G20 Summit Addresses Fragile World Economy
"When President Bush welcomed leaders from around the world to the White House on Friday night, for what may well be one of the last formal dinners of his administration, the topic was the fragile world economy," the New York Times (NYT) reports. "But it will be up to a new United States president, Barack Obama, to figure out how to juggle [the leaders'] competing interests — and quickly."

The Washington economic summit at the start of the weekend "may have made history by, in essence, expanding the world's financial board of directors — and starting a process that could lead to more coordinated global action on the current crisis in months to come," the Christian Science Monitor reports.

"Facing the gravest economic crisis in decades, the leaders of 20 countries agreed Saturday to work together to revive their economies, but they put off thornier decisions about how to overhaul financial regulations until next year," another NYT piece reports.

During one of the luncheons, there was "was lively luncheon talk among the leaders about free trade and the international trade negotiations known as the Doha Round, which have been all but given up for dead."

Among the promises, "the G-20 pledged a new effort to bolster supervision of banks and credit-rating agencies, scrutinize executive pay and tighten controls on complex derivatives, which deepened the recent market turmoil." And, in one of the few concrete commitments, the Japanese prime minister "pledged to increase lending to the I.M.F. [International Monetary Fund] by up to $100 billion, and he encouraged other cash-rich countries to do the same." (See next news item for more on Japan's current woes.)

The declaration adopted by the leaders on Saturday calls for a second summit on April 20, just 101 days after President-elect Obama is sworn in.

Japan Officially Slips Into Recession Due to Exports
"Japan, the world's second-largest economy, has officially slipped into recession, hurt by weak export growth and steep cuts in corporate spending amid the worsening global slowdown," reports the NYT. Japan's decline "adds to the grim outlook for the global economy, after Hong Kong and the European Union released data on Friday that showed they were in recession.

"Until now, Japan has stood apart from most other developed nations because its banks were relatively unscathed by the financial crisis," the NYT continues.

But today's data shows that "America's woes reached Japan via its exports, as Americans spend less on Japanese cars, televisions and machine tools."

China Faces Economic Slowdown
"China faces a 'formidable challenge' to prevent a slump in the world's fourth-biggest economy, the government warned today as cooling factory and property investment signaled a deepening slowdown," Bloomberg News reports.

"Stalling worldwide demand for products made-in-China is driving home a new economic reality for businesses that until recently were struggling to keep up with soaring exports," the Associated Press (AP) reports. Although the country's economy is still growing by nine percent, its growth in the last quarter was "the slowest in 5 years and down from 11.9 percent last year. Forecasts for next year range as low as 7.5 percent."

According to the Financial Times (subscription required), "the slowdown was evident in every sector except oil. Steel production dropped 17 percent compared with October last year, while power generation fell for the first time in a decade."

"Export growth and inflation slowed in October, industrial production rose by the least in seven years and money supply expanded by the least since 2005," Bloomberg says of reports last week.

"The slowdown inhibits China's ability to work with other nations in alleviating the worldwide crisis," according to the NYT. "The slowdown in exports contributed to the closing of at least 67,000 factories across China in the first half of the year, according to government statistics. Labor disputes and protests over lost back wages have surged, igniting fear in local officials."

Says AP: "The suddenness and severity of the chill from the global slowdown prompted leaders to announce late Sunday a $586 billion economic stimulus package aimed at boosting growth in China's own markets."

While some experts have expressed optimism over the package's impact, it remains "unclear whether the package will be enough to salvage exporters left high and dry by overseas customers who are either canceling or abandoning orders as they face what might be one of the bleakest Christmas shopping seasons in decades."

U.S. Trade Deficit Narrows
The U.S. trade deficit narrowed to $56.5 billion in September amid a record drop in imports, the Commerce Department reported Thursday. The report showed a 4.4 percent decline in the trade deficit from the revised August deficit of $59.1 billion. The deficit was narrower than the $47 billion expected by private forecasters, according to Agence France-Presse (AFP).

"A decline in crude oil prices helped to narrow the United States trade deficit in September, but both imports and exports fell sharply," the NYT reports. Economists "said they expected numbers for crude oil imports to keep sliding as government data catches up with oil's falling prices and consumption."

