Finance counsels

Pakistan may offer as much as $1 billion of bonds and resume selling state assets in the coming months, Finance Minister Shaukat Tarin said, as the government forecasts a widening budget deficit amid rising war costs.

“We have made all the arrangements and we will conduct roadshows in the next couple of months,” Tarin said in an interview in Singapore yesterday. The government may sell about $500 million each of euro-denominated and Islamic bonds, totaling no more than $1 billion, he said.

The country will try to sell state assets in the fiscal year starting in July after pausing for the past two years because of market conditions, he said after meeting investors to update them on Pakistan’s economy.

Pakistan’s budget deficit may widen to 5.3 percent of gross domestic product against a target of 4.9 percent in the year ending June 30 because of higher spending, including the cost of fighting militants in tribal areas, Tarin said on Jan. 27. The country was forced to turn to the International Monetary Fund for a bailout to avert defaulting on its debt in 2008.

“A global bond offering from Pakistan may be more feasible in a few months as global economic conditions improve,” said Asad Farid, an economist at AKD Securities Ltd. in Karachi. “The risk premium is very high so it’s better for the government to opt for funds from donors rather than the markets.”

Debt Protection

The cost of protecting against Pakistan defaulting on its bonds will probably fall from current levels as the government begins to market more debt, Tarin said.

Credit-default swaps protecting the debt of Pakistan rose 27.5 basis points to 950 basis points as of 9:48 a.m. in Singapore, according to prices from Royal Bank of Scotland Group Plc. The cost of protecting the country’s debt has fallen from 3,084.3 basis points on Jan. 1, 2009, to 870.5 yesterday, according to prices from CMA DataVision in New York.

Demand for emerging-market debt may be hurt as countries including Spain, Portugal and Greece struggle to finance their budget deficits. Portugal’s public debt will rise to 91 percent of GDP by 2011, according to European Commission forecasts. Greece’s debt will climb to 135 percent of GDP and Spain’s will increase to 74 percent. Portugal and Greece led a surge in the cost of insuring against losses on European sovereign debt to a record yesterday.

Vietnam raised $1 billion from its second global bond sale last week, offering higher yields than lower-rated Philippines and Indonesia, amid the busiest start to a year for global borrowing by developing nations since 2005.

New Tax

Pakistan also plans to introduce a value-added tax to boost revenue in the next fiscal year, Tarin said. The state’s revenue targets are “intact,” he added.

The country sold local Islamic bonds worth 14.4 billion rupees ($170 million) in September. Islamic law bans the payment and receipt of interest, prohibits investment in businesses tied to gambling and alcohol, and stresses profit-sharing.

The IMF on Aug. 8 agreed to increase a loan to Pakistan by $3.2 billion, after the nation was forced to turn to the Washington-based lender for a $7.6 billion bailout in November 2008. Pakistan is expecting $2.2 billion of aid and loans from the U.S. and Japan before June 30, which may help bridge the government’s financial gap, Tarin said last week.

The Friends of Democratic Pakistan, an aid group that includes the U.S., U.K., Japan and Saudi Arabia, may provide $1.4 billion to $1.8 billion to Pakistan in the current fiscal year ending June 30, Tarin said yesterday.

Foreign Aid

The group, formed in 2008 to provide help to the nation at the forefront of the fight against terrorism, pledged $5.3 billion in aid in April.

The South Asian nation’s war against Taliban guerillas in the country’s northwest has hurt the economy. More than 3,000 people were killed in terrorist attacks in Pakistan last year, according to the Pakistan Institute for Peace Studies in Islamabad.

Growth in the 12 months ended June 30, 2009, cooled to 2 percent, the slowest pace in eight years. The $168 billion economy may expand 3.4 percent this fiscal year, Tarin said yesterday, reiterating an earlier government forecast.

The State Bank of Pakistan kept its benchmark interest rate unchanged at 12.5 percent on Jan. 30 amid accelerating inflation, after reducing the rate by 2.5 percentage points from April to November last year.

Interest Rates

Pakistan aims to bring interest rates lower when inflation eases, which won’t happen “in the next couple of months,” Tarin said. Inflation will average about 11 percent this fiscal year and 6 percent to 7 percent the following year, he said.

Consumer prices rose 10.52 percent in December, the most in four months. The inflation rate may climb further after the government last month raised power tariffs by 14 percent and increased gas prices by as much as 18 percent to help contain its budget deficit.

