Business and Finance

After days of speculation, Houston oil service companies Schlumberger Ltd. and Smith International Inc. jointly announced today plans to merger in a stock transaction valued at about $11 billion.

Smith shareholders will receive 0.6966 shares of Schlumberger in exchange for each Smith share. Based on the closing stock prices for both companies on Feb. 18, the agreement places a value of $45.84 per Smith share – 37.5 percent higher than Smith’s Feb. 18 closing price of $33.35.

Upon closing, Smith stockholders collectively will own approximately 12.8 percent of Schlumberger's outstanding shares of common stock.

Andrew Gould, Schlumberger’s chairman and chief executive officer, said that Smith’s drilling technologies, other products and expertise complement those of Schlumberger.

Smith CEO John Yearwood predicts accelerated technology development for the combined company’s customers.

Said Yearwood: “Schlumberger offers Smith's various segments enhanced engineering and design capability to place our products and expertise at the center of the total drilling system of the future.”

The deal, which is subject to regulatory and Smith stockholder approvals, is expected to close in the latter part of the year. It will create an industry giant with revenues double that of rival Halliburton Co. (NYSE: HAL).

For 2009, Schlumberger (NYSE: SLB) and Smith (NYSE: SII) reported revenue of $22.7 billion and $8.2 billion, respectively.

Meanwhile, Halliburton posted 2009 revenue of $14.7 billion.

Schlumberger expects to realize incremental pretax synergies — after integration costs –of approximately $160 million in 2011 and approximately $320 million in 2012. Schlumberger expects the combination to be accretive to earnings per share in 2012.

On Feb. 19, Smith’s stock shot up by more than 14 percent to a new 52-week-high of $38.16 in heavy trading after The Wall Street Journal reported that the company was in advanced talks to be acquired by Schlumberger.

There was no word yet as to how many jobs might be impacted by the transaction.

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On an overcast English morning, two women from middle England are out shopping. They duck first into the Gucci boutique, fingering discounted handbags and rifling through racks of last season’s fashion lineup. Dolce & Gabbana is next, followed by Armani.

The outlet boutiques — among 136 clustered along a cobblestone outdoor shopping center called Bicester (BIS-ter) Village about an hour’s drive from London — are mobbed with bargain-seekers even at an early hour.

"You get value for money here," says Ann Prentice, who pauses to chat only briefly before her friend hustles her off to Valentino. "My husband is in business, so it’s hard for us just now, but I don’t mind paying more for quality."

Luxury outlet malls are the one bright spot of brisk trade going into the holiday shopping season. In recent weeks, retailers have reported small but still rather anemic signs of recovery. Yet sales numbers show that consumers have been flocking to discount outlets all year long, despite the recession.

Value Retail, the London-based company that owns the largest string of luxury outlets in Europe, including Bicester Village, has seen sales rise 20% to just over 1 billion euro ($1.5 billion) in the first three quarters of this year compared with 2008. (Sales totals are for the nine cities where its Chic Outlet Shopping outlets are located, including Milan, Paris, Dublin, Munich, and Madrid.) Foot traffic also rose 10% in the third quarter to 6.5 million shoppers.

When sales are tabulated for the fourth quarter, the growth is expected to be off the charts given the almost complete retail freeze of the fourth quarter of 2008. That compares with predictions of flat or at most a 2% increase in spending across the retail sector over the holiday shopping period.

Value Retail, whose major investor also owns part of the sprawling Woodbury Common outlet mall outside of New York City, has seen its growth this year double the average over the past 14 years, when sales increased at a rate of about 10% annually, according to Scott Malkin, Value Retail’s chairman.

"It’s human nature to indulge," Malkin says. "I think we’ve gone away from ‘I need more for the sake of more and more,’ to people being more discerning in what they purchase."

That sentiment has benefited luxury outlets in a year when full-priced luxury sales have been forecast to fall as much as 10%, according to Bain & Co. consultants.

