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WORLD> America
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US budget deficit hits record; jobless claims surge
(Agencies)
Updated: 2008-11-14 08:16 Washington -- The financial picture of the United States grew darker Thursday, a day marked by breathtaking numbers: a quarter-trillion-dollar budget deficit for a single month and projections of up to $1 trillion for a year, a half-million new applications for unemployment benefits and a 900-point swing on Wall Street. There was some good news, with the country's stock market rallying from near its lows for the year to its third-biggest point gain ever. But analysts predicted that the steady drumbeat of gloomy statistics would only get worse in coming months as the country endures what could be the worst downturn since the severe 1981-82 recession. The initial costs of the US government's economic bailout efforts sent the budget deficit for October soaring to a record $237.2 billion, putting it on track to reach the once-unfathomable sum of $1 trillion for the year. "And as bad as these numbers are, they may look good a year from now because things are going to get much worse," said Sung Won Sohn, an economist at the Smith School of Business at California State University. In more grim economic news released Thursday, the number of newly laid-off workers applying for jobless benefits last week hit the highest level since the period right after the Sept. 11, 2001, terrorist attacks. As the US economy weakens, the government's fiscal health was projected to deteriorate, too, with layoffs cutting into tax revenues and forcing higher payouts for programs such as unemployment benefits and food stamps. Unemployment, which jumped to a 14-year high of 6.5 percent in October, is now projected to climb above 8 percent. Sohn said that will further crimp government tax revenues, which were down 7.5 percent in October from a year ago. The stream of negative news initially sent Wall Street down sharply, with the Dow Jones industrials briefly trading below 8,000. The markets rebounded with a fury, though, and closed up almost 553 -- the third-largest point gain on record, following the 889-point rise on Oct. 28 and the 936-point surge on Oct. 13. Wal-Mart Stores Inc. reported profits up 10 percent for the third quarter as the company's renewed focus on low prices attracted financially squeezed shoppers. But the country's biggest retailer trimmed its outlook because of the troubled global economy. The US Treasury Department said the $237.2 billion deficit for October, the highest ever for a single month, reflected the $115 billion spent last month to purchase stock in eight of the country's biggest banks, the opening phase in the $700 billion rescue of the financial system passed by Congress on Oct. 3. It was far bigger than analysts expected, more than four times larger than the October 2007 deficit of $56.8 billion, and more than half the total for all of last year. The potential $1 trillion deficit reflected not only the massive expenditures from the rescue effort but also an expected second stimulus program and the effect of a steep recession. The US Labor Department reported that the number of new applications for jobless benefits jumped by 32,000 to 516,000 last week. That nearly matched the 517,000 claims reported seven years ago, and it is only the second time since 1992 that claims have topped 500,000. On Capitol Hill, some of the largest US banks sharing in the $700 billion government bailout tried to assure lawmakers they are using the money to make more loans and help financially strapped homeowners avoid foreclosure.
Executives from JPMorgan Chase, Goldman Sachs Inc., Bank of America and Wells Fargo & Co. told the Senate Banking Committee that none of the $85 billion they have received collectively from the government is being used to pay salaries or bonuses. Congressional Democrats pushed forward a package to pump $25 billion in emergency loans into US automakers, but Democratic Sen. Chris Dodd of Connecticut said the package lacked the support to pass. "I don't know of a single Republican who's willing to support" the idea, said Dodd, chairman of the Senate Banking Committee. He personally backed the proposal but cautioned against "bringing up a proposition that might fail." Dodd appeared to suggest that Congress wait until President-elect Barack Obama is sworn in on Jan. 20 to provide further help to the carmakers. In the House, five prominent hedge fund managers told lawmakers they support a new central exchange to open the murky world of some complex investments partly blamed for the global financial crisis. But they offered differing views on the need for stricter regulation of hedge funds themselves. A third economic report showed that the US slowdown was also having an effect on trade, with the overall trade imbalance falling by a bigger-than-expected 4.4 percent in September to $56.5 billion, the smallest deficit in 11 months. Imports plunged by a record amount, reflecting slumping global demand for oil and other foreign products such as cars, which declined to the smallest total in more than four years. The report showed that the weakness in the US was beginning to spread overseas, depressing US exports, which also fell by a record amount in September. The politically sensitive deficit with China bucked the trend and rose to an all-time high as US retailers kept stocking their shelves with Chinese-made televisions, toys and games for a Christmas shopping season that may turn out to be a bust. US President George W. Bush will host the leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G20 leaders will meet in Washington on Friday and Saturday to seek a common approach to what has become a global economic crisis. Bush on Thursday defended his administration's response to the crisis, which has included massive amounts of government assistance to banks and outright government takeovers of the country's biggest mortgage-finance companies. "I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown," Bush said in a speech in New York. |