Foreign direct investment may total as much as $5 billion in the next fiscal year, including asset sales by the government, Tarin said.

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Canadian Finance Minister Jim Flaherty’s March 4 budget may include a stronger forecast for 2010 economic growth, a survey of analysts showed, giving him more scope to fight the country’s rising debt burden.

Canada’s economy will expand 2.7 percent in 2010, faster than the 2.3 percent projected in the September fiscal update, according to a Bloomberg survey of 14 of the 16 forecasters Flaherty consults for his budget. Flaherty will meet the 16 economists from banks, universities and research institutes in Ottawa tomorrow to gather their projections.

Faster growth in 2010 may help propel Prime Minister Stephen Harper’s plan to shift the government’s focus to eliminating the deficit, which could sustain demand for Canadian debt at a time when opposition lawmakers and economists question the government’s ability to balance the budget.

“That’s meaningful, and that’s clearly a welcome development,” said Warren Lovely, a government strategist at Canadian Imperial Bank of Commerce in Toronto. “It’s safe to say that Ottawa and economists generally are encouraged by recent developments and specifically encouraged by evidence the recovery is really taking root here.”

Lovely said the economic forecast is just a “starting point” on which to base the budget, and investors will be focused on the plan “to get back to balance.”

Canada’s nominal output, which is not adjusted for inflation and is the broadest measure of the tax base, will expand 5.1 percent this year, up from 4.1 percent forecast in September, according to the Bloomberg survey.

Lowest G-7 Debt

While Canada’s debt is rising, it has the lowest debt-to- GDP ratio in the Group of Seven countries. Long-term Canadian bonds have outperformed U.S. treasuries over the past year on Canada’s stronger fiscal position.

U.S. 10-year Treasuries yielded 31 basis points more than equivalent-maturity Canadian bonds on Jan. 28. The U.S. bonds yielded, on average, about five basis points over the Canadian securities in the past year, according to Bloomberg data.

Government bonds fell today, with the yield on Canada’s benchmark 10-year note rising one basis point to 3.36 percent at 9:19 a.m. New York time. The price of the 3.75 percent security due in June 2019 fell 9 cents to C$103.09 ($96.57).

“The fundamental point is that Canada’s fiscal position remains superior, much superior to the U.S. in particular, and that there is continued scope for significant outperformance in the longer end of the yield curve,” Lovely said.

Generate Revenue

Canada, which revised its fiscal forecasts in September, estimates a budget deficit of C$55.9 billion in the year ending this March, and a 6-year funding gap of C$164 billion. The federal government estimates it will need to borrow about C$100 billion this fiscal year, raising its debt to a 9-year high of C$519.6 billion by March 31.

Faster growth this year would allow Canada to generate a total of C$76 billion more in output over the next six years, according to Bloomberg calculations based on the forecasts. Canada generates about $15 billion in revenue for every C$100 billion of output, according to the government’s last fiscal update.

“It’s not completely a game changer, but it is a little bit of padding that will be appreciated at a time like this,” said Eric Lascelles, chief economics and rates strategist at TD Securities Inc. in Toronto.

Statistics Canada said last week that the economy expanded a faster-than-expected 0.4 percent in November, and raised its growth estimate for the two prior months.

While raising their 2010 forecast, the analysts cut their outlooks for 2012-2015, suggesting revenue gains may fade over time. Two of the 16 groups that will meet Flaherty this week — Caisse de Depot et Placement du Quebec and Milton, Ontario-based Centre for Spatial Economics — declined to take part in the Bloomberg survey.

‘New Normal’

Forecasts for slower growth in the final years of the budget horizon underscore concerns by the parliamentary budget officer that Canada’s long-term growth potential is limited, which will undermine the government’s ability to erase the deficit.

Bank of Canada Governor Mark Carney said Jan. 21 that the “new normal” for potential growth won’t be much greater than 2 percent beyond 2011, because of low productivity gains and an aging workforce. Carney also has said Canada will rebound more slowly from last year’s recession than it has previously.

Flaherty said Jan. 15 in Toronto that the country isn’t running “structural” deficits and will return to balance as the economy recovers without additional measures such as tax increases.