Rather than view outlet shopping as cannibalizing from their High Street or Madison Avenue sales, luxury retailers in fact have welcomed the opportunity to sell excess merchandise in a slow time, while reaching a separate segment of customers to whom they wouldn’t normally be able to sell.

"We’re a service to the brand," says Desirée Bollier, the CEO of Value Retail Management low rates payday advance. "The brands have a lot more stock they want to dispose of, elegantly. We’re a platform for them that is quality, with a customer that is aspirational."

These so-called "aspirational" customers — those who may not be as wealthy as the typical elite luxury buyer, but will still purchase a few high-end pieces — now make up 60% of luxury buyers overall, according to Bernstein Research, an arm of AllianceBernstein.

"Before the recession, we were nice to have," says Bollier, referring to luxury outlets. "With the recession we’re a must. Our customers are not your fashionistas. She’s not going to buy the ‘It’ bag, but she recognizes the quality of a timeless piece."

Still, some fashion-forward heavy hitters are among the recent shoppers at these outlet malls: Stars Elizabeth Hurley and Victoria Beckham have been spotted in Bicester Village recently. Over the summer, a Saudi princess arrived with a retinue of 70 people. Tipped off in advance, says Malkin, the luxury brands sent out the Arabic speakers from their stores in London for the day to accommodate the entourage.

Most of Value Retail’s shoppers make the outlets a day-trip destination from the cities they’re visiting, or if they’re local residents, they may drive an average of two to three hours to reach an outlet mall. Some of these customers feel too intimidated to walk into a full-priced luxury boutique for the first time, so buying an item at a discount outlet can build confidence and allow shoppers to trade up. Rather than look for a dress to wear for an upcoming Saturday night, for example, they’re shopping for more enduring or signature items — at discounts of up to 60%.

"We use the expression, ‘guilt-free shopping,’" Malkin says, a particularly important sentiment in a recession. "What we’ve seen in the last 18 months is that women will buy something at full price in the center of Paris or London or Madrid and tell people that they bought the item at one of our villages. It’s a ways of avoiding conflict, of not wanting to seem better off than their friends and create discomfort and guilt."

The hope, of course, is that aspirational customers will be so satisfied with the items they purchase that they will eventually trade up into becoming luxury customers themselves, paying full price.

"People nine months ago said luxury is finished," says Malkin. "That’s nonsense. There will always be luxury, just that the nature of it will always be evolving." 

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Russell Read, the former chief investment officer of Calpers, the largest pension fund in the United States, knows his trees.

Read owned a 500-acre Maine forest landscaped with the same mix of maples and oaks the colonists would have seen when they first arrived on the shores of America.

Bob Carlson, who was a board member at the California Public Employees’ Retirement System for nearly half its history, recalls asking about commodities like timber during Read’s interview for the position at Calpers.

“His eyes lit up,” said Carlson. “That’s what I wanted.”

Read got the job in June 2006 at the age of 42 and quickly set out to turn Calpers into a modern, aggressive investor.

At the time, esoteric new markets were racking up huge, almost unimaginable gains. He and the board were in agreement — Calpers should be part of it.

“I think the push for commodities and infrastructure and forestry and some of those other things was kind of a movement afoot,” said Tony Oliveira, Supervisor of California’s Kings County and one of the Calpers board members who helped choose the new investment chief.

A former senior executive at Deutsche Bank, who had once taught risk management, Read seemed to be the right person for the times.

Despite Read’s background and the ever riskier bets he was making, Calpers still struggled with risk management. Carlson, who describes Read’s risk management plans as “brilliant,” said that Read left the fund before he could put them in place.

Red flags about the growing riskiness of Calpers’ portfolio also went unheeded. A consultant warned Read in December 2007 about the size of the fund’s commitment to private equity, but the push went on.

For a while, Calpers looked smart under Read, hitting a peak value of $260 billion in October 2007 as it borrowed money to boost returns and moved into sophisticated collateralized debt obligations, land for residential real estate, as well as commodities.

