In this issue:

Treasury Borrows Against Even Bigger Deficits

Many African-American Children Live in 'Extreme Poverty'

Large Numbers of Unemployed Are Dropped from the Labor Force

U.S. Manufacturing Falls to 18-Month Low

Greenspan Not So 'Upbeat' as Some Would Wish

More Grim News from U.S. 'Mis-Fortune 500' Companies

U.S. Automakers Post Big Drop in April Sales


From Volume 2, Issue Number 18 of Electronic Intelligence Weekly, Published May 5, 2003

U.S. Economic/Financial News

Treasury Borrows Against Even Bigger Deficits

The U.S. Treasury announced it will increase the number of bond sales it makes during the year—supposedly to have more flexibility to deal with what it now projects will be a $425-billion deficit, the Washington Post reported May 1. (You read it first in EIR in January, that the U.S. deficit was heading toward $400-500 billion.) Reflecting the reality of the disintegrating U.S. economy, the Treasury also took the unprecedented action of selling government bonds to raise money to cover a deficit in the second quarter of the fiscal year, since tax revenues coming in from April filings do not provide enough cash to keep the store open. Moreover, it now states it will have to borrow in the third quarter as well, to the tune of $76 billion.

Nota bene: Treasury says its $425-billion deficit estimate does not include the cost of the Iraq war, nor the President's tax cuts, should they be adopted.

Many African-American Children Live in 'Extreme Poverty'

Underscoring the impoverishment of the lower 80% of U.S. family-income brackets, a report by the Children's Defense Fund, released April 30, found that the number of black Americans under 18 years old, who live in "extreme" poverty, i.e., with after-tax family income (including food and housing benefits) below half the official poverty line, jumped by 25%, since 2000, to 932,000 children in 2001, the highest level since the government began collecting such data in 1980. Half the poverty line in 2001, as defined by the U.S. Census Bureau's Current Population Survey, which data formed the basis for the CDF report, was $7,064 for a three-person family, obviously way below what is needed to support a family.

More than 1.8 million black youth were living in extreme poverty in 2001, based on cash income (excluding food and housing benefits).

The proportion of black children living in extreme poverty (counting non-cash benefits) in 2001 jumped to a near-record high of 8.4%, slightly below the 23-year peak reached in 1992.

Large Numbers of Unemployed Are Dropped from the Labor Force

A front-page New York Times article April 27 highlights what EIR and New Federalist readers have known for years: the growing multitude of Americans without work, who are not counted in the unemployment rate. During the past two years, the percentage of Americans classified as "in the labor force"—those who are either working or actively looking for work—has fallen to 66.2%—the lowest level in 40 years. More than 74.5 million adults are outside of the labor force, in almost every demographic group, according to Department of Labor statistics.

This suggests that the official jobless rate, "offers an artificially sanguine picture of the labor market," notes the Times. Among those whom the government admits are unemployed, the average length of time out of work has been rising over the past two years, to 4 1/2 months—with many out of work more than six months.

"There aren't any jobs, just not any," said Bill Jacobs, who had been laid off after working 25 years at a steel plant in Pittsburgh. "It's a dead-end street."

The surge in people dropped from the labor force, helped lower the official unemployment rate even as jobs were disappearing, in Metropolitan areas such as Boulder, Colo.; Binghamton, N.Y.; Bloomington, Ind.; and Spokane, Wash.

U.S. Manufacturing Falls to 18-Month Low

U.S. manufacturing activity fell in April to an 18-month low, due, not to war in Iraq, as some claim, but concerns about "soft demand" and rising prices paid by manufacturers, according to the Institute for Supply Management's survey of purchasing and supply executives at about 400 industrial companies, released May 1. The ISM's manufacturing index slid to 45.4% in April, the lowest level since October 2001, from 46.2% in March, meaning faster shrinkage in activity. (A reading below 50% indicates contraction). New orders index declined to 45.2% from 46.2% in March. The employment index dropped to 41.4%, compared to 42.1% in March, indicating the 31st consecutive month of lay-offs.

At the same time, Midwest U.S. manufacturing contracted for a second month in April. The National Association of Purchasing Management's Chicago index fell in April to 47.6 from 48.4 in March, according to a survey of purchasing managers in Northern Illinois and Northwestern Indiana, one of the largest industrial regions in the U.S. (A reading below 50 indicates contraction). The employment index fell to 43.7 from 45.1 in March; new orders fell to 44.6 from 52.5.

Greenspan Not So 'Upbeat' as Some Would Wish

Excerpts from Federal Reserve Chairman Alan Greenspan's testimony on April 30 to the House Financial Services Committee show that, contrary to the Washington Post's April 30 headline that Wall Street's oracle was "upbeat," he believes the "extent" and "timing" of the anticipated "expansion" of the economy, is "uncertain." He also said that there will be "further unwinding" of the "economic tensions associated with the war in Iraq," i.e., the economy. He sees no positive signs from business confidence or CEO's failure to invest and hire, thus his "cautious optimism" as characterized by the press. On Bush's proposed tax cuts: he supports the dividend-cut, but only if spending cuts are made to prevent an increase in the Federal budget deficit.

More Grim News from U.S. 'Mis-Fortune 500' Companies

* Goodrich Corp., the aircraft-parts maker, plans to lay off 1,700 workers by the end of 2004, driven by falling orders from Boeing and Airbus, which provide about one-third of the company's sales. The largest U.S. maker of aircraft-landing gear, also slashed its 2003 profit forecast by more than 70% to $0.27-0.42 per share, from $1.45-1.60. Excluding the proceeds from the sale of an avionics business, Goodrich lost $32.8 million from continuing operations during the quarter.

* Gulfstream Aerospace Corp., the business-jet maker, will shut down its primary manufacturing facility for a month, starting June 30, and lay-off 1,000 employees.

* General Motors is cutting 400 jobs at its Saturn plant in Delaware, representing 19% of the plant's workforce, after sales for Saturn's L-Series dropped by 29% in April.

* JDS Uniphase, the world's largest supplier of fiber-optic parts, said it will continue to cut jobs and close plants, and reported a net loss of $137 million for its third quarter that ended March 31.

U.S. Automakers Post Big Drop in April Sales

The "Big Three" automakers posted a 6.1% drop in sales for April, in spite of huge incentives, although results were better than the previous couple of months. General Motors' light vehicle sales, excluding Saab, fell 8.9% in April, compared to the level a year ago, despite zero-percent interest financing for loans of up to five years—with car sales dropping by 22%. Ford's sales of its domestic brands (Ford, Lincoln, and Mercury) fell 6.9%. Chrysler said that its U.S. sales were off by 10.2% in April.

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