“There is a considerable range in the medium-term economic forecasts of the private sector, but they all suggest the federal budget cannot be balanced within the next several years without the application of some policy restraint,” Don Drummond, chief economist at Toronto Dominion Bank, said in an interview. “If tax increases are to be avoided, the restraint must come through lowering the rate of growth of program spending.”

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AmerenUE’s 1.2 million Missouri electricity customers will see a new charge on bills because of higher fuel costs.

The average monthly increase for residential customers is 15 cents. The exact amount will vary by household and by month depending on electricity usage.

The charge reflects a $19.8 million rise in the utility’s fuel and purchased power costs from June to September and will appear on bills as "Rider FAC Adjustment." 

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San Jose Councilman Sam Liccardo is suggesting waiving fees, offering free parking and reimbursing companies for the taxes they generate to encourage businesses to locate in the city's downtown.

Liccardo, whose council district includes the downtown, said Monday that as the country emerges from the worst recession in 75 years, the city must seize opportunities to create jobs.

"We need to take some risks," Liccardo said. "If the recession is over, nobody in my neighborhood or business district have yet received the news."

Liccardo said that the proposals mean foregoing revenue to the city coffers, but he doesn’t see much choice: "Starting where we are with a very anemic economy — the idea of declining to take risks to try to get business moving again would really leave us condemned to the current status."

The councilman said he plans to ask City Manager Debra Figone and Harry Mavrogenes, head of the city’s Redevelopment Agency, to assess the costs at the Feb. 8 City Council meeting and return on Feb. 23 with a strategy to put the proposals to work. Mayor Chuck Reed supports the proposals as do Councilwomen Nancy Pyle and Rose Herrera.

"The most important item in there is providing whatever additional resources are necessary to work at the speed of business," Reed said. "We want to allocate additional resources for development so the staff can work overtime to meet tight deadlines no fax needed payday loans."

Specifically, Liccardo proposes to:

— Waive license fees for new small businesses employing up to 8 employees that apply for a business license between March 1, 2010 until the end of Fiscal Year 2010-11;

— Waive fees on parking leases at city-owned parking lots for two years for businesses that sign or renew a lease in a downtown office or retail building, under the following conditions: each business may have only up to 50 parking spaces; number of parking spaces is dependent on the amount of office/retail space leased by the company; the program will stop when an agreed-upon number, such as 1,000 spaces, have been taken.

"These ideas … can work effectively if packaged together to sell San José to the rest of the world," he said in his memo. "The underlying principle of each of these ideas is simple: We need to generate business activity to shake our economic doldrums, and to use any 'net new' tax revenues as an incentive for that activity.”

As he noted the proposals if adopted by the City Council will mean losing short-term tax revenues, but, "Defending the status quo, however, merely assures us that the city coffers will receive the same percentage share of zero.'

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As if being a banker in Missouri isn’t tough enough these days, Peter Benoist of Enterprise Bank wants to set up shop in the real estate disaster zone known as Phoenix — in the skeleton of a failed bank, no less.

The banking business in Arizona is sickly indeed. The state’s banks have lost money for the past two years. Six percent of their loans are failing, according to September figures from the FDIC. The state’s real estate market is in depression, with housing prices down 14 percent for the year as of September, after falling 12 percent in 2008.

By contrast, Missouri banks look almost healthy. They still turn a profit on average, although a small one. Only 2.75 percent of loans are troubled.

Missouri’s real estate market has held up relatively well, with home prices down only 2 percent in September after holding steady in 2008.

So, why would a Missouri banker want to lend money in a place where most bankers are losing their monogrammed shirts?

It seems the lure of Sun Belt growth still tugs at bankers here. When Phoenix works through its real estate mess, Benoist bets it will resume growing faster than St. Louis.

"We were concerned over whether the state of Missouri would offer enough organic growth," said Benoist, chief executive of the bank’s parent company, Enterprise Financial Services. The Phoenix-Mesa-Scottsdale metro area grew 31 percent from 2000 to 2008, according to the Census Bureau. St. Louis grew 4.4 percent.

Enterprise is based in Clayton, and operates in St. Louis and Kansas City. Last month, it bought the corpse of Valley Capital Bank in Mesa from the FDIC, the government undertaker for failed banks. Valley Capital is tiny, with $41.3 million in assets, compared to $2.5 billion at Enterprise.

Enterprise paid a 2 percent premium for Valley’s $40 million in deposits, and the FDIC agreed to share any losses on Valley’s loans.