But as the financial crisis unfolded last year, Calpers lost $100 billion, more than a third of its value, tumbling to $160 billion a year and a half after the high. The other thing it lost was its gold plated reputation, founded on steady returns, pioneering new investments and policing public companies as an activist shareholder. Smaller rivals who were more conservative lost much less.

Calpers has not retreated, though — just the opposite, in fact. As the entire pension industry questions what level of risk it should be taking in the aftermath of last year’s financial meltdown, Calpers in June increased its target for venture capital and private equity — what the fund’s advisor itself called the highest risk, highest reward bet — to 14 percent of overall investments, up from 10 percent.

Chief Investment Officer Joseph Dear, who declined to comment for this story, in a published internal interview called the changes “relatively minor”. “We looked at the long term return assumption and basically said we don’t see a significant reason to change,” he said.

“Calpers has the reputation of being the gold standard of pension investing, largely by the virtue of its size. But the reality is very different,” said Edward Siedle of Benchmark Financial Services, a pension fund investigator and investment consultant. 

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The dominance enjoyed by Amazon.com Inc’s Kindle faces its first major test this holiday season, but industry experts say only a real technological leap will pose a threat.

Barnes & Noble Inc is expected to unveil its own branded electronic book reader on Tuesday with a hybrid model that incorporates a reading screen similar to the Kindle’s white and gray display, with a second touch-screen display that makes browsing easier.

The bookseller’s main advantage could be in its physical stores where users will be able to test out the device. A disadvantage may be its as-yet unknown price, which some say will be higher than the Kindle’s recently lowered $259.

Barnes & Noble has not confirmed its e-reader plans.

But the market — arguably built by Amazon — is getting crowded, with e-readers in the pipeline from a spin-off of Royal Philips Electronics called iRex Technologies, Taiwan’s Asustek, Plastic Logic and a Hearst-backed venture called FirstPaper. They would share the space with Interead’s “Cool-er,” the Cybook OPUS from Bookeen and others.

“It takes one person to prove this is a very viable business model and as soon as that is proven you have a lot of people … who jump in,” said Mukul Krishna, global director for digital media at consultancy Frost & Sullivan, adding that the best time to enter the market is ahead of the holidays.

“Amazon has done exactly that with the Kindle. They’ve caught everyone’s imagination,” Krishna said.

E-reader hype has hit a peak in the past month, as Amazon rolled out the Kindle internationally and the world’s biggest Web players and publishers began to mobilize.

Google Inc unveiled plans for an online e-book store, while News Corp’s Rupert Murdoch visited Japan and South Korea to size up e-reader technology. But Amazon is expected to retain its first-mover advantage.

“Amazon really controls the digital shelves right now,” said Mark Coker, founder of e-book publisher Smashwords. He cited the Kindle’s locked-in customers, who must buy e-books exclusively from Amazon that can then only be read on their Kindles or on Apple Inc’s iPhone or iPod Touch.

“I think everyone realizes Amazon got it completely right. They are way ahead of the curve,” he said.

Some 3 million e-readers are expected to be sold in the United States this year, with sales doubling in 2010, according to Forrester Research.

Amazon does not provide data on Kindle sales, but investors will be eager to learn of its progress when the online retailer releases results on Thursday.

DIGITALLY SHARING

Analysts say the larger — but not unsurmountable — threat to Amazon could come from demand for an open system in which e-books bought from various sources can be shared on multiple devices. 

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Bank of America Corp and former Merrill Lynch & Co brokerage chief Robert McCann have resolved a dispute over his contract, freeing him to take another job in financial services.

The settlement was announced by the two sides on Thursday. A joint statement gave no details, but McCann’s lawyer, Steven Eckhaus, said his client was free to return to work at the end of the month.

McCann left Merrill Lynch after the investment bank was acquired by Bank of America on January 1. In a lawsuit in August, he accused the bank of blocking him from taking another job in financial services before January 2010. He contended he should have been free to go back to work in July.

