Business and Finance

Deep in Republican oil country, President Barack Obama is fending off criticism of his energy policies, pointing to plans to fast-track an oil pipeline that emerged after he delayed the larger Keystone XL project earlier this year.

Obama was directing federal agencies Thursday to expedite a 485-mile line from Oklahoma to refineries on Texas’ Gulf Coast that would remove a critical bottleneck in the country’s oil transportation system. The directive would also apply to other pipelines that alleviate choke points.

“We’re drilling all over the place,” Obama said in Maljamar, N.M., on Wednesday, standing alongside oil rigs on federal land. The president was announcing his plans for the expedited pipeline, a southern portion of the original Keystone XL, in Cushing, Okla., where construction is expected to begin this spring.

In oil fields and amid acres of solar panels, Obama is trying to rebut charges that he has stifled domestic energy production and been too eager to spend government money on renewable energy projects as gas prices have climbed to $3.86 a gallon. His emphasis on oil drilling is aimed at countering criticism of his rejection of the 1,700-mile Keystone XL pipeline, which would carry tar sands oil from western Canada to refineries along the Texas Gulf Coast.

For Obama’s advisers, rising gas prices pose a threat to his re-election bid because they could undermine the benefits of a payroll tax cut that he made the centerpiece of his jobs agenda last fall _ Congress approved the tax cut extension in February _ and throttle the economic recovery.

Republicans view rising gas prices as emblematic of Obama’s energy record and hope to tag him with the blame even though no president has much control over prices at the pump. Gas prices have risen more than 50 cents a gallon since January in response to a standoff over Iran’s nuclear program that has threatened to disrupt Middle East oil supplies.

GOP presidential hopeful Rick Santorum, campaigning at a Harvey, La., company that services oil rigs, said Obama’s administration should open more federal lands for leases to boost U.S. oil production and revenue for the federal government.

“Here’s an opportunity for us in this country to do something about it: increasing jobs, lowering energy prices, decreasing the deficit, all of the things you would think the president of the United States would be for,” Santorum said.

Mitt Romney, Santorum’s chief rival for the Republican nomination, has labeled Obama’s top energy advisers as the “gas hike trio,” urging the president to fire three Cabinet secretaries because of the high prices.

The status of the Keystone XL pipeline has been a focal point in the heated political fight over energy development.

Calgary-based TransCanada said it hopes to complete the $2.3 billion Oklahoma-to-Texas section next year after receiving the last approvals it needs to start construction. Many of the permits and environmental reviews already have been completed as part of the larger Keystone project, company officials said.

Republicans questioned whether the executive actions by Obama would speed up the pipeline’s construction and said it reiterated the need for the larger Keystone XL pipeline.

“The American people can’t afford more half-measures on energy from the president. No matter what he says, the reality is he killed the Keystone pipeline and the energy production and 20,000 jobs that went with it,” said Kirsten Kukowski, a Republican National Committee spokeswoman.

Obama’s energy tour was also aimed at defending his administration’s support of renewable energy projects, an agenda tarnished by his administration’s decision to pump millions into California solar company Solyndra before it collapsed.

In an interview with American Public Media’s “Marketplace” on Wednesday, Obama noted that the funding came from a loan guarantee program approved by Congress to help renewable energy companies, some of which would not succeed.

“Do I wish that Solyndra had gone bankrupt? Absolutely not. And obviously it’s heartbreaking what happened to the workers who were there,” Obama said. “When you look at the overall portfolio, is it right for us to make sure that we’re not just cashing in our chips and letting the Chinese or the Germans develop the technologies that we know are going to be critical in the future? I’m proud to say that we’re going to continue to support it.”

Electoral politics remain close to the surface. Nevada and New Mexico remain top targets on Obama’s 2012 election map, and while Republican stronghold Oklahoma will get scant attention from his political team, taking his message to the site of a future oil pipeline allows him to strike back at his chief critics on energy.

Obama was ending the day with a stop in battleground Ohio, talking about automobile research and development at Ohio State University in Columbus. The president has cited his decision to raise fuel efficiency standards to 55 miles per gallon for new vehicles by 2025 as an important step in conserving oil and saving consumers at the gas pump.

Obama has repeatedly invoked his decision to rescue General Motors and Chrysler from collapse with billions in federal aid, a move that saved hundreds of thousands of auto assembly and supplier jobs in Ohio, Michigan and elsewhere. Romney opposed the bailout, and Obama’s team intends to make it a stark contrast between the two candidates if the former Massachusetts governor wins the GOP nomination.

