Archive for September, 2010

Mortgage rates hit another record low: Freddie Mac (Reuters)

Thursday, September 2nd, 2010 | Finance News

NEW YORK (Reuters) – U.S. mortgage rates fell in the past week to the latest in a series of record lows as yields on government debt dropped, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.

Rock-bottom rates offer a glimmer of hope for a housing market that has failed to find footing in the aftermath of the expiration of popular home buyer tax credits.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.32 percent for the week ended September 2, down from the previous week's 4.36 percent and its year-ago level of 5.08 percent, according to the survey.

Thirty-year mortgage rates have fallen to fresh lows for 10 out of the past 11 weeks. Freddie Mac started the survey in April 1971.

Meanwhile, 15-year fixed-rate mortgages averaged 3.83 percent, down from 3.86 percent last week, the lowest since Freddie Mac began surveying this loan type in 1991. Fifteen-year mortgage rates have fallen to fresh lows for eight out of the past 11 weeks.

"The 12-month price growth of core personal expenditures remained at 1.4 percent in July, which kept overall inflation expectations well at bay," Amy Crews Cutts, Freddie Mac deputy chief economist, said in a statement.

Federal Reserve Chairman Ben Bernanke reiterated this in an August 27 speech in Jackson Hole, Wyoming, saying that with inflation expectations reasonably stable and the economy growing, inflation should remain near current readings for some time before rising slowly, she said.

"As a result, mortgage rates eased further this week to new historic lows," she said.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

(Editing by James Dalgleish)

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Oil prices fall after brief surge (AFP)

Thursday, September 2nd, 2010 | Finance News

LONDON (AFP) – World oil prices dropped Thursday on profit-taking after soaring a day earlier in the wake of booming US manufacturing data, traders said.

Brent North Sea crude for delivery in October fell 65 cents to 75.70 dollars a barrel in midday London trade.

New York's main contract, light sweet crude for October, slipped 17 cents to 73.74 dollars a barrel.

Crude futures had surged by about two dollars on Wednesday in the wake of strong manufacturing data from the United States and China -- the world's two biggest consumers of oil.

In a volatile week's trade, oil prices had fallen sharply on Monday and Tuesday as traders fretted over the pace of the US economic recovery and growing fuel inventories.

"Oil prices rose sharply on Wednesday, although the markets failed to recoup all of Tuesday's surprisingly large loss," said Edward Meir, an analyst at broker MF Global.

"Strong manufacturing figures from both China and the US triggered the advance," he said Thursday.

The oil market had on Wednesday shrugged off data from the US Department of Energy that showed American crude inventories jumped 3.4 million barrels last week -- far higher than the 800,000 barrel rise predicted by analysts.

Traders also set aside a report from payrolls firm ADP saying that US private sector employment dropped in August for the first time in seven months as well as government data showing a bigger-than-expected drop in construction spending.

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A Dearth of Work for China’s College Grads (BusinessWeek)

Thursday, September 2nd, 2010 | Finance News

The job hunt came as a shock. The 23-year-old job seeker graduated in June from a good school -- Beijing University of Technology -- with a bachelor's degree in materials science, a subject he figured would appeal to employers. Yet he had to go through scores of interviews and comb the online job sites endlessly before landing a job at a local trading company. Happy ending? Barely. The pay, $368 a month, is meager by Beijing standards, so he has had to move back in with his parents and he's too ashamed about the outcome of his job search to give his name. As the young man explains, there are too many recent grads looking for jobs, while companies want only the most qualified people at the lowest price.

At least he got a job -- many of his peers are still looking. Even as labor shortages plague manufacturing industries, more than one-quarter of this year's 6.3 million Chinese college graduates are unemployed, according to the Education Ministry.

The problem of graduate unemployment and underemployment has been building for years, due to rising university enrollments and a mismatch between what students learn and the skills companies need. About a decade ago, the government decided to boost university admissions, a move that policymakers believed would yield big economic benefits as China shifted to an economic model based more on innovation than on cheap manufacturing. Since 1998 the number of graduates has risen threefold, according to Zeng Xiangquan, dean of the School of Labor Relations and Human Resources at Renmin University of China in Beijing.

"Ant Tribes"

The expanded enrollment has slowed down salary increases for entry-level white-collar jobs. Graduates in high-cost cities such as Beijing and Shanghai struggle to get by, living in crowded dormitory-like conditions. Chinese sociologist Lian Si has coined the term "ant tribe" (yi zu in Chinese) to describe the tens of thousands of grads subsisting in squalor on the outskirts of China's biggest cities. In an Aug. 6 commentary for China Daily, Yu Jianrong, a scholar at the Chinese Academy of Social Sciences in Beijing, wrote that with so many college grads marginalized, China risks creating a new class of "underdogs" who seethe with "hatred against the bureaucracy."

Foreign companies are not doing much to absorb this surplus labor. Those that take on newly minted grads typically find they "have to invest significantly in training and development to bring their new hires up to par with their peers in other countries," says a white paper published in May by the American Chamber of Commerce. "While we hire many recent graduates, of course we prefer candidates to have working experience, especially in a multinational, diverse environment," says Trevor Hale, director of corporate communications for Ford Motor, Asia Pacific & Africa. "In some disciplines like engineering or marketing, we would much rather have fewer people who are more senior and experienced than a greater number of less experienced people." According to Gerard A. Postiglione, a researcher on Chinese education at the University of Hong Kong, Chinese college students are not trained to work collaboratively, be creative and innovative, or take risks.

Some of these deficiencies are a product of the Communist Party's decision to model the educational system on that of the Soviet Union. After the new regime seized power in 1949, China's comprehensive universities were replaced with Soviet-style schools that churned out graduates narrowly focused on skills seen as necessary to manage a heavy-industrialized, planned economy. Academia was dealt another blow by the Cultural Revolution of 1966-76, when the Red Guards shut down all institutions of higher education and persecuted thousands of teachers and administrators.

Education Reform Plan

One feature that has survived all the upheaval is the traditional emphasis on rote memorization. "The teacher stands and talks, talks, and talks. The students sit and listen, listen, and listen," says Renmin's Zeng. "We overemphasize theory and don't (do well) when it comes to the teaching of practical skills." Compounding the problem is that state-owned enterprises, which traditionally hired many college grads, have been severely downsized themselves.

The government is trying to set things right. Chinese authorities on July 29 announced a "National Plan for Medium and Long-Term Education Reform and Development" that will boost spending on education at all levels and focus university curricula more on practical skills. Outside analysts are encouraged. "The blueprint 10-year plan is very clear about the flaws in the educational system," says University of Hong Kong's Postiglione. The city of Chongqing, meanwhile, has introduced special funds and tax rebates to support graduates who set up their own businesses. The central government is urging young people with college degrees to apply for official posts in the poor interior provinces.

Already, the government is claiming a small victory of sorts, with the Education Ministry announcing recently that the rate of employment for recent graduates rose from 68 percent in 2009 to 72.2 percent this year. "As the economic structure changes, more suitable jobs for graduates will be created," says Zhang Juwei, deputy director at the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. Although Zhang may be right, that scenario is little comfort to the more than 25 percent of recent grads still hunting for work.

The bottom line: China's new university graduates lack the skills companies need, and there are too many of them, which is keeping salaries low.

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