He sought to lift a “non-competition” clause in his contract so he could take a job with a Bank of America rival. Published reports said the rival was Swiss bank UBS AG. UBS declined to comment on Thursday.

Representatives of Bank of America, the No. 1 U.S. bank, declined comment on the settlement.

Justice Melvin Schweitzer of the New York State Court of Claims reserved judgment on McCann’s lawsuit after hearing arguments from lawyers and testimony from McCann on September 16. “This is a very close call,” the judge said at the hearing. [ID:nN16156325]

Bank of America Chief Executive Kenneth Lewis called Merrill’s brokerage unit the “crown jewel” of that company when he announced the purchase of Merrill.

Merrill had about 16,000 brokers at the time, and its profits have helped Charlotte, North Carolina-based Bank of America offset rising losses from credit cards and other consumer credit.

In a court filing, McCann contended that he gave written notice on January 5 that he would resign and that Bank of America accepted his reason for leaving. He said the bank rescinded its acceptance the following month, and fired him effective January 30, 2009.

For its part, the bank’s lawyers argued that McCann was “intimately familiar” with Bank of America’s long-term strategic plans and that it would lose a lot of business if he went to work for a rival.

The case is McCann v. Bank of America Corp 602628/2009 in New York State Supreme Court (Manhattan)

(Reporting by Grant McCool and Steve Eder; editing by John Wallace)

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The seductive message from the marketing campaigns, particularly those aimed at young people, is that credit cards are a way to freedom. But to the people at FoolProofMe.com, credit cards are a way to destruction if you’re not careful.

"We advise young people to tear up credit card ‘convenience checks’ and not to owe anything on their cards" by not charging anything unless they can pay the bill in full, said Will deHoo, 29-year-old founder and president of FoolProofMe.com, a website that features consumer videos designed primarily for young people.

Using credit unions as Web hosts, the advertising-free www.FoolProofMe.com site dispenses what it calls "tough consumer messages" for high schools and community groups, parents, college-age students and adults.

"Many companies send you credit cards designed to make sure you pay obscene penalties," says a young man in a video introducing a segment on credit cards for college students. A young woman adds, "They target us because they think we’re too young, dumb and naive."

To be fair, credit cards can help young people establish credit and they offer everyone a convenient way to pay for purchases and possibly earn rewards. I use my credit card for just about everything I buy, including groceries. But I always pay my bill in full and use my card only for items I actually intended to buy.

Studies, however, consistently show that most people spend more when using credit cards than when shopping with cash, said Remar Sutton, a longtime consumer advocate who volunteers as "unpaid but enthusiastic" chairman of the board of FoolProofMe.com. His advice to college students: It’s OK to use a credit card for textbooks if you are sure you’ll pay the bill in full, but don’t use it for eating out, clothes or other items that could tempt you to splurge.

"Credit card companies spend billions of dollars telling you to finance purchases," a young man says in another video at FoolProofMe.com. "They make it easy to borrow so much that you have to finance purchases."

Clearly, no credit card company can force you to overspend, and credit card companies often offer useful advice to manage credit responsibly. But the folks at FoolProofMe.com argue that their advice delivers "real consumer education," not "infomercials" tainted by conflicts of interest.

"This site contains hard-hitting and realistic messages in an attractive format about the risks of credit cards and debt," said Stephen Brobeck, executive director of the Consumer Federation of America. A survey commissioned by the federation and FoolProofMe.com found only 53 percent of parents with children under 18 at home were "very confident" the children would leave home knowing how to manage money.

According to deHoo, the "Top 10" financial myths held by 14- to 21-year-olds who helped test FoolProofMe.com videos are:

1. I don’t have to worry about credit at my age.

2. Bad credit can’t keep me from getting a job.

3. All loan companies have the same rates.

4. All credit cards are alike.

5. The job of financial advertising is to tell the truth.

6. It’s OK to bounce a few checks.

7. It’s OK to make minimum payments on a credit card.

8. Paying late occasionally can’t hurt my credit.

9. Fine print isn’t important.

10. Young people don’t have credit scores.

To help dispel those myths, "FoolProofMe.com represents an important new financial tool to help parents educate their children," Brobeck said.