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The Federal Reserve paid $75.4 billion to the U.S. Treasury as an expanded bond portfolio generated $83.6 billion in interest income from its open-market operations last year.

The Fed

The Federal Reserve is pushing back against some banks

First-time claims for unemployment benefits ticked higher last week, slightly dimming prospects for Friday’s employment report.

The Labor Department reported Thursday that 362,000 people filed for initial unemployment benefits in the week ended March 3, up from the previous week’s revised 354,000 claims.

Economists surveyed by Briefing.com had predicted 355,000 new claims would be filed.

About 3.4 million people filed for their second week of unemployment benefits or more in the week ended Feb. 25, the most recent data available.

Jobless claims are considered a key indicator of the job market’s strength. The number can be volatile from week to week, so economists often look to the four-week moving average as a broader gauge.

Lately, that figure has been on a gradual decline. But last week it rose slightly to 355,000, up from the previous week’s average of 354,750.

The worse-than-expected report on initial claims comes one day before the government’s monthly employment report is scheduled to be released.

A CNNMoney survey of 19 economists predicts that the economy added 210,000 jobs in February, down from January, when 243,000 jobs were added to payrolls.

Most of the gain will likely come from the private sector, where the prediction is for an addition of 225,000 jobs.

The unemployment rate is expected to remain unchanged at 8.3%  

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WASHINGTON • U.S. service companies expanded in February at the fastest pace in a year, helped by a rise in new orders and job growth.

The Institute for Supply Management said Monday that its index of nonmanufacturing activity rose to 57.3, up from January’s 56.8 and the third straight increase. Any reading above 50 indicates expansion.

Expansion in the service sector coincides with the lowest unemployment in three years, five straight months of solid to strong job growth and rising consumer confidence.

The trade group of purchasing managers surveys roughly 90 percent of U.S. companies in all sectors outside of manufacturing. That includes retail, construction, financial services, health care and hotels.

Fourteen of the 18 industries that the survey tracks expanded in February. Real estate, rental and leasing, transportation and warehousing, construction, hotels and restaurants, and information technology firms were among those that reported growth.

Anthony Nieves, chairman of the ISM’s survey committee, said that most of the comments from the group’s members “reflect a growing level of optimism about business conditions and the overall economy.”

Companies expressed concerns about inflation and rising gas prices, Nieves said. A measure of prices paid by service firms jumped to the highest level in 11 months.

Still, the overall reading for the sector was the best since February 2011.

“February seems to be off to a strong start for the economy,” John Ryding, an economist at RDQ Economics, said in a note to clients. “The pickup in order growth was particularly encouraging,” he added, because it indicates that growth will likely continue.

A separate report showed factory orders fell 1 percent in January, the biggest decline in 15 months. Businesses sharply reduced orders for machinery, equipment and other so-called core capital goods, the Commerce Department said.

The decrease was largely expected after a tax cut expired at the end of last year. Even with the decline, orders have gradually been climbing back to near pre-recession levels.

Demand for services should continue to rise, according to the ISM report. A measure of new orders reached its highest point in a year.

The group’s employment index declined from its highest reading in six years. Still, it stayed at a level that suggests many service companies are adding workers.

That confirms other data that show service companies have stepped up hiring. The government said last month that service firms added 176,000 jobs in January, the most in four months.

On Friday the government issues its February jobs report. Economists expect another big month of job gains; the latest forecast predicts 210,000 total net jobs were added last month, according to a survey by FactSet.

Big job gains at service firms are necessary to reduce unemployment. Factories are creating a lot of new jobs, but the sector isn’t large enough to employ that many people.

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Higher oil prices are affecting U.S. growth but are currently not a reason to think the economy will stall, a top Federal Reserve official said on Thursday.

“It pushes people not to spend. This is one of the factors affecting consumer confidence and consumer spending,” John Williams, president of the San Francisco Federal Reserve Bank, said in a question-and-answer session after a speech in Honolulu.

“Given where oil prices have gone, it’s part of the story for (expectations of) modest growth.”

However, a severe supply shock in the Middle East would have a more negative impact if it sent prices sharply higher, he said.

Williams, a voting member this year on the Fed’s policy-setting panel, has supported recent moves by the U.S. central bank to bolster what he has termed as a “lackluster” economic recovery.

