U.S. Economic News Week Ending October 8, 2010

U.S. and global stock markets held steady this week as attention turned to mounting tensions in currency markets. The U.S. dollar hit fresh lows against several currencies, raising pressure on global leaders to address issues that have emerged as countries attempt to keep their currencies weak to boost exports. For the first time in years, currencies will be the leading topic of discussions for leaders gathering in Washington at the annual meeting of the International Monetary Fund. The rise of currencies such as the Japanese yen and Australian dollar threatens to derail economic recoveries and global cooperation. Investors have increasingly speculated about the possibility of a global agreement designed to stabilize currency markets and manage an orderly decline of the dollar.

U.S. economic news

Economy sheds more jobs than expected
The U.S. economy shed more jobs than expected in September as government payrolls declined by 159,000. Overall, employers cut staffing by 95,000 workers, a jump from the 75,000 workers let go in August. Private payrolls that exclude government agencies climbed 64,000, a lower number than forecast. The unemployment rate remained at 9.6%. The average work week held at 34.2 hours.

U.S. data show mixed recovery
Other data released this week showed a U.S. economy still on the course of an uneven recovery. Factory orders dropped more than expected in August. The decline was the third in the past four months. Commercial airplanes drove the decease; excluding transportation, all other factory orders rose. There were, however, positives in the report. A barometer of capital spending increased, and non-defense capital goods orders, excluding airplanes, rose by 5.1%. Meanwhile, the U.S. service sector expanded in September, allaying some of the fears that the economy could slip back into recession as manufacturing cools. An index based on a survey of U.S. purchasing managers at nonmanufacturing firms rose to 53.2 in September, from 51.5 in August, the Institute for Supply Management reported. Service sector firms account for two-thirds of the economy and employ four of every five private sector workers in the United States.

Also this week, the National Association of Realtors Pending Home Sales Index increased 4.3% to 82.3 for August. Year over year the index was 20.1% below its level of 103 in August 2009, and consumer credit fell $3.3 billion in August from July to $2.414 trillion, the lowest level since early 2007. The decline was driven by a $5 billion drop in credit-card and other revolving credit to $822.2 billion. Car loans and other non-revolving credit rose $1.7 billion to $1.592 trillion.

U.S. and global corporate news

Alcoa kicks off earnings season with 21% drop in profits
Alcoa's profit fell 21% on higher operating expenses, even as sales benefited from higher prices and rising world demand for metals. Alcoa was the first Dow Jones Industrial Average company to report third-quarter results.

American, British Air, and Iberia launch trans-Atlantic venture
In an effort to compete with rivals and defend market share, American Airlines, British Airways, and Spain's Iberia Airlines forged a trans-Atlantic joint venture. International joint ventures have picked up as many countries keep foreign ownership limits on airlines and three major global alliances — Star Alliance, SkyTeam, and Oneworld — battle for the upper hand on cross-continental routes.

Renault sells 14.9% stake in Volvo
Renault, the second-largest car maker in France, sold a 14.9% stake in Volvo.

Global economic news

IMF reports stronger-than-expected growth for the first half of the year
The International Monetary Fund reported this week that growth in the first half of the year has turned out slightly stronger than it had expected with the global economy expanding at an annualized 5.25% rate.

ECB and BOE keep rates unchanged
The European Central Bank and Bank of England both held interest rates unchanged this week. Speaking before the meeting of the Group of Seven this week, ECB President Jean-Claude Trichet said he opposes disorderly currency moves as concerns about "currency wars" mount. Worries about such wars have risen as countries around the world take measures to devalue currencies and loosen monetary policy to safeguard export-led growth.

German exports fall for second month in a row
German exports fell in August for the second month as a strengthening euro and slowing global growth curbed demand. The decline comes after exports helped growth in Europe's largest economy accelerate in the second quarter at the fastest pace in two decades.