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Gordon Pape blames Jim Flaherty for spoiling his retirement from book writing.

He had already rattled off an average of a couple of books a year for 20 years. Sleep-Easy Investing was to be his last. Then a year later, Flaherty announced tax-free savings accounts. Pape immediately foresaw these new accounts could fill a need for every Canadian adult.

They would be the only logical choice to store emergency funds or save for major purchases in an age of rock-bottom interest rates.

For anyone expecting to have a low income in retirement, or for some expecting a higher income as a result of a move to a high-tax province, these accounts could be a better choice than registered retirement savings plans.

While they could produce the biggest results for savers decades away from retirement, they could help working couples split income, retirees stretch their savings out longer, top-up education savings and limit the tax hit on investments at the time of death.

As obvious as this was to financial experts and the economists who first pushed the idea of these accounts, Pape detected widespread ignorance.

Few among the young and old he encountered knew about the accounts in the months before they became available at the start of the year. So he vowed to change all of that.

He tackled a new book with all the rigor a man can muster in a month of writing. He explored the history of the tax-planning innovation, and every advantage and disadvantage in, what would seem to be, every possible financial circumstance.

He called the outlook for stocks right in his Tax-Free Savings Accounts, the book he published at the start of the year in the midst of a stock market meltdown. While he generally preached conservatism, he suggested it was at least feasible it would make sense to use the $5,000 annual contribution limit to invest in stocks.

"What is not unrealistic is the possibility – indeed the probability – that high-quality stocks will double in value in the two to three years following the end of a deep bear market," he wrote.

Pape made no specific recommendations, but National Bank of Canada stock has indeed nearly doubled since his book came out, and debt-laden miner Teck Resources Ltd. stock has quintupled.

He said yesterday his book attracted hundreds of questions. So he has written yet another book to answer many of them, and provide details about the different accounts and their fees at various financial institutions.

You can ask your own questions about the original book as well as his soon-to-be-published book, The Ultimate Guide to Tax-Free Savings Accounts, this Sunday. Pape will appear in the Money Matters Tent at the Word On The Street book festival at 1:30 p.m. at Queen’s Park.

A half-hour before he takes the stage, you will be able to ask wisecracking business author John Lawrence Reynolds about his latest, Bubbles, Bankers & Bailouts.

jdaw@thestar.ca

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OAK BLUFFS, Mass.–President Barack Obama announced yesterday he wants to keep Ben Bernanke on as Federal Reserve chairman, saying he shepherded America through the worst economic crisis since the Great Depression.

"Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall," said Obama, with Bernanke standing by his side. "Almost none of the decisions he or any of us made have been easy."

Obama made the announcement while on vacation on the island of Martha’s Vineyard after aides said initially the president intended a news-free week there. He and Bernanke sported the open-collar look.

Bernanke, 55, is credited with turning the economy away from its deepest and longest recession since the 1930s. Now he faces the challenge of meeting White House expectations to chart the full economic recovery considered critical to Obama’s legacy.

In sticking with a Republican for the country’s top banker, the Democratic president was aiming for stability at a time of continuing, though easing, crisis.

The move was designed to reassure the U.S. financial sector as well as foreign central banks that the administration isn’t changing course on its largely well-received approaches to the financial meltdown and overall monetary policy.

Bernanke’s early tenure was as complicated as the crisis facing the banks he sought to save.

The Fed chairman’s successful, although unconventional, strategy to move the economy away from recession, unlock frozen credit and stabilize spiralling financial markets depended in large part on creating radical and unprecedented lending programs. But he’s not without his detractors, and Chris Dodd, the Democratic chairman of the Senate Banking Committee, warned of a thorough hearing before Bernanke would be confirmed for a second four-year term.