The key for a newly arrived bank in Arizona is to stay away from real estate. Benoist says he will target the sort of commercial and industrial companies that are the bank’s bread and butter in St. Louis.

Enterprise is a mid-sized bank that tries to fill a niche market serving small to mid-sized privately held businesses. It doesn’t try very hard to tempt consumers with auto loans and credit cards. Instead, its goal is to serve the credit and transaction needs of private business, then land the business owners’ personal banking and financial planning accounts.

Arizona bankers’ main mistake was to fund the real estate boom. Now, many of them are hurting financially and can make fewer loans. Benoist thinks he can take advantage of that to swipe away their business customers online cash advance.

"All those customers are up for grabs," says Joe Stieven of Stieven Capital Management in St. Louis, a specialist in bank stocks. "The opportunities for a well-run institution are some of the best I’ve seen in 20 or 30 years."

A bank that arrives now should have the chance to buy up other ailing or doomed banks on the cheap, he said.

Other St. Louis banks have chased growth south and west, and the results haven’t always been pleasant. First Banks expanded rapidly in California in the 1990s, then into Florida in the last decade. Now, soured California real estate have produced massive losses.

Enterprise lost $47 million in the first nine months of 2009. A little more than $45 million of that loss was on paper only — a writedown in "goodwill," the presumed value of hard-to-measure things such as customer relationships and a well-known name.

After taking the writedown, the bank earned $4.7 million in the third quarter, four times its profit a year earlier.

Enterprise has been yearning for the Sun Belt for years. It opened a business lending office in Phoenix three years ago and hired Jack Barry to run it. Benoist had known Barry when both worked at Mark Twain Bank, now a part of U.S. Bank. When hired, he had been running a business lending operation in Phoenix for Marshall & Ilsley bank.

"It was not just about the market. It was about the banker in the market," said Benoist, Enterprise Financial’s CEO. "If Jack Barry had been in Houston or Denver, we’d probably be talking about Houston or Denver."

A lending office can’t take deposits or handle other banking business. Enterprise had planned to start a full-service Phoenix bank from scratch last year, but it was stymied by regulators.

"It doesn’t make any sense, in this environment in Arizona, to try to start a new bank," said Tom Wood, acting superintendent of the Arizona Banking Department. "It’s going to take forever to get it approved."

New banks need both federal and state approval, and both processes have slowed to a crawl.

Wood said his own staff is down to three people, and the federal regulators are too busy closing banks to pay much attention to new ones that want to open.

The FDIC’s sale of Valley Capital provided a back door into the market.

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The prospective new owners of the Phoenix Coyotes are willing to sign a long-term lease to keep the team in Arizona, but they also are looking at playing some “home” games in western Canada to boost revenue and attendance.

Ice Edge Holdings Inc. also is talking about parking charges at the Glendale-owned Jobing.com Arena to help the hockey team’s bottom line in Glendale.

Glendale officials said they are open to the Coyotes playing a handful of home games in Saskatoon, Saskatchewan, under the right circumstances since, Ice Edge is willing to sign a long-term lease.

Daryl Jones, COO of Ice Edge Holdings Inc., told the Phoenix Business Journal Monday that negotiations with the National Hockey League are moving forward and the ownership group expects to sign a long-term lease with Glendale shortly after working out sales terms. Jones didn’t give a timetable for when his group will finalize its purchase of the Coyotes, currently in Chapter 11 bankruptcy protection.

The NHL bought the team in October through a U.S. Bankruptcy Court sale for $140 million. Plans call for Ice Edge and the NHL to finalize a deal for the Coyotes by June.

Jones also said Ice Edge is not seeking a lease clause that would allow it to move the team if attendance and revenue do not improve.

“We’re in this for the long haul,” he said, adding that a long-term commitment to the Phoenix market will give fans and business sponsors some certainty the NHL franchise is staying here. “It’s all about getting the fans to believe in you.”

The previous lease had a 30-year term. The Coyotes have been playing at the Jobing.com Arena since 2003.

Glendale spokeswoman Julie Frisoni said the Phoenix suburb has had meetings with Ice Edge, but more serious lease negotiations would occur after the sale is complete.

Jones said Ice Edge continues to look at playing some regular season home games in Saskatoon, however.

“It’s definitely something we are entertaining,” he said.

