In Denver last week, President Barack Obama signed into law his $787 billion economic stimulus package — one of the most costly pieces of legislation in United States history — to breathe life into the nation's failing economy.

Obama said the massive government spending and tax cut bill opened the road for Americans to begin "laying claim to a destiny of our own making."

Small-businesses owners struggling to keep up with their bills may see some relief from a new $255 million emergency loan program authorized this week as part of the economic recovery bill. Under the American Recovery and Reinvestment Act, the Small Business Administration (SBA) temporarily will guarantee 100 percent of loans of up to $35,000 issued by banks to small businesses that are struggling to make payments on existing debt. The SBA will subsidize the interest on the loan, and small businesses will have a year before they have to start repaying it.

In remarks before signing the economic recovery bill, Obama cautioned Americans not to expect a quick or dramatic economic turnaround and said government intervention was not at an end. The stimulus "doesn't constitute all we're going to have to do to turn our economy around," he said.

Over the weekend, the nation's governors said that passage of the bill to stimulate the economy "might help them avert draconian budget cuts, but that they did not expect to see signs of an economic recovery until late this year or early 2010," the New York Times reports. "The officials [...] said that state revenues were coming in far below their projections and that the new federal measure, while helpful, would not be a panacea."

Soon after signing the economic stimulus package, the White House unveiled a plan to help 9 million "at risk" homeowners modify their mortgages, committing $75 billion of taxpayer money to back the initiative. The plan contains two separate programs: one program is aimed at 4 million to 5 million homeowners struggling with loans owned or guaranteed by Fannie Mae or Freddie Mac, while a separate program would potentially help 3 million to 4 million additional homeowners by allowing them to modify their mortgages to lower monthly interest rates through any participating lender.

On Wednesday, Obama laid out the four key elements of the Homeowner Affordability and Stability Plan:

1. Refinancing help for four to five million homeowners who receive their mortgages through Fannie Mae or Freddie Mac;
2. New incentives for lenders to modify the terms of sub-prime loans at risk of default and foreclosure;
3. Steps to keep mortgage rates low for millions of middle-class families looking to secure new mortgages; and
4. Additional reforms designed to help families stay in their homes.

Obama will use his first address to Congress on Tuesday to explain his economic policies and how they will aid the economy. On Thursday, when he releases his budget outline, the president is expected to set a goal of cutting the annual deficit at least in half by the end of his term, administration officials tell the New York Times.

MAPI: Economy Has Potential for Improvement in Late 2009
The U.S. economy continues to decline, and any recovery promises to be long and arduous. Yet, "assuming businesses and consumers find a way through the painful beginning of 2009, there is potential for improvement in late 2009 and into 2010, according to the Manufacturers Alliance/MAPI Quarterly Economic Forecast.

The Manufacturers Alliance/MAPI Quarterly latest forecast "predicts that inflation-adjusted gross domestic product (GDP), which grew by a miniscule 1.3 percent in 2008, will decline 2.1 percent in 2009 before rebounding to 2.2 percent growth in 2010," according to an announcement of the forecast. "The GDP forecast for 2009 in the current MAPI report is double the previously anticipated 1 percent decline for this year projected in the November 2008 release."

Manufacturers Alliance/MAPI chief economist Daniel J. Meckstroth said, "Manufacturing did not create the problem but is paying the price for the problems that began in the financial markets."

Jobless Claims in February
"February is shaping up to be another brutal month of job losses: The number of laid-off workers receiving unemployment benefits hit an all-time high of nearly 5 million, and new jobless claims are at levels not seen since the early 1980s," the Associated Press says. "And those numbers are sure to climb higher, based on the flood of newly laid-off workers seeking benefits."

In the week ending Feb. 14, the U.S. Department of Labor's advance figure for seasonally adjusted new jobless claims was 627,000, the same level as the previous week's revised figure. The four-week moving average was 619,000, an increase of 10,500 from the previous week's revised average of 608,500.

"The three straight weeks of seasonally adjusted claims above 600,000 also is the longest stretch in more than 26 years," the Associated Press notes. "Even with approval of the stimulus package, economists "are warning that any recovery may not take hold until late this year at the earliest, given that the housing market is still deteriorating, the financial market has yet to stabilize and job losses are mounting."

Producer Prices Rebound
"U.S. producer prices rebounded last month for a wide range of products from energy and automobiles to prescription drugs, easing concerns of a deflationary spiral of lower prices and spending," the Wall Street Journal reports (subscription required).

According to the Labor Department on Thursday, the producer price index (PPI) for finished goods rose 0.8 percent in January. This increase follows declines of 1.9 percent in December and 2.5 percent in November. The index was down 1 percent a year earlier.