Many on Wall Street view Bernanke as the best choice to tackle high unemployment, fight off any inflation threat and take on the next set of risky, difficult decisions.

Associated Press

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Ontario teachers have upped their bet on Toronto sports fans, setting off a new round of speculation about the value of the city’s hockey, basketball and soccer teams.

The Ontario Teachers’ Pension Plan said yesterday it is buying a further 7.7 per cent stake in Maple Leaf Sports and Entertainment from media company CTVglobemedia.

That will leave Teachers’ with a 66 per cent stake in the Toronto Maple Leafs, Raptors, Toronto FC and the Marlies, plus the Air Canada Centre, BMO Field and Ricoh Coliseum.

The owner with the second-largest stake is businessman and MLSE chairman Larry Tanenbaum, who also increased his significant stake when he bought 7.7 per cent from CTVglobemedia in February.

In a release, Ivan Fecan, president of CTVglobemedia, said the broadcaster-publisher sold at a profit but said nothing about the sale or purchase price.

"The time is right for us to exit and redeploy the proceeds from this sale to pay down debt," Fecan revealed.

Like other media companies in Canada, CTV is faced with declining advertising revenue. Meanwhile, its lenders will require it to keep debt service costs in line with cash flow.

It has been a constant guessing game to determine the market value of Maple Leaf Sports & Entertainment.

Forbes business magazine estimated last November the Leafs were the most valuable hockey franchise in North America at $449 million (U.S.) and the Raptors the 17th most valuable basketball franchise at $310 million. Part of those estimates included the value of the Air Canada Centre, estimating it was worth about $228 million free credit report without a credit card. So, those three assets were supposedly worth $876 million (U.S.), or about $1.07 billion (Canadian) at the time.

The only public disclosure from an insider is contained in the 2008 annual report of the Ontario Teachers’ Plan.

The report reveals the pension plan put a total value of $1.58 billion in private Canadian equity holdings. It held a 25 per cent stake in CTVglobemedia and, at the time, a 58 per cent stake in MLSE, plus an undisclosed number of other companies worth less than $100 million each.

Any estimate of the value of these firms would be based on old data in a period of rapidly deteriorating ad revenue. An estimate at time of sale would be complicated further by the fact the buyers are part-owners of the motivated seller.

Pension plan executives would have had an interest in propping up CTVglobemedia while, at the same time, assigning a significant value to Maple Leaf Sports.

Spokespersons for CTVglobemedia and Ontario Teachers’ both declined comment beyond what was in their release. All parties would have committed to keep the private transaction, well, private.

Tanenbaum chose not to return a telephone call, as did Eugene Melnyk, owner of Ontario’s other major league hockey team, the Ottawa Senators franchise.

A spokesperson for would-be franchise purchaser Jim Balsillie, co-CEO of Research In Motion, said he would not talk to the press.

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WASHINGTON – Employers sharply scaled back layoffs in July, and the unemployment rate dipped for the first time in 15 months, sending a strong signal that the worst recession since the Second World War is finally ending.

A net total of 247,000 jobs were lost in the U.S. last month, the fewest in a year. That compares with 443,000 jobs that disappeared in June. And the unemployment rate for July declined to 9.4 per cent from 9.5 per cent in June.

In Canada, about 45,000 jobs were lost in July and the unemployment rate remained at 8.6 per cent.

The snapshot the Labor Department released today offered other encouraging news, too: Workers' hours nudged up after sinking to a record low in June, and paychecks grew after having stagnated or fallen.

"There's clearly been a turn for the better," said economist Ken Mayland, president of ClearView Economics. "The worst is behind us in terms of layoffs."

Still, the labour market remains on shaky ground. The 247,000 jobs lost in July represent a vast improvement on much higher job losses earlier in the year. But they're a far cry from the positive job growth needed to sustain an economic recovery.

