U.S. Economic/Financial News

Housing Bubble Collapse Leads to Thousands of Job Losses

Wolseley PLC, a British-based distributor and installer of building supplies with a large U.S. presence, reported that it cut approximately 4,000 jobs in the United States during the last five months of 2006, because of the collapse of U.S. home construction, according WBNS-10 TV of Central Ohio. A Wolseley division, the Ferguson Corporation of Newport News, Virginia, which specializes in distributing plumbing, heating, and cooling supplies, slashed 500 jobs. In addition, Wolseley cut 3,500 jobs mainly in the states of Nevada, California, Florida, and Michigan.

EIR of Nov. 17, 2006 reported that the housing bubble collapse would eliminate 1.5 to 1.7 million jobs in U.S. residential construction and related industries.

Housing Collapse Is Not Letting Up in Major Cities

One of the latest products that Wall Street is attempting to sell, is the story that the U.S. housing crash is over. Don't believe it. DataQuick Information Systems reported Jan. 15 that, in the once red-hot Bay Area of California, which includes San Francisco, home sales in December 2006 were at the slowest December sales rate in a decade, and that December marked the 21st straight month in which a year-over-year decline in sales occurred. As for Minneapolis, Minnesota, BlackEnterprise.com reported Jan. 24 that home "sales dropped 16% for 2006, as inventory—and foreclosures—hit local records."

The collapse of the Boston-area housing market is indicated by an interconnected parameter: In Bristol, Norfolk, and Plymouth Counties in Massachusetts—all south of Boston—the total number of foreclosure notice filings for the first ten months of 2006 increased 129%, compared to the same period in 2004. Boston.com projects that in these three counties, for all of 2006, the number of foreclosures doubled, compared to the same period of 2004. Peter Ruffini of Harbour Realty reported that in these three counties, "The average market time [for selling a home] skyrocketed to 120 to 180 days"—that is, 4-6 months.

Op-Ed Points to the Nation's Decrepit Dams

Within two weeks of the release of Lyndon LaRouche's "The Lost Art of the Capital Budget" (EIR Online #2, Jan. 9), the New York Times ran an op-ed pointing to the necessity of refurbishing the nation's thousands of decaying dams.

Author Jacques Leslie concludes his Jan. 22 column with, "The American Society of Civil Engineers estimated in 2005 that repairing dams threatening human life would cost $10.1 billion, while a 2003 study by the Association of Dam Safety Officials placed the cost of repairing all non-federally owned dams in the national inventory at $36.2 billion. In the last session, Congress considered legislation to repair dams at a rate of $25 million a year for five years, but even that feeble gesture didn't make it out of committee.

"Americans are easily persuaded to spend hundreds of billions of dollars combatting debatable terrorist threats from outside the United States, while failing to notice that inside the country, the infrastructure is crumbling. True, outside forces from time to time topple established regimes, but usually not before their insides have started to rot."

Leslie notes that in 2005, the American Society of Civil Engineers gave United States dams a grade of "D." Things haven't gotten any better since.

Most dams in the country are over 25 years old; many are over 50, some over 100. The number of dams identified in one estimate as capable of causing death and in need of rehabilitation more nearly tripled from 1999 to 2006, from around 500 to nearly 1,400. The civil engineers 2005 report placed the number of unsafe dams much higher, at more than 3,500.

A majority of the dams in the 2005 National Inventory of Dams, maintained by the Army Corps of Engineers are privately owned. This makes repairing them all the harder.

GM, UAW To Copy Lazard Plan for Retiree Health Care

General Motors and the United Autoworkers Union are looking to copy a Lazard plan to make the union responsible for covering health-care obligations for retired workers, the Detroit News reported Jan. 24. The plan is based on a deal reached between Goodyear Tire & Rubber Co. and the United Steelworkers Union to settle a recent strike. Under the agreement, negotiated by former Lazard Ltd. vice president Ron Bloom, Goodyear transferred its $1.2 billion health-care liability for current and future union retirees to a fund managed by the union. Goodyear, in turn, will put $1 billion in cash and equity into the fund. In 2005, Bloom raised the idea with UAW officials who were evaluating GM's request for health-care concessions.

It is estimated that GM would be able to dump its $55 billion in retiree health-care liabilities onto the UAW, using the specter of bankruptcy, for 60-70 cents on the dollar—meaning benefits would be cut by 30-40%.

The Detroit News reported that GM officials said the automaker is studying the Goodyear deal, and conducting preliminary discussions on a similar setup. According to the Wall Street Journal Jan. 23, GM "has hired advisers that worked with Goodyear on their contract talks."

Ford is also studying the Goodyear agreement.

Private Equity Vultures Circle Virginia Utility

Private equity groups are bidding for a massive buyout of energy assets of the Virginia-based utility, Dominion Resources, the Wall Street Journal reported Jan. 24.. Goldman Sachs and Morgan Stanley are collaborating, as part of a mega-consortium that also includes Carlyle Group, on a huge private-equity deal for Dominion's oil-and-gas assets—a deal valued at up to $15 billion. A second group of private equity firms, Blackstone Group, Texas Pacific Group, and Kohlberg Kravis Roberts, is exploring its own offer.