what the company’s president and CEO proclaims is a “crisis” in the chicken industry. And this “crisis” translates to a just-announced 1,100 jobs cut and several facility closings for Pilgrim’s Pride. (See the list at the end of the blog post.*) So, the question still remains: What does an alternative energy fuel source have to do with chickens? Well … it just so happens that the major ingredient in chicken feed (and one of the largest overall expenses in producing and delivering chicken products to consumers) is corn. And corn happens to be the main ingredient in (you guessed it) corn-based ethanol (I think the name gives it away here). Recent federal incentives for corn-based ethanol production have caused the price of chicken-feed to soar. Based on current commodity futures markets, the Pilgrim’s Pride total costs for corn and soybean meal to feed all their chickens in fiscal 2008 would be more than $1.3 billion higher than what they were two years ago, according to the company. “Our company and industry are struggling to cope with unprecedented increases in feed-ingredient costs this year due largely to the U.S. government’s ill-advised policy of providing generous federal subsidies to corn-based ethanol blenders,” Chief Executive Officer J.Clint Rivers said in a press release. This matter over the effects of the ethanol industry’s need for corn on the chicken industry has been a concern for a few years now, and seems to have hit critical mass with the Pilgrim’s Pride closings. Matthew Herman, manager of a Tyson Foods chicken production and processing complex in Monroe, NC testified before a House Agriculture Subcommittee at the beginning of last year that demand from ethanol producers has doubled the cost of corn and driven up by 40% the feed cost of the chicken industry alone. He also noted at this hearing that the livestock and poultry industries normally purchase more than half of the corn produced in the country to make feed for their animals. However, the rapidly expanding ethanol industry consumed more than two billion bushels of corn (18% of production) in 2006 and will take as much as 3.5 billion bushels in […]
A couple days ago, the Pentagon announced that EADS won a $36 billion ($100 billion growth potential) contract to build U.S. Air Force refueling tankers in Mobile, AL, ending a more than two-year bidding battle. But the real controversy, which raises issues of nationalism, globalization, homeland security, etc., is just beginning. Let me get you up to speed. Business Facilities began covering this story at its inception back in 2005, when French-owned EADS, primary shareholder of Airbus, selected Mobile over 70 other sites in 32 states to locate its airfield engineering center. In 2007, this facility opened as scheduled at the Brookley Field Industrial Complex. But at the same time back in 2005, EADS began its bid to win the air force tanker contract. Its main competition: Chicago-based Boeing, the company that had supplied the refueling tankers for 50 years, but which came under scrutiny in 2002 and 2003 when shady and illegal business discussions between Boeing CFO Mike Sears and Air Force procurement official Darleen Druyun sent them both to prison. In May 2005, the House of Representatives requested that the Pentagon deny military contracts to foreign companies receiving government subsidies in a World Trade Organization member company. This was seen as a fairly blatant attempt to knock EADS out of consideration, but EADS sidestepped this by partnering on the deal with U.S. company Northrup Grumman. Fast forward to this month when EADS was awarded the contract, much to the surprise of most industry analysts, and to the outrage of numerous politicians who claim that while 1,000 jobs will be created in Alabama, more would have been created nationally if Boeing won. Disgruntled lawmakers, some of whom are lobbying for the decision to be overturned, assert that 85% of Boeing’s planes would have been built on U.S. soil, while only 58% of EADS will be made in the U.S., as main manufacturing work will be done in Europe and only final assembly completed in Alabama. House Speaker Nancy Pelosi cites a threat to homeland security as a reason for not wanting a foreign company building U.S. military equipment, while other politicians have acted particularly childish, calling the EADS product “crap” and Northrup Grumman “a front for the French.” The ubiquitous presidential candidates had their say, too, with Democratic delegate-leader Barack Obama, who shares his home state of Illinois with Boeing, perhaps showing his bias while expressing displeasure with the Pentagon’s decision. Hillary Clinton used the opportunity, more than anything, to blast the Bush administration (Pentagon), which is typical campaign […]
Saw this article in The New York Times today; it’s about how New Jersey’s brownfield redevelopment incentives didn’t do much during the 1990s, but now that there’s hardly any greenfield space left in the state, developers are giving them a shot. I think it’s kind of unfortunate that the easiest way for a developer to earn back their 75% of cleanup cost is by putting retail on the site. I live in New Jersey, and let me tell you, we have enough retail. Can’t they change the way the money is generated to give a boost to industrial or high-tech office work development? Companies that build a factory or research center on a brownfield site should be able to get their three-quarters cleanup reimbursement faster, not slower, than a speculative developer building yet another strip mall. Oh, and I should say (in defense of the Garden State) that when I wrote that there’s no greenfield space left to develop on, that’s not because we have no green space at all–it’s just that so much of the prime stuff has been protected by law (hurray). As the most densely populated state in the country (“New Jersey’s density is currently 1,165 people per square mile—denser than both India (at 914) and Japan (835). No other state even comes close.” – NY Times), we could be at the forefront of what development along the Bos-Wash corridor is going to look like soon.
