In this issue:

Mayors: Cities Are Engines of U.S. Economy

U.S. States Continue To Bleed More Jobs

More Families Spending More Than 30% for Housing

U.S. Airlines Report Huge Third-Quarter Losses

GM and Ford Will Not Survive as Bankers, Says Bloomberg

From Volume 3, Issue Number 43 of EIR Online, Published Oct. 26, 2004

U.S. Economic/Financial News

Mayors: Cities Are Engines of U.S. Economy

The U.S. Conference of Mayors issued a report Oct. 15, entitled, "The Role of Metro Areas in the U.S. Economy," which highlights the importance of urban areas as the "engines" that drive the economy, and identifies the nation's metropolitan areas as the "key drivers" of the U.S. economy. "It's the 318 metro economies—made up of cities—that are the strength of this nation," stated Tom Cochran, USCM Executive Director.

The report, prepared by Global Insight, points out that, "metro areas" are transportation hubs for exporting U.S. goods, with transportation infrastructure linking non-urban areas to overseas and lowering transportation costs. Because of infrastructure and skilled labor, urban centers are "at the core of new industry development," making them "crucial for the rise of innovation and invention." Developing a new industry in a metro area provides many benefits to the economy, such as "technology transfers" between companies, a process that accelerates the rate of innovation, growth and expansion of the economy.

As a result of these factors, "metro areas are often at the center of the development of many new technologies ... and play a major role in shaping the future economic direction of the U.S. economy."

Metropolitan areas in 2003 accounted for 85.4% of the nation's GDP; output from the 10 largest metros was greater than the combined gross state product of the 31 smallest states.

U.S. States Continue To Bleed More Jobs

Michigan lost another 15,000 jobs in September, as manufacturing hemorrhaged 6,000 jobs, the Detroit News reported Oct. 21. In the past year, payrolls have dropped by 53,000, according to the state Department of Labor & Economic Growth. Meanwhile, North Carolina lost 5,600 jobs in September, according to the state Employment Security Commission.

More Families Spending More Than 30% for Housing

Due to an inflating bubble in housing prices, as real incomes are falling, more and more families are struggling to pay for rising rents or mortgage payments, and still meet other basic needs—placing them in danger of being evicted or foreclosed on, the Baltimore Sun reported Oct. 17. In Baltimore, nearly one-fourth of all renters paid a whopping 50% or more of their income on rent. Plus, there has been a sharp rise in the number of Baltimore families whose housing costs exceed 30% or more of their income on housing costs—the maximum amount considered affordable; up from 46% in 2002 to 58% last year for homeowners, and from 39% to 47% for renters. Nationally, the share increased to 47% for renters, and to 42% for homeowners.

U.S. Airlines Report Huge Third-Quarter Losses

Three of the top U.S. airlines reported extensive losses in the third quarter of 2004, despite draconian austerity measures. American Airlines reported a net loss of $214 million in the third quarter, down from a $1-million profit a year ago, and warned that its loss in the fourth quarter would be "significantly larger." In addition, it threatened another round of layoffs and announced fleet reductions. Delta said its third-quarter loss had nearly quadrupled, from $164 million to $646 million, seeking to slash $1 billion more in wages and benefits from its pilots. Northwest posted a net loss of $46 million in the third quarter, down from its net profit of $42 million a year ago.

GM and Ford Will Not Survive as Bankers, Says Bloomberg

In its third quarter, General Motor's profit came entirely from its financing arm, while it lost money making vehicles. GM's profit of $440 million was due to the $656 million its General Motors Acceptance Corp. (GMAC) unit made in lending money to vehicle buyers. This is the seventh consecutive quarter GM has made more money from lending than manufacturing. Ford, which will soon report third-quarter results, got $897 million of its $1.2 billion profits in the second quarter from financing car and truck purchases.

Both companies are losing money in their European manufacturing activities, and Standard & Poor now rates GM just above junk bond status. GMAC (and apparently Ford Credit) have also gotten into the mortgage-lending business. Both automakers are also having pension problems, with GM borrowing $13.5 billion in 2003 to fund its pension plan. If they are to survive, David Pauly of Bloomberg wrote Oct. 15, GM and Ford have to figure out how to make money from manufacturing: "They can't survive in their current state," he concluded.

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