TOP STORIES -- Jan. 4-9

U.S. Economy Creates Few Jobs in December

The U.S. economy managed to add only 1,000 jobs in December as employers relied on productivity gains, rather than hiring, to meet increased demand, the Labor Department said.

The unemployment rate did drop two-tenths of a point to a 14-month low 5.7%, from 5.9% in November. The decline was not the product of job gains, however, but because more than 300,000 people dropped out of the labor force, according to department statistics.

The anemic employment report created chatter on the presidential campaign trail, with Democrats ridiculing Bush administration policies while Republicans generally sought to change the subject.

Some of December’s poor showing may be a fluke -- the product of a change in Americans’ holiday buying habits that government measuring methods haven’t caught up with. But even economic optimists acknowledged that the latest employment numbers were bad news.

Stocks Take a Steep Drop at End of Week

Stocks fell sharply Friday after the Labor Department’s disappointing jobs report and as investors cashed in profits from the market’s recent advance.

Regulatory problems for IBM and downgrades of telecommunications stocks also pulled down prices.

The Dow Jones industrial average suffered its worst loss since late October. Broader stock benchmarks also posted declines but held up better.

Investors are still waiting for job growth to materialize, and analysts are worried that the latest sign of economic weakness has put a damper on Wall Street’s new year’s rally.

Many economists also speculated that the Federal Reserve would delay raising a key interest rate. As a result, bonds surged.

For the week, however, major indexes ended higher. The Dow rose 0.5%, and the S&P; 500 climbed 1.2%. The Nasdaq composite, up 4% for the week, hit a 2 1/2-year high on Thursday.

Oil prices rallied during the week.

Retailers Post Upbeat Holiday-Month Sales

Consumers at the last minute tied a bow on the holiday shopping season, giving the retail industry decent December gains.

Sales at established chain stores were up 4.2% from a year earlier, compared with the 1% year-over-year increase registered in December 2002. “It’s a sigh of relief,” said Michael P. Niemira, chief economist and research director for the International Council of Shopping Centers, which compiled the results.

Several companies based in California, including Sharper Image Corp., Hot Topic Inc., Guess Inc and Pacific Sunwear of California Inc., logged some of December’s most impressive gains. In 2003, the industry rang up 13% of the full year’s revenues in the month. But San Francisco-based retailer Gap Inc. said same-store sales in December rose a mere 1%.

Collectively, the industry’s comparable-store sales rose 4% for November and December combined -- the best holiday shopping season for retailers since 1999.

Spitzer, SEC to Review Ex-NYSE Chief’s Pay

State and federal regulators said they would investigate Richard Grasso’s $188-million compensation package and decide whether to sue the former New York Stock Exchange chief.

New York Atty. Gen. Eliot Spitzer and the Securities and Exchange Commission, responding to an NYSE request for help, said they would study the circumstances surrounding Grasso’s outsize pay. The goal will be to determine whether legal action is warranted against Grasso -- or the former NYSE directors who awarded him the compensation -- to recoup a large portion of the money.

The current NYSE board gave Spitzer and the SEC copies of an independent report commissioned by John S. Reed, the exchange’s interim chairman. In letters to Spitzer and the SEC, the NYSE said the report showed that “serious damage has been inflicted on the exchange by [Grasso’s] unreasonable compensation.”

Grasso’s lawyer did not return a call seeking comment.

U.S. Regulators Snub State Banking Laws

Federal regulators issued regulations that asserted their dominance over state banking rules, raising the ire of consumer advocates and state officials.

The U.S. Office of the Comptroller of the Currency said state laws would apply to national banks on narrow issues such as zoning or lost property. But it asserted that Congress had granted it virtually all control over the fundamentals of retail banking, including lending and the taking of deposits, at all federally chartered banks. These include national bank subsidiaries of major players such as Bank of America Corp. and Wells Fargo & Co.

The agency said its authority would benefit consumers because it would be, among other things, more cost-efficient.