Such games could be played at a new arena in Saskatoon with the Phoenix team playing teams from Vancouver, Edmonton and Calgary. Jones said the team might move games and dates that traditionally don’t draw well in Phoenix. He stressed, however, Ice Edge did not want to take actions that might erode support for the team in Arizona.

The Saskatoon revenue could be shared with Glendale and allow the city to book more non-hockey events at the arena.

Playing games outside of home markets is not common in professional sports, although the National Football League’s Buffalo Bills have played games in Toronto, and college sports teams sometimes play games in different venues to improve revenue.

Jones said playing some home games in Saskatchewan could build support for the Coyotes in western Canada and encourage tourism from Canada.

Another aspect of a new lease between Ice Edge and Glendale would be allowing the team to charge for parking. That could bring in $12 million to $15 million annually for the Coyotes.

Jones said other teams charge for parking and it’s realistic to expect the Phoenix team to be able to do the same. He stressed the team does not want parking charges or ticket prices to discourage fans attending games in a time when housing prices are down and consumer spending is strained.

Frisoni said Glendale is open to considering new revenue for the Coyotes and acknowledged most major sports arenas in North America have parking charges.

Ice Edge is comprised of American and Canadian investors, including John Breslow, who was a Coyotes minority owner when Phoenix businessman Jerry Moyes owned the team. Jones said he expects three or four Arizonans to be part of Ice Edge’s ownership group but he would not disclose additional names.

Moyes put the team into Chapter 11 in May and the NHL and Glendale won a bankruptcy court battle over Research in Motion CEO Jim Balsillie to buy the team. Balsillie bid $243 million and wanted to move the team to Hamilton, Ontario. The NHL did not respond to request for comment late Monday afternoon.

Attorneys and business consultants familiar with Coyotes reorganization case say the team could lose between $40 million and $50 million this year, but will save $6 million not having to pay former coach and minority owner Wayne Gretzky.

The Coyotes are in fifth place in the NHL’s Western Conference this year. The conference’s top eight teams make the playoffs. The Coyotes haven’t been in the playoffs since 2002. Coach Dave Tippett is in the running for NHL Coach of the Year and Ilya Bryzgalov could win the league’s top goalie award.

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Intel Corp. said Thursday that its fourth-quarter profit blew past expectations, confirming a rebound in the recession-battered personal computer market is underway.

Intel’s bright profit outlook for 2010 means the No. 1 maker of computer microprocessors sees a lasting recovery past the stellar fourth quarter — not an isolated holiday shopping blip.

PC shipments grew more sharply than expected in the quarter, a promising sign after a brutal year for the industry during the recession. Intel, which supplies the vast majority of the "brains" inside computers, rode the resurgence of consumer PC shopping to a profit of $2.3 billion, or 40 cents per share.

That was more than nine times as much as it earned in the year-ago quarter, when profit totaled $234 million, or 4 cents per share.

Intel also posted its highest gross profit margin in history, at 64.7 percent. A higher gross margin number means the chipmaker was able to turn more revenue into profit. It’s a key measure for a manufacturing-intensive company such as Intel because it reflects how well costs are held in check guaranteed personal loan approval.

Sales climbed 29 percent to $10.6 billion, as Intel sold more chips, many at higher prices than in the past.

Analysts expected a profit of 30 cents per share and $10.2 billion in revenue.

Intel is the first major tech company to report results for the fourth quarter, and it’s seen as a barometer for the PC market and for tech spending in general. Stacy Smith, Intel’s chief financial officer, said in an interview that he believes consumer spending will continue to drive growth in Intel’s business in 2010.

Intel hasn’t yet seen signs that big companies are feeling freer to replace old computers, but Smith said he believes it will happen this year, once the companies finish testing the new Windows 7 system from Microsoft that will be installed on most new workplace PCs.

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A tech rally propelled the Nasdaq and helped the broader market erase losses Friday, as investors took in stride a surprisingly weak jobs report amid other recent signs that the economy appears to be stabilizing.

The Dow Jones industrial average (INDU) added 11 points, or 0.1%. The S&P 500 index (SPX) gained 3 points, or 0.3%. The Nasdaq composite (COMP) gained 17 points, or 0.7%.

The Dow and S&P 500 ended at 15-month highs and the Nasdaq at a 16-month high to cap off the first trading week of 2010.