When the economy is healthy, employers need to add a net total of around 125,000 jobs a month just to keep the unemployment rate stable. And to push the jobless rate down to a more normal 5 per cent range, it would take stronger job growth – of at least 200,000 jobs a month. Economists say it might take until 2013 to drive down the unemployment rate to 5 per cent.

Yet the new figures were better than many analysts were expecting, and they signalled improvements to an economy that has been clobbered by the recession. Analysts had been forecasting that job losses would amount to around 320,000 and that the unemployment rate would tick up to 9.6 per cent.

Stocks surged after the report was released. In early-afternoon trading, the Dow Jones industrial average jumped 175 points, or 1.9 per cent, and other stock averages also gained sharply.

President Barack Obama welcomed the news, saying the numbers indicate "the worst may be behind us" in a recession well into its second year.

"Today, we're pointed in the right direction," he said in remarks in the White House Rose Garden. Even so, Obama added: "We have a lot further to go. As far as I'm concerned, we will not have a true recovery until we stop losing jobs."

The dip in the unemployment rate was the first since April 2008. One of the reasons the rate declined, though, was that hundreds of thousands of people left the labour force. The labour force includes only those who are either employed or are looking for work.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included the unemployment rate would have been 16.3 per cent in July. That's down from 16.5 per cent in June, which was the highest on records dating to 1994. All told, 14.5 million were out of work in July.

After fresh revisions, job losses in May and June turned out to be less than previously reported. Employers cut 303,000 positions in May, compared with 322,000 previously logged. And they trimmed 443,000 in June, compared with an earlier estimate of 467,000 free 3-in-1 credit report.

The job cuts made in July were the fewest since August 2008.

The slowdown in layoffs in part reflected fewer jobs cuts in manufacturing, construction, professional and business services and financial activities – areas that have been hard hit by the collapse of the housing market and the financial crisis. There also were fewer layoffs in the temporary-help industry, which analysts watch for clues about future hiring. Retailers, though, cut more jobs in July.

Those losses were blunted by job gains in government, education and health services, and in leisure and hospitality.

The deepest job cuts of the recession came in January, when 741,000 job disappeared, the most in any month since 1949. Since the recession began in December 2007, the economy has lost a net total of 6.7 million jobs.

Slower job losses are occurring because companies aren't cutting investment and spending as drastically as they had been during the depths of the recession, which came in the final quarter of last year and carried over into the first quarter of this year.

With companies feeling a bit better about the economy's prospects and their own, they boosted workers' hours in July. The average work week rose to 33.1 hours, after having fallen to 33 hours in June, the lowest on records dating to 1964.

And employers bumped up wages. Average hourly earnings rose to $18.56 in July, up from $18.53 in June. Hourly earnings were stagnant in June. Average weekly earnings, which fell in June, rose to $614.34. Those gains raised hopes that consumers – whose spending accounts for the single-largest slice of economic activity – will feel more confident and more inclined to spend in the months ahead, thus helping the recovery.

Other recent barometers have shown some improvements in manufacturing, housing and construction activity.

The government reported last week that the economy shrank at a pace of just 1 per cent from April-to-June, another sign the recession is winding down. Many analysts predict the economy could start growing again in the current July-to-September quarter.

And the Fed recently observed that the economy is finally showing signs of stabilizing in some regions of the country – especially in parts of the Northeast and Midwest – bolstering hopes of a broader-based recovery this year.

Even with the improvements, it will take time for the jobs market to fully heal. The Federal Reserve has said the jobless rate is likely to top 10 per cent in 2009.

Some Fed officials think the rate could rise as high as 10.6 per cent in 2010. The post-World War II high was 10.8 per cent at the end of 1982, when the country suffered through a severe recession.

An elevated unemployment rate could become a political liability for Obama when congressional elections are held next year. The last time the unemployment rate topped 10 per cent, the party of the president – then Ronald Reagan's GOP – lost 26 House seats in the midterm elections in 1982.

Obama has urged Americans to be patient and give time for his $787 billion stimulus package of tax cuts and increased government spending to take hold. Most of the money will flow in 2010.

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