That was hotly disputed by consumer groups and state officials. Chief law enforcement officials of California and New York were particularly galled by the OCC’s contention that only it, and not state regulators, may enforce state laws that apply to federally chartered banks.

Writers Guild President Resigns Under Pressure

Victoria Riskin resigned as president of the Writers Guild of America’s Western division, saying she wanted to end a controversy over her membership qualifications before it affected coming contract negotiations with studios.

Contract talks are expected to start soon over such high-stakes issues as sharing in studio DVD revenue and strengthening the union’s health plan.

Riskin told directors she would leave, heading off what was likely to be a bruising fight. “Vicki did the right thing in agreeing to step down,” board member J.F. Lawton said.

Riskin is succeeded by Vice President Charles Holland in representing about 9,000 TV and film writers, most of whom live in Southern California.

Riskin quit after a report commissioned by the board from Stanford law professor William B. Gould IV recommended she be replaced. Gould concluded that Riskin’s writing inactivity disqualified her to run for reelection in September.

Riskin said that she followed procedures laid out for her by guild officials. But, she said, “I wanted to step aside so the guild could go on and do its work.”

Fox’s Grushow Exits to Launch TV Venture

Sandy Grushow, hard-charging chairman of Fox Entertainment Group, surprised Hollywood by announcing he would leave the network immediately to become a TV producer.

“This was, and is, an extremely difficult decision for me,” Grushow said in an e-mail to Fox executives.

Grushow, 43, had been negotiating a new contract with Fox, where he has worked for nearly 20 years. Then he abruptly changed course, triggering a clause in his employment deal that allows him to start a TV production company that Fox must finance for the first three years, to the tune of at least $10 million.

For the last four years, he was in charge of the network’s entertainment division and Twentieth Century Fox Television.

Fox Group Chairman Peter Chernin, who oversees the Fox movie studio, will assume many of Grushow’s duties. Fox Entertainment President Gail Berman, and studio co-Presidents Gary Newman and Dana Walden will report directly to Chernin.

Advisor’s Liquid Assets Fall Short, SEC Says

Regulators offered a glimpse into the finances of an Orange County money manager accused of defrauding 5,200 investors, alleging that James P. Lewis Jr. had squandered a large chunk of their money on luxury goods and had liquid assets worth less than 1% of the $813 million he purportedly owed clients.

In a court filing, the Securities and Exchange Commission said Lewis had $2.3 million in cash, $5.8 million in investments in two private firms, and interests in several homes. Lewis, 57, used accounts at his Financial Advisory Consultants firm to write checks to retailers such as Tiffany & Co. and Gucci, the SEC said in a filing to U.S. District Judge Audrey B. Collins. The SEC said Friday that a temporary receiver was named to search for assets.

Neither Lewis nor the attorney who has represented him, Douglas J. Pettibone, returned calls for comment. Pettibone has asked the judge to allow him to withdraw as Lewis’ counsel.

According to SEC filings, Lewis operated a Ponzi scheme that began unraveling last summer, when Lewis began telling clients their assets had been frozen because of an investigation by the Department of Homeland Security. There was no such probe, the SEC said.

Tortilla Makers Lose Lawsuit Against Rival

A federal judge has thrown out an antitrust lawsuit against giant tortilla maker Gruma Corp., in a blow to manufacturers in California and elsewhere that had accused the industry leader of unfairly wresting control of the U.S. retail tortilla market.

Lawyers said that U.S. District Judge Kenneth Hoyt in Houston dismissed the suit after deciding that the 18 plaintiffs had failed to prove their allegations. They had sought $70 million in damages, claiming Gruma had broken the law by, among other things, paying grocers to stock its products and eliminate rival brands.

“We were shocked,” said Philip Manly, owner and general manager of Los Angeles-based El Dorado Mexican Food Products, a 58-year-old, family-owned firm and one of eight California companies among the plaintiffs.

Manly said the small tortilla makers planned to appeal.

Irving, Texas-based Gruma is the American unit of Mexican conglomerate Gruma.

From Times Staff and Wire Services

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For a preview of this week’s business news, please see Monday’s Business section.