A chief U.S. economist at RBS Greenwich tells the NYT that "the overall trade gap would continue to narrow as American consumers cut back on their purchases, reducing the demand for foreign-made stereos and plasma-screen televisions."

New Plan: Government Throws AIG Billions More
Last month, the U.S. government gave American International Group (AIG) a $38 billion credit line — on top of the $85 billion the government gave the ailing insurer in September. As of early last week, there's a new plan: the government will throw AIG another $40 billion.

Last Monday, after AIG reported a $24.47 billion loss, the federal government announced it would be injecting $40 billion more into the insurance giant, through the purchase of preferred shares under the Troubled Asset Relief Program, "after signs that the initial bailout was putting too much strain on the company," the NYT reports.

"The government's original emergency line of credit, while saving A.I.G. from seeking bankruptcy protection for a time, now appears to have accelerated the company's problems," according to the NYT. "The government's original short-term loan came with a high interest rate — about 14 percent — which forced the company into a fire sale of its assets and reduced its ability to pay back the loan, putting its future in jeopardy."

Debate Continues Over Possible Auto Industry Bailout
In their Nov. 12 meeting, President-elect Barack Obama asked — nay, demanded — that current president George W. Bush help out the teetering auto industry, according to reports. That same day, U.S. Treasury Secretary Henry Paulson ruled out the possibility of using part of the $700 billion rescue plan to help the struggling auto industry. Paulson said the Troubled Asset Relief Program was targeted to the financial sector and thus could not be used to bail out automakers unless Congress amends the plan.

"The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition during a lame-duck session next week," the NYT reported on Friday. "At the same time, hope among many Democrats on Capitol Hill for an aggressive economic stimulus measure all but evaporated."

"Hardline opponents of an auto industry bailout branded the industry a 'dinosaur' whose 'day of reckoning' is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion Wall Street rescue in this week's lame-duck session of Congress," AP says. The auto companies "are seeking $25 billion from the financial industry bailout for emergency loans" and "Senate Democrats intended to introduce legislation Monday attaching an auto bailout to a House-passed bill extending unemployment benefits."

An alternative proposed by the White House "would let the car companies take $25 billion in loans previously approved to develop fuel-efficient vehicles and use the money for more immediate needs." The White House said today that it did not want the U.S. auto industry to fail but stressed that it should use already available financing rather than new assistance funds. (via AFP/IndustryWeek)

It is possible that "any help for automakers will have to wait until 2009, when Obama takes office and the Democrats increase their majority in the Senate," according to AP. The president-elect has said that "he believes aid is needed but that it should be provided as part of a long-term plan for a 'sustainable U.S. auto industry' — not simply as a blank check."

It seems increasingly likely that Detroit automakers will get a bailout from Washington in some form.

Unemployment Climbs, Tech Sector Feels It
First-time filings for state unemployment benefits hit their highest level since September 2001, as companies cut more jobs in the face of a slowing economy.

The number of newly laid-off individuals seeking unemployment benefits rose to 516,000 in the latest week, the U.S. Department of Labor reported Thursday. For the week ending Nov. 8, initial claims climbed by 32,000 from the previous week's revised figure of 484,000 and nearly matched the 517,000 claims reported seven years ago. The latest week measured marks only the second time since 1992 that claims have topped 500,000. The four-week average of new claims also hit a historic high, shooting up to 491,000 — the highest since March 1991.

Even the technology sector, which up until recently has resisted the economy's growing weakness over the last year, is on pace to lose 180,000 jobs this year, the most since 2003, amid a global economic downturn, according to a report released by outplacement firm Challenger, Gray & Christmas, Inc. last week (via Digital Daily). The firm said telecommunications, electronics and computer industry companies had cut 140,422 jobs through Oct. 31. It said 69,654 tech-sector jobs had been cut in the third quarter of the year alone. That did not include major layoffs announced since Oct. 31 such as the 5,000 to 6,000 job cuts at Sun Microsystems on Nov. 14.

The number of individuals continuing to seek unemployment benefits rose to 3.9 million. "That's the highest total since January 1983, though the labor market has grown by about half since then," AP notes.