Everyone knows about wind turbines and how they are increasingly popping up around the world as another enviro-friendly way to create energy. But did you know that scientists are currently developing and testing a new turbine that you will never see, but that can create limitless, constant energy? That is because the turbine will be bound to the ocean floor with its blades whirling about 40 feet below the surface. Scientists are developing these underwater turbines with the goal to harness the energy of the Gulf Stream current off the Floridian coast. You can read specifics of this interesting concept here. The article tackles questions like, “Won’t fish get chopped up?” and “Will large ships be able to navigate around them?” These are legitimate questions that need real answers before underwater turbines can become a justifiable plan, but tapping into ocean currents could become a key component in acquiring sustainable energy on a planet with dwindling natural resources.
A recent article entitled “America for Sale” caught my attention this morning. Why? Just a few days ago, I was writing an article about Virginia’s new initiative, VITAL (Virginia International Trade Alliance), which essentially creates a network of companies committed to luring foreign investments into the commonwealth and marketing it globally. And this is a goal of numerous states, of course–branding, trading, and investing overseas. A no-brainer, right? Well, I didn’t think of it until I read the “America for Sale” article, but suppose a state is too successful at attracting foreign investors and shareholders. At what point does an American business become an unAmerican business? Does it matter where a corporation’s origin is if its investors use a different language and currency? Do we have national safeguards to prevent an overload of foreign investment? If not, shouldn’t we? Can we recognize the line between selling stocks and selling out?
Not bloody likely. According to an annual report, titled “Doing Business,” put out by the International Finance Corporation (IFC) in late 2007, Pakistan is perceived as a better place for doing business in South East Asia than India in many respects. In fact, Pakistan ranked 76 among 178 economies worldwide, while India held the 120th spot. However, after the assassination in Pakistan of opposition leader Benazir Bhutto in late December, Pakistan has no chance of outpacing India as a prime spot for foreign investment anytime in the near future. The country’s economy (which is in shambles now) endured nearly $2 billion in losses in just two days of violence following her murder, according to government estimates. According to a January article on Forbes.com: “Until recent months, Pakistan had been an increasingly popular destination for foreign investment, partly because military ruler President Pervez Musharraf introduced liberal economic policies after he came to power in a 1999 coup. The economy has grown at an average annual rate of 7.0 percent since 2002. The Karachi stock exchange has shot up almost 900 percent this decade. But the killing of Bhutto, a former prime minister, has left an economic void since she was seen as the only opposition leader with genuine national appeal and strong foreign backing.” All that said, I guess it is safe to say that India will remain as top dog with foreign investors … for now.
When governments are strapped for cash and hesitant to raise income taxes, lawmakers often invent some wacky taxes on random goods, according to a Yahoo! news story this week. Six states currently enforce a tax on pornography. Texas goes a step further and taxes strip clubs, cheekily calling it the “pole tax.” Other states have taxes on the sale of illegal drugs. Enforcible, you ask? Usually only post-arrest. A less scandalous tax comes in October when several states take a percentage of pumpkin purchases. What a trick! Basically, it seems a lot of politicians use such offbeat taxation to raise revenue without raising the boiling points of the average taxpayer. Have to keep the voters happy, right?
Lest we be forget that the Internet is based on wires and antennas, consider this news item (Reuters via NYTimes): A breakdown in an international undersea cable network disrupted Internet links to Egypt, India and Gulf Arab countries on Wednesday, and Egypt said it could take several days for its services to return to normal. It was not immediately possible to gauge the impact of the disruption on financial institutions. Egypt’s telecoms ministry said 70 percent of the country’s Internet network was down and India initially said it had lost over half its bandwidth. The Internet was designed as a military research project, with the goal of creating a network that could not be taken out by destroying a single central computer. Indeed, it’s admirable that data traffic could still get through via alternate routes in Egypt and India. But I sometimes think that we don’t realize how vulnerable the whole thing is. We are talking about, I presume, a single, lonely cable lying on the sea floor here. How many dollars worth of business and personal data were interrupted by what could been, for all we know, a shark attacking what it thought was a fat and listless eel? Okay, that’s unlikely, but the point is that it’s pretty easy to disrupt the Internet by accident, and if you know where to strike, you’ll virtually guaranteed of some success. Part of the problem is that we run pretty close to our capacity. That means that cutting even a minor backbone cable (or cyber-attacking an important backbone traffic routing computer) can have an outsize effect as data tries to cram through the existing pipes on the way to its destination. Fortunately, unlike the electric grid, there won’t be an overload that shuts down the data traffic routers (the equivalent of electric substations, if you like). Unfortunately, what an overloaded router does is a) become slow and/or b) randomly reject or drop your packets of information. Data that doesn’t arrive exactly as you sent it or arrives in partial form is about as useful as electricity that comes on only during odd-numbered minutes of the day. Capacity does not appear to be getting better. It’s kind of like the gasoline refinery situation here in the U.S. or the worldwide oil situation for that matter: there is enough of either, but demand is so close to capacity/production that even a minor supply disruption can affect everyone worldwide. The Internet is a bit more segmented–the traffic disruption in the Middle East and India […]