Recession Is Official, Research Panel Declares
In case there was any doubt, a committee of academic economists has determined that the U.S. economy has been in recession since March, the last month of a 10-year expansion that was the longest in U.S. history.
However, the economic contraction that began in April was so gradual that a recession might not have occurred were it not for the Sept. 11 terrorist attacks, according to the Business Cycle Dating Committee of the National Bureau of Economic Research, the arbiter of when U.S. expansions and recessions begin and end. The attacks damaged the economy significantly, convincing the six economists that a recession was underway.
The latest data show that the U.S. economy contracted at a 1.1% annual rate in the third quarter, weaker than estimated a month ago. The decline was the worst performance since the first quarter of 1991, when the GDP decreased at a 2% rate.
Human-Cloning Firm Received Federal Aid
The Massachusetts company condemned by the Bush administration for its efforts to clone a human embryo received a federal grant this fall to conduct biotechnology research.
Scientists working for Advanced Cell Technology said they had created the world’s first cloned human embryos, a controversial advance intended to speed development of new medical therapies. It also could hasten the arrival of the first cloned baby.
But before the cloning experiment was disclosed, the company was awarded $1.8 million under a Commerce Department program intended to accelerate research and development in private companies, said Michael Baum, a Commerce Department spokesman.
The company said the grant would not be used for any human-cloning research. Rather, the money is to fund experiments in reprogramming adult human cells to develop therapies for diseases.
Baum said the terms of the grant forbid the company from using the federal money to conduct research on human cloning.
Traffic at Malls Drops; Overall Sales Fare Better
Malls and department store traffic during the Thanksgiving weekend was weaker than last year, with department stores bearing the brunt of the pain.
Mall traffic during the weekend after Thanksgiving fell 7.4% from year-ago levels, while traffic at department stores inside malls fell 11.7%, according to the national retail traffic index from Chicago-based RCT Systems Inc.
Retailers took solace from a report by Telecheck Services Inc. that showed a 2.3% gain in overall same-store sales over the holiday weekend compared with a year ago. Retailers are sticking with predictions that the holiday season will generate moderate growth. The National Retail Federation is predicting a 2% increase in sales compared with the 2000 holiday season.
Film, TV Group Target Canada for Tariffs
Leaders of the Film & Television Action Coalition plan to file a petition this week with the Commerce Department charging that Canadian film subsidies are illegal and warrant countervailing tariffs on Canadian productions.
But the planned action was criticized by a group that is pushing for legislation that would mimic the Canadian subsidies with a wage-based incentive--the tack taken by bipartisan bills under consideration in Congress.
Once a petition is filed, trade officials have 20 days to decide whether an investigation is warranted. If the petition is accepted, it would open studios to an in-depth investigation of what role--if any--the subsidies played in their decisions. The effort is opposed by the Motion Picture Assn. of America, which has lent its support to the pending legislation.
So-called runaway productions cost the U.S. an estimated $10 billion in annual revenues, according to a government report issued this year.
Home Sales Rise but Market May Weaken
Nationwide sales of existing homes recovered last month from depressed levels in September. But with mortgage rates edging higher and consumer confidence waning further, analysts say, the nation’s housing market most likely will weaken in the near term.
In October, though, sales of previously owned homes beat economists’ expectations, rising 5.5% from September, the National Assn. of Realtors said.
All regions in the country showed gains last month, most dramatically in the Northeast. Sales in California were up 4.1%.
Home sales were boosted last month by declining mortgage rates. But the average 30-year fixed rate has been increasing since hitting a three-decade low of 6.45% three weeks ago.
ABC Buys TV Rights
to ‘Harry Potter’ Films
In a deal that could set a new record, ABC has acquired the television rights to “Harry Potter and the Sorcerer’s Stone” and its first sequel from Warner Bros., in a deal estimated to be worth nearly $140 million.
The Walt Disney Co.-owned network will pay roughly $70 million to televise the first film over a 10-year period beginning in May 2004, giving it the right to run the movie on both ABC and Disney’s cable channels, according to knowledgeable sources.
The network’s fee for the second movie will be calculated based on its box-office performance.
Disney and Warner Bros. would not confirm the value of the transaction.
The previous record amount paid by a network for broadcast rights was reportedly $80 million, which News Corp. allocated for both “Jurassic Park: The Lost World” and “Star Wars: Episode I--The Phantom Menace.”
No Charges Filed in Probe of CSFB
The U.S. attorney’s office in Manhattan has decided not to bring criminal charges against Credit Suisse First Boston over the firm’s handling of initial public stock offerings during the late-1990s IPO boom, according to the investment bank.
Federal prosecutors had been investigating how CSFB allocated shares of IPOs to investors as part of a far-reaching government probe of the IPO practices of major Wall Street brokerages.
The Securities and Exchange Commission and the National Assn. of Securities Dealers are conducting separate civil inquiries of CSFB and other brokerages. But the elimination of possible criminal action is a major step for CSFB and could help the firm in its attempts to negotiate a settlement of the civil matters, experts said.
Harassment Ruling Erases Key Defenses
A state appellate court ruled that employers can be held liable for workplace sexual harassment by supervisors under state law--even if they took steps to correct the behavior or were unaware of it.
The ruling by the 3rd District Court of Appeal in Sacramento is a blow to employers, attorneys said, because it removes defenses to absolute liability established by the U.S. Supreme Court in 1998.
The high court held that, under federal law, employers can escape liability if they show they have taken steps to prevent sexual harassment and promptly move to correct complaints, or if the employee fails to make a complaint.
The California suit was filed by Theresa McGinnis, who alleged she was sexually harassed by a supervisor in a state Department of Health Services office in Sacramento.
Investors Returning
to Stock Funds
New figures show that U.S. investors cautiously returned to stock mutual funds in October after September’s record outflow. Stock funds took in a net $758 million in October, according to the Investment Company Institute, the fund industry’s main trade group. That’s a puny sum by recent standards, but it’s reassuring on the heels of September’s $29.3-billion outflow, which was the third straight negative month and the fifth of the year.
Invesco Funds Group will become the latest mutual fund company to stop selling its funds directly to investors without a sales charge. Starting in March, new customers will be able to buy its funds only through brokers and advisors, the company said.
The direct-sale side of the mutual fund business--commonly referred to as no-load--is shrinking as investors turn to professionals for help with their investments.
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For a preview of this week’s business and economic news, please see Monday’s C2.