Following Monday’s big rally, stocks have been mixed to lower all week, with investors showing reluctance to move after the major gains of 2009 and ahead of the jobs report.

Although the economy appeared to turn a corner in the fourth quarter, market participants are looking for further signs of stability before they push stocks a lot higher. In particular, still-high unemployment and sluggish consumer spending remain a worry.

"The big picture is that there are still a scary number of people out of work, particularly when you think about that consumer spending fuels two-thirds of economic growth," said Len Blum, managing director at Westwood Capital.

Blum said that Wall Street is split between those who think the economy has turned a corner and those who think that a double-dip recession remains on the table. He said that the jobs report adds weight to the double-dip theory.

"The majority of the positive indicators we’ve seen are a result of government stimulus and the inventory restocking," he said. "Whether we see a second leg down or just a mediocre recovery is going to depend on whether there is more stimulus since there isn’t anything fundamental to drive things right now."

Jobs: Employers cut 85,000 jobs from their payrolls in December, the Labor Department reported Friday. The figure was a surprise to economists who were expecting no change in payrolls, according to a Briefing.com survey.

On a more positive note, November’s report was revised to show a gain of 4,000 jobs versus the initially reported loss of 11,000, breaking a 22-month streak of declines.

The unemployment rate, generated by a separate survey, held steady at 10%, in line with forecasts.

On the move: Boeing (BA, Fortune 500), Coca-Cola (KO, Fortune 500), Wal-Mart Stores (WMT, Fortune 500) and Exxon Mobil (XOM, Fortune 500) were the main drags on the Dow. But losses were offset by strength in tech components IBM (IBM, Fortune 500), Microsoft (MSFT, Fortune 500), Intel (INTC, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500).

Citigroup cut its fourth-quarter earnings forecasts on Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), saying that fixed-income trading revenues fell in the fourth quarter and are set to fall an additional 15% to 20% in 2010. The companies are also likely to see weaker revenues from their commodity and currency units.

UPS (UPS, Fortune 500) announced it was cutting 1,800 jobs as part of a restructuring and that it expects fourth-quarter earnings to top expectations. Shares gained just short of 5%.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers three to two on volume of 995 million shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.15 billion shares.

Economy: A report released after the start of trading showed wholesale inventories rose 1.5% in November after rising 0.6% in October. Economists surveyed by Briefing.com thought inventories would fall 0.3%.

Another report release in the afternoon showed consumer borrowing fell by $17.5 billion in November versus the $5 billion expected. Borrowing fell by $3.5 billion in the previous month.

World markets: Asian markets ended higher. In Europe, London’s FTSE 100 gained 0.1%, France’s CAC 40 rose 0.5% and the German DAX gained 0.3%.

Commodities and the dollar: The dollar tumbled versus the euro and the yen.

Dollar-traded gold inched higher. COMEX gold for February delivery rose $5.20 to $1,138.90 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery fell 9 cents to settle at $82.75 a barrel on the New York Mercantile Exchange, further retreating from 15-month highs hit earlier in the week.

Bonds: Treasury prices slipped, raising the yield on the 10-year note to 3.83% from 3.82% late Thursday. Treasury prices and yields move in opposite directions.

Talkback: With the economy in recovery mode and a new year underway, what’s your 2010 plan for your portfolio? Will you invest more, less or not at all? Are you willing to take on more risk? E-mail your story to realstories@cnnmoney.com and you could be featured in an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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The U.S. unexpectedly lost 85,000 jobs in December, supporting Federal Reserve forecasts that a labor market recovery will take time and making it more likely interest rates will stay near zero for the next six months.

Payrolls fell last month after a revision showed a gain of 4,000 in November, the first in almost two years. The median estimate of economists surveyed by Bloomberg News projected no change in December. The jobless rate held at 10 percent.

Treasury yields and the dollar slid as traders increased bets the Fed will keep interest rates near a record low for “an extended period.” While job cuts have slowed, companies are holding back on hiring as they gauge the strength of the economic recovery and contend with tight credit.

“There is still a lot of caution about the recovery because of lingering credit-crunch effects,” said Jim O’Sullivan, chief economist at MF Global Inc. in New York, who forecast a payrolls decline of 100,000. “It’s just a matter of time, probably a month or two, before the trend in payrolls turns positive on a sustained basis.”