"The core PPI, which excludes food and energy, advanced 0.4 percent last month, well above expectations for a 0.1 percent rise," the Wall Street Journal notes. "That was up 4.2 percent from a year ago.

Eurozone Downturn Picks up Pace
In the early weeks of February, "the eurozone economic downturn gathered pace ... adding pressure on the European Central Bank to cut interest rates again in March" the Associated Press notes of a closely watched survey's findings on Friday. According to the purchasing managers' index (PMI) survey, "the services and manufacturing sectors in the 16 nations that share the single currency saw business activity fall at a record rate during the month."

"Europe's manufacturing and service industries unexpectedly contracted at a record pace as consumers held back on spending and companies postponed investments in the face of the worst recession in more than six decades," Bloomberg News reports.

A composite index of both industries, based on a survey of purchasing managers by Markit Economics, fell to 36.2 in February, a record low, from 38.3 in January.

"Producers are scaling back output and cutting jobs as the global financial turmoil pushes Europe into the deepest recession since World War II," Bloomberg adds.

"Eurozone employment fell for the eighth consecutive month, with manufacturing seeing jobs lost at a much faster rate than services," the Financial Times reports (subscription required). "Signs of the pace of decline peaking 'have been decisively wiped away,'" a chief economist at Markit Economics, which produces the survey, says. "There appears to be no sign of a bottoming-out."

For manufacturers still employed, manufacturing pay settlements in the United Kingdom "have fallen to their lowest level for more than a decade as companies seek to find ways of cutting costs to avoid redundancies and losing valuable experience and skills," a separate Financial Times report states. According to the EEF, "which represents manufacturing employers," the average level of annual increases "has fallen at an unprecedented rate to 1.8 percent" during the three months to the end of January.

"The proportion of companies freezing pay almost doubled to more than 40 per cent compared with just over 20 per cent in the previous three months," the Financial Times says. "The proportion of companies postponing pay settlements almost trebled from just more than 7 percent to more than 20 percent from a year ago."

GM and Chrysler Stumble, and Ford Benefits
Last week, General Motors Corp. and Chrysler LLC went to the U.S. government seeking $21.6 billion in additional federal loans to stave off bankruptcy and win extra time for restructuring. "Both companies insisted they would be able to repay the mountain of loans, which amount to the largest bailout in the 100-plus-year history of the U.S. automaking industry," Agence France-Presse says.

Chrysler said it plans to discontinue three vehicle models, cut production by 100,000 vehicles a year, eliminate 3,000 jobs and reduce fixed costs by $700 million.

GM's 117-page plea for up to $30 billion in emergency federal loans last week included the promise of 47,000 job cuts, or about one out of five jobs, as well getting rid of the Saturn, Hummer and Saab brands. The Detroit automaker said it will concentrate its restructuring effort on its strongest brands — Chevrolet, Cadillac, Buick and GMC trucks. Pontiac will become more of a niche product line.

"Left with just four key brands, GM will be a leaner, more focused car company," says the Wall Street Journal (subscription required).

The company "also said it plans to tap funding from other governments, including Canada, Germany, Britain and Sweden, where it has extensive operations and plenty of jobs are at risk," MarketWatch reports.

Saab Automobile, the Swedish automaker whose parent company is GM, filed for bankruptcy protection last week after its owner GM abandoned it. "The move came after GM warned that Saab would have to file for bankruptcy protection 'as early as this month' unless it received help from the Swedish government, which in turn flatly refused to step in and rescue the automaker,'" AFP says.

Meanwhile, Ford Motor Co., "which hasn't taken a dime of government bailout loans, is benefiting from the troubles of its two cross-town competitors in Detroit," the Wall Street Journal reports (subscription required).

While GM and Chrysler "have been hit with a steady stream of negative news — including growing concern they may need to file for bankruptcy protection — Ford has been having more success at luring away its competitors' customers." Ford says its "share of the U.S. retail market rose in each of the past four months, while GM's and Chrysler's fell."

For some domestic-car buyers, the "bankruptcy talk has been enough to cause them to defect to Ford," the Wall Street Journal notes. Still, Ford faces a number of challenges. One analyst said "the company is 'weighed down' by the perception of many consumers that it is in the same boat as GM and Chrysler." Moreover, "Ford isn't assuming its trend of recent market share increases will continue."

Meanwhile, Toyota Motor Corp., which supplanted GM as the world's largest auto seller in 2008, said last week it will "further suspend production in Japan to cope with slumping global demand and mounting inventories of unsold vehicles."

The company "is already shutting down output for 14 days at its 11 domestic plants during the first three months of this year," according to the Associated Press. "But facing sluggish sales and rising inventories, Toyota spokesman Yuta Kaga said the company has decided to halt production again in April for three days at the 11 factories."