The economy tanks

Orders to U.S. Factories Fall

Orders to U.S. factories decreased in January for the first time in three months, a sign manufacturing is cooling at the beginning of the year.

Bloomberg, 

March 5, 2012

Bookings (TMNOCHNG) fell 1 percent after a revised 1.4 percent gain in December that was larger than previously estimated, figures from the Commerce Department showed today in Washington. The median of 61 economists’ projections in a Bloomberg News survey called for a 1.5 percent decline.

Rising oil prices and the expiration of a tax credit at the end of 2011 that supported business investment represent a risk to American manufacturers. At the same time, the need to rebuild inventories and replace outdated equipment may help keep factories at the forefront of the economic expansion.

“Manufacturing has been the strongest link in this recovery and it continues to grow, but maybe the impact of the sharp rise in energy costs is beginning to take a toll on growth,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “The big unknown remains oil prices.”

Economists’ estimates in the Bloomberg survey ranged from a decline of 3 percent to a gain of 0.5 percent. The Commerce Department revised the December gain up from a previously estimated 1.1 percent increase.

Bookings for goods meant to least at least three years decreased 3.7 percent in January, less than the 4 percent drop the government estimated in a Feb. 28 report.

Investment Cools

Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 3.9 percent, also less than estimated last week, after rising 3.5 percent in December.

Shipments of such equipment, which are used in calculating gross domestic product, decreased 3 percent after a 2.8 percent advance in December.

The expiration at the end of 2011 of a tax incentive allowing full depreciation on equipment purchases may have prompted a slowdown in orders at the start of this year. The allowance this year dropped to 50 percent.

Bookings for non-durable goods, including petroleum and chemicals, rose 1.3 percent, today’s report showed.

Factory inventories climbed 0.6 percent in January, and manufacturers had enough goods on hand to last 1.33 months at the current sales pace, the same as in December.

Auto Sales

Improving demand for autos will probably keep manufacturing growing. Cars and light trucks sold at a 15 million annual rate last month, according to industry data. It was the strongest month since February 2008.

“It’s very encouraging to see the recovery of retail sales,” Jenny Lin, a senior U.S. economist at Ford Motor Co. (F), said last week on a conference call. “As people are returning to jobs, as employment conditions continue to improve, you will see people going for the new vehicles.”

The Federal Reserve is among those highlighting the importance of autos in stimulating gains in investment spending and production.

“Manufacturing continued to expand at a steady pace across the nation,” with “several districts indicating gains in capital spending, especially in auto-related industries,” the Fed said Feb. 29 in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy.

Business investment slowed last quarter as the depreciation credit was about to end. Corporate spending on equipment and software rose at a 4.8 percent annual rate from October through December, down from the prior period’s 16 percent gain.

Another report showed that the industry that has powered the two-year expansion is cooling. The Institute for Supply Management’s factory index fell to 52.4 from 54.1 in January, the Tempe, Arizona-based group said last week. Readings above 50 signal growth.

Yahoo 'Likely' To Fire Thousands In Biggest Layoffs Ever

Business Insider, 5 March, 2012

New Yahoo CEO Scott Thompson is "liklely" to fire thousands of employees, Kara Swisher reports.

She writes: "While Yahoo has been subject to numerous layoffs over the years, none has been as large as what is now being contemplated to slash costs."

Boston Consulting Group will help Yahoo figure out whom to can.

Timing: end of the month.

Yahoo has 14,000+ employees. It has software development contractors who will also face cuts.

Swisher says people working in public relations, marketing, research, marginal businesses and "weaker regional efforts" are most likely to be targeted.

Thompson joined Yahoo in January, after the company fired its last CEO, Carol Bartz, in the Fall.

Bartz was let go because her biggest triumph as Yahoo chief was increasing profitablitly by cutting costs.

She was unable to grow Yahoo's revenues or put the company into any new lines of business that showed short-term results and long-term promise.

Thompson will need to pull off both tricks – cutting cost and growing Yahoo's revenues – to succeed.

These layoffs will help with costs. We hope that Yahoo can be done with them in one go.

As for growing Yahoo's business, Thompson's only effort so far has been to shake down Facebook with patents.