The yield on the two-year Treasury note fell to 0.97 percent at 4:23 p.m. in New York from 1.02 percent late yesterday. The dollar slid from a four-month high against the yen, dropping 0.8 percent to 92.64 yen from 93.37 yesterday.

Stocks rose for a fifth day on optimism about earnings. The Standard & Poor’s 500 Index gained 0.3 percent to 1,144.98.

Labor Participation

The survey of households, used to calculate the unemployment rate, showed employment dropped by 589,000 workers last month. A decrease of 661,000 in the number of people saying they were in the labor force prevented the jobless rate from rising. The participation rate, or the share of the population in the labor force, fell to 64.6 percent, a 24-year low.

The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 17.3 percent from 17.2 percent.

United Parcel Service Inc., the world’s largest package- delivery company, said today that it plans to cut 1,800 jobs as it reduces the number of U.S. operating districts. Atlanta-based UPS is considered a bellwether for the economy because it delivers goods ranging from auto parts to financial documents.

A separate report showed inventories at wholesalers jumped in November by the most in five years, indicating stockpiles will provide a bigger boost to fourth-quarter economic growth. The 1.5 percent gain, the biggest since October 2004, followed a 0.6 percent rise, Commerce Department figures showed.

Fourth-Quarter Growth

Economists at Macroeconomic Advisers said in an e-mail to clients that they raised their fourth-quarter growth forecast to 5.4 percent, from 4.9 percent before the wholesale report. Gross domestic product increased 2.2 percent in the third quarter.

Consumer credit slumped a record $17.5 billion in November as unemployment close to a 26-year high discouraged borrowing, Fed figures showed today direct payday loans. Revolving debt, such as credit cards, plunged by a record $13.7 billion. Auto loans also declined.

Payrolls were forecast to be unchanged, according to the median estimate of 76 economists surveyed by Bloomberg News. Estimates ranged from a decrease of 100,000 to a gain of 85,000. The November reading was revised from an initially reported 11,000 decline.

Over the past two years, the drop in payrolls has been the biggest as a percentage of all jobs since World War II was ending in 1944-45.

Obama Administration

The Obama administration is under pressure because about half of the jobs lost during the recession have occurred since the president’s inauguration in January of last year.

“This is a very stubborn recession,” Labor Secretary Hilda Solis said in an interview today on Bloomberg Television. “We’re going to have to work harder to create jobs.”

Mike Curtis, a former Chrysler LLC service and parts manager, moved to Texas in December after failing to find steady work in California or Illinois for more than a year.

He said he sent 50 resumes to employers such as FedEx Corp., United Parcel Service Inc. and Home Depot Inc.

“Worst-case scenario, if I can’t find something in the next two months, I’ll pack up and go somewhere else,” said Curtis, 43, who lives with a friend near Dallas. “But where do I go?” he said. “I’m frightened right now. I’d like to have a steady paycheck, but can’t seem to find anything.”

Today’s report showed factory payrolls declined 27,000 after decreasing 35,000 in the prior month. Payrolls at builders fell 53,000 after declining 27,000.

Weather’s Impact

The number of people with jobs who were unable to work because of bad weather during the survey week rose 241,000 last month, the biggest increase since January 2009.

Service industries, which include banks, insurance companies and retailers, subtracted 4,000 workers after adding 62,000 in November.

President Barack Obama on Dec. 8 proposed more spending on the nation’s transportation system and tax credits to spur hiring by small businesses in a second round of efforts to cut the jobless rate. In early 2009, the administration forecast the $797 million stimulus plan would keep unemployment below 8 percent.

In another boost, the Census Bureau will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. That hiring may boost payrolls by a peak of 700,000 in May before those workers begin getting dismissed in June, according to a forecast by Lori Helwing at BofA Merrill Lynch Global Research in New York.

The number of temporary workers rose 46,500 in December, the fifth straight gain. Payrolls at temporary-help agencies often turn up before total employment as companies await stronger demand.

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Despite any concerns about economic woes, more Houston Business Journal readers want to focus on their health in the new year.

Of the 328 responses to this week’s BusinessPulse survey asking about New Year’s resolutions, 26 percent said they want to lose weight. That was closely followed by 24 percent who didn’t make resolutions.

Other survey choices included: “Save more money” (17 percent), “focus on my career” (14 percent), “spend more time with family/friends” (9 percent) and “quit smoking” (1 percent) business

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