Wednesday, July 31, 2002

Wobbling New data suggest that America’s recession last year was worse, and its recovery this year is weaker than previously thought. Is there now a risk of another downturn?     THIS was definitely not what the doctor ordered. With world stockmarkets—and political America— still reeling from a long list of corporate scandals which have destroyed some of the country’s biggest companies, there seemed at least one comfort: America’s economic recovery seemed strong. Now that reassurance, too, has been brushed aside. Figures issued by the government on July 31st showed that the economy grew much more slowly than expected in the second quarter of this year—by only 1.1% at an annual rate. Almost as alarming are the revisions made by government statisticians to earlier figures. It now turns out that last year’s recession was significantly worse than previously estimated, and growth in the first three months of 2002 a bit less impressive than earlier statistics had indicated. The backward changes will mean a downward revision to America's spectacular productivity figures and cast further doubt on the “miracle” of the new economy. The new figures are a blow to hopes that America’s economic recovery is well established. Suddenly, the recovery looks weak and the economy looks vulnerable to further shocks. The determination of American consumers to keep spending has bolstered the economy for so long. If consumers should now lose heart, as some recent surveys suggest they might, all bets will be off. Another downturn—a so-called “double- dip” recession—would then be highly likely. With Europe and Japan still in the doldrums, the forecasts of steady global growth this year could soon look overly optimistic. 1:28:31 PM  Google It!  comment  []

Providian Financial to close 3 offices, lay off 1,300 workers Credit card issuer Providian Financial Corp. said it is closing three offices in California and Utah and firing another 1,300 workers as part of recovery from crippling loan losses. The San Francisco-based company disclosed the layoffs Tuesday in its second-quarter earnings report. Providian reported net income of $153.9 million, or 53 cents per share - a 34 percent drop from a profit of $232.4 million, or 79 cents per share, at the same time last year. The company closed a Sacramento office Tuesday, laying off 300 employees. Providian said 1,000 more jobs will be cut from its fast-shrinking payroll with the closure of offices in Fairfield and Salt Lake City before the end of the year. The purge follows through on a promise Providian management made to Wall Street in May. At that time, the company said it would jettison 2,600 more workers, or about 26 percent of its work force, during the final eight months of the year. 1:21:36 PM  Google It!  comment  []

Economic Growth Slowed Sharply in the 2nd Quarter The U.S. economy lost momentum in the second quarter of this year, growing at an annual rate of just 1.1 percent. New figures Wednesday also showed that last year's recession was worse than thought, with the economy shrinking in three quarters of 2001. The gross domestic product in the April-June quarter was in sharp contrast to a revised 5 percent growth rate turned in during the first three months of the year, the Commerce Department reported. 12:51:12 PM  Google It!  comment  []