The news at a glance
U.S. economy: Is another recession ahead?; Banks: HSBC eliminates 30,000 jobs; Madoff: Victims’ payouts take a hit; Corporate leaders: BSkyB backs James Murdoch; Energy: Oil companies post healthy profits
U.S. economy: Is another recession ahead?The risk of another downturn is real, said Christopher Rugaber in the Associated Press. According to Commerce Department data released last week, the U.S. economy grew in the second quarter by an anemic 1.3 percent, thanks to flat consumer spending, cuts to government outlays, and weak hiring. Adding to the dismal picture was a revision of first-quarter growth from 1.9 percent to a feeble 0.4 percent. That makes the first half of the year “the worst six-month performance since the Great Recession officially ended, in June 2009.” GDP growth for the past year now comes to just 1.6 percent, raising the specter of a double-dip recession. Over the past six decades, year-to-year GDP growth has fallen below 2 percent just 12 times. In 10 of them, the U.S. was either in a recession or soon to fall into one.
Such weak growth is “far too sluggish” for the economy to make a dent in unemployment, said Renae Merle in The Washington Post. The economy needs to grow at 2.5 percent simply for the labor market to “be treading water.” Although private investment and exports both grew last quarter, they weren’t enough to dull the economy’s pain. The new numbers from all sources offer “very little by way of positive news,” said John Ryding, chief economist at RDQ Economics.
Banks: HSBC eliminates 30,000 jobsHSBC, Europe’s largest bank, announced that it will cut an additional 25,000 jobs on top of the 5,000 it is already eliminating, said Julia Werdigier in The New York Times. The cuts, amounting to 10 percent of the bank’s global workforce, will come mostly from “mature markets, including Europe and the U.S.” The bank plans to continue hiring in Brazil and in Asia. As part of its scaling back of U.S. operations, HSBC sold 195 branches in upstate New York to First Niagara for $1 billion in cash.
Madoff: Victims’ payouts take a hitVictims of Bernard Madoff’s Ponzi scheme may soon see their potential settlements slashed, said Kara Scannell in the Financial Times. A federal judge in New York ruled that the Madoff victims’ trustee cannot sue HSBC for failing to detect Madoff’s fraud, erasing nearly $9 billion the trustee had hoped to recover. And because “the judge signaled that he would dismiss similar claims against other defendants,” a $19 billion suit against JPMorgan Chase and a $55 billion suit against Bank Medici could also be thrown out.
Corporate leaders: BSkyB backs James MurdochJames Murdoch has held on to his job as chairman of British broadcaster BSkyB, despite accusations that he lied to Parliament about his knowledge of phone hacking at News Corp., said Jane Martinson in the London Guardian. BSkyB’s board of directors last week backed Rupert Murdoch’s youngest son with a unanimous vote of confidence, while noting that it will keep a “watching brief” on continuing investigations into the phone-hacking scandal. News Corp. owns 39 percent of BSkyB, but its $12 billion takeover bid for the rest of the broadcaster collapsed last month after the scandal emerged.
Energy: Oil companies post healthy profitsIt’s good to be an oil company, said Dan Froomkin in HuffingtonPostâ€‹.com. The Big Five announced “a whopping $36 billion in profits in the second quarter of 2011,” with ExxonMobil alone posting $10.7 billion in profits, a 41 percent increase over last year. Shell’s profits nearly doubled from last year, to $8.7 billion, and Chevron and BP were also up. Only ConocoPhillips posted slightly lower earnings, after it sold its stake in Russia’s Lukoil.