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Netflix’s key contract with Starz expired on Tuesday, causing a massive hit to its instant streaming catalog of movies and TV shows.

Pay-cable network Starz struck a four-year licensing deal with Netflix back in 2008. Netflix had been trying for months to negotiate a new contract, but talks fell apart back in September.

The Starz contract officially expired on February 28, so titles such as "Toy Story 3," "Scarface" and "Young Frankenstein" are no longer available on streaming from Netflix.

A significant amount of Starz’ content catalog is Disney (, Fortune 500) films, though it includes licensed titles from several other studios. Netflix spokesman Steve Swasey would not confirm how many titles were pulled.

Swasey implied that Netflix will be able to get some of those titles back by striking deals with other cable networks, saying that "only about 15 Disney titles are really non-replaceable."

"There’s always an ebb and flow of title availability, and there always will be," Swasey said. "There’s never a shortage of stuff. You’ll see more titles soon."

As of January, Starz content accounted for 2% of viewing time, Swasey said.

Still, the loss highlights two major problems for Netflix (): a streaming catalog that some customers complain is lackluster, and the increasing costs of content.

Before the talks fell apart last year, Netflix called the Starz contract "one of our most important deals" — because it was one of the few that gave Netflix streaming access to relatively recent movies.

Because Starz has licensing deals with several major movie studios, Netflix was able to piggyback on the arrangements and boost its catalog of recent releases.

Starz said it ended the contract talks because of "our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content."

Meaning: Starz wants more money. Netflix was able to score cheap contracts years ago, when streaming video hadn’t fully broken into the mainstream. Now that streaming video is so popular, providers are upping the price tag for their content.

Those increasing costs have set off a vicious cycle. In order to offset content charges, Netflix began charging separate prices for its DVDs-by-mail and streaming video plans in September 2011.

That raised the cheapest-possible bill for customers who want both services from $10 to $16 a month. Outraged customers left thousands of comments on Netflix’s blog, and in the third quarter of 2011, the company’s U.S. subscriber base fell for the first time in years.

Millions of customers stayed on, but some have complained of a too-small streaming catalog. Outright loss of content, like the Starz expiration, leaves angry customers asking why they’re paying more for less.

Netflix has been striking other deals to beef up its catalog. Last week, the company announced a multi-year agreement to get Academy Award-winning titles "The Artist" and "Undefeated," as well as other movies from The Weinstein Company.

Netflix is making an even bigger bet on TV, including studio-like moves. Last year Netflix licensed its first original series, "House of Cards," which stars Kevin Spacey and is due out in late 2012. In November, Netflix announced it would release a new season of the cancelled "Arrested Development" in 2013.

Meanwhile, studios now have a bargaining chip in the form of Netflix’s competitors. Beyond direct rivals like Hulu and kiosk service Redbox (owned by Coinstar ()), big tech players like Amazon (, Fortune 500) and Google (, Fortune 500) are jumping into the streaming game.  

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Daniel Macias is the face of Silicon Valley seldom seen by those who don’t live there.

When he was 19, he wasn’t starting what would become one of the world’s most successful tech companies, like Mark Zuckerberg did at that age when he founded Facebook. Macias spent his 19th birthday behind bars, where he’d been sentenced for assault.

Now 20, Macias spent a recent day learning to build houses as part of a construction job training program near Facebook’s headquarters. He hopes to join the carpenters union when he finishes the program.

“If I wasn’t going to school, I would have been in the streets,” Macias said.

Money and jobs abound in Silicon Valley for people with the right high-tech or business skills. For those who don’t, the Great Recession has meant the same challenge as anywhere else in the country.

Facebook moved into its new offices on the former campus of Sun Microsystems along San Francisco Bay not long before announcing plans for an initial public offering. Inside, employees wrestle with the enviable problem of what to do with their money once the IPO makes them overnight millionaires.

A short drive down the road, East Palo Alto saw the number of murders double from four to eight, a significant spike for a city of just 28,000 people. Average income hovers just under $18,000 annually, compared to more than $66,000 for Silicon Valley as a whole. The unemployment rate in December was 17 percent, compared to 8.3 percent region-wide.

Those disparities stem in part from the complicated histories of the small cities that span the Highway 101 corridor threading through the heart of Silicon Valley, and in part from national economic trends that have spared few struggling communities. They also reflect some changes unique to the most recent tech boom, fueled by social media, cloud computing and mobile apps.

As per capita income rises in region, the median income has fallen, suggesting that as some people are getting richer, more are making less. The percentage of students in Silicon Valley public schools receiving free or reduced-price lunches has increased steadily over the past several years, an indication of hard times for more families.

Data on these economic trends are collected every year in the Silicon Valley Index, compiled by local nonprofit analysts. This year’s report highlighted the recovery of the region’s high-tech economy as wildly successful companies like Facebook go on hiring sprees.

But that recovery has not had the same ripple effect on the region as a whole compared to previous tech booms, said Russell Hancock, head of Joint Venture, one of the groups behind the index.

In the past, companies like Hewlett-Packard Co. and Lockheed Martin Corp. brought mid-level jobs to Silicon Valley along with the expected science, engineering and management positions, Hancock said. But globalization has sent the manufacturing jobs overseas online pay day loans. Meanwhile, information technology has made once-plentiful clerical and office positions obsolete.

“The technologies that we invented here have actually eliminated entire classes of jobs,” Hancock said. Without those jobs, the prospects for workers without high-end tech skills have become even more challenging:

“If you took away tech, our region would look like any other region, maybe even worse,” he said.

The contrast between the haves at Facebook and the have-nots in East Palo Alto nearby has stirred some tension. City Councilman Carlos Romero is pushing for the company to do more to address traffic and the resulting air quality issues created by the influx of new workers. He also worries that especially after Facebook’s IPO, newly flush employees will start buying up the city’s relatively affordable real estate close to their offices and send housing prices spiraling higher than low-income residents can afford.

“This is not about making sure that Facebook doesn’t come into the community,” Romero said. “This is about making sure East Palo Alto is not left out.”

Nearly half of Facebook’s employees take some form of alternative transportation, and the company is placing a hard cap on the number of vehicles allowed on and off campus to keep traffic down, said Facebook spokesman Tucker Bounds. Facebook has also been working with local developers on efforts to build housing for employees on vacant land near the campus to lessen the impact on the existing housing market, Bounds said.

Facebook has initiated some outreach into the surrounding community, including support for the program where Macias is learning to be a carpenter, known as JobTrain.

Kail Lubarsky, director of marketing at JobTrain, said no graduates have gotten jobs with Facebook yet, but she said she’s working with the company in hopes of establishing an internship program. JobTrain has culinary arts training that could lead to jobs for students in Facebook’s cafeterias. But the real goal is to place students in entry-level jobs that could let them advance to join the ranks of the in-demand coders, designers and executives who thrive most in Silicon Valley.

At JobTrain, some students said they were gunning for Facebook jobs. But many said they were simply grateful for the chance to start over, to get a foothold in an economy that has challenged many of them, even in a place where on paper the recovery is in full swing.

Macias said he sees parallels between his effort to get ahead and the Facebook employees up the road, whom he sees as average people who worked hard and succeeded.

“They took advantage of opportunities,” he said.

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U.S. stock futures are slightly higher on hopes that Greece would soon get its crucial second bailout and following another batch of upbeat U.S. economic news.

Investors are growing more optimistic that European finance ministers will sign off on the Greek bailout and a bond swap agreement with Greece’s private creditors on Monday.

Dow Jones industrial futures are up 33 points to 12,903. The broader S&P 500 futures are up 2 points at 1,357. Nasdaq 100 futures are up 2 points at 2,595 instant credit reports.

Sentiment in the markets has been further buoyed by more positive U.S. economic data, particularly in the jobs market. Figures released Thursday showed jobless claims fell last week by 13,000 to 348,000, the lowest level since February 2008.

Most European and Asian markets rose Friday.

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Italian officials say rough seas have increased movements of the crippled Costa Concordia and are thwarting the start of fuel removal a month after the cruise ship capsized off a Tuscan island.

The national office overseeing search and anti-pollution operations said Friday that instruments registered increased and faster movements of the ship, which is resting on its side just outside Giglio island’s port. But they said the movements have since slowed down. If the ship keeps shifting, it could drop down onto deeper seabed, complicating plans to remove fuel quick payday loan.

At least 17 people died in the incident and 15 are missing. Italian TG5 broadcast video showing confusion among the captain and crew on the ship’s bridge in the hour after Concordia rammed a reef.

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