Economic Calendar

Thursday, June 21, 2012

College Football’s BCS Reaches Consensus on 4-Team Playoff

By Nancy Kercheval - Jun 21, 2012 8:17 AM GMT+0700

College football’s Bowl Championship Series commissioners reached a consensus on a four-team seeded playoff structure for the 2014 season.

The proposal will be presented to the Presidential Oversight Committee, which has the final say, the BCS said on its website. The university presidents meet June 26 in Washington.

“We are excited to be on the threshold of creating a new postseason structure for college football,” the statement, attributed to BCS commissioners and Notre Dame Athletic Director Jack Swarbrick, said. “We are getting very close and we look forward to next week’s meeting.”

The BCS commissioners have met five times to discuss a playoff model since the championship game on Jan. 9, when the University of Alabama won its second national title in three years with a 21-0 victory over Louisiana State at the Superdome in New Orleans.

Big Ten Commissioner Jim Delany told ESPN that the group is “unified” although there are some issues that have not been finalized.

“There’s always devil in the detail, from the model to the selection process, but clearly we’ve made a lot of progress,” Delany said.

The commissioners divulged few details on their website ahead of the meeting with the university presidents.

The semifinals under the proposed championship would rotate among the major bowls, the Associated Press reported, citing people familiar with the BCS decision. A selection committee would help pick the schools competing in the four-team playoff.

To contact the reporter on this story: Nancy Kercheval in Washington at

To contact the editor responsible for this story: Michael Sillup at


Japanese Stocks Advance as Fed Expands Operation Twist

By Yoshiaki Nohara - Jun 21, 2012 9:47 AM GMT+0700

June 21 (Bloomberg) -- Japan stocks rose a second day on speculation the yen’s advance will be halted after the U.S. Federal Reserve refrained from adding stimulus. Shares also advanced after lawmakers approved two economists seen to support loose monetary policy to sit on the Bank of Japan’s board.

Honda Motor Co. (7267), a carmaker that gets 44 percent of its sales in North America, rose 3 percent after the yen fell against the dollar yesterday in response to the Fed announcement. Renesas Electronics Corp. (6723) gained 4.3 percent on a report KKR & Co. and Silver Lake are in talks to invest in the chipmaker. Stocks also rose on a report foreign investors were net buyers of Japanese stocks last week for the first time in nine weeks, according to the Finance Ministry.

The Nikkei 225 Stock Average (NKY) gained 1 percent to 8,839.99 as of 11:13 a.m. in Tokyo. The broader Topix Index advanced 1 percent to 754.83, with about three stocks rising for each that fell.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at

To contact the editor responsible for this story: Nick Gentle at


Europe Companies in Crisis Snapped Up by Overseas Buyers

By Matthew Campbell and Jonathan Browning - Jun 21, 2012 6:01 AM GMT+0700

The fourth Friday of every month at a pub in San Francisco’s Ghirardelli Square, British expatriates living in the technology capital of the world meet to eat, drink, and reminisce about home. The group includes staffers at West Coast tech giants Google Inc. (GOOG), Apple Inc. (AAPL) and Inc. (AMZN) and lists more than 1,000 registered members on its Meetup page. That number is about to get larger.

As growth in the global technology industry slows, European companies have been hobbled by weak valuations. As a result, cash-rich U.S. acquirers are swallowing up their European counterparts, outspending European acquirers by almost two-to- one in the region. That means more of Europe’s tech whizzes are moving to Silicon Valley, even as the continent’s recession- wracked governments push attempts to spur innovation.

Overseas buyers, especially from the U.S.,“are doing the math and valuing European public companies more highly than the European markets,” said Simon Pearson, an M&A partner at Ernst & Young LLP in London. “The number of substantial European tech companies is going to continue to dwindle.”

U.S. buyers have spent $42 billion on acquisitions of Europe’s technology companies since 2009, led by Hewlett-Packard Co. (HPQ)’s $10.3 billion takeover of U.K. data-analysis firm Autonomy Corp. last year, compared with $27 billion in deals by European buyers.

No Ecosystem

The gulf may grow even wider as two one-time European technology giants that have struggled against U.S. and Asian competition, smartphone maker Nokia Oyj (NOK1V) and phone-equipment vendor Alcatel-Lucent, are expected to shed assets. Bankers are also predicting consolidation in the computer-services space, in which European leaders Cap Gemini SA (CAP) and Atos SA trail U.S.- and India-based competitors in a market that’s barely growing.

Unlike the technology giants in the U.S., large European companies lack “an ecosystem of mid-sized businesses around them,” which in turn drives even more innovation, said Errol Damelin, the founder of Wonga, the London-based online loan provider. Europe does have a new wave of startups, though it may take until 2020 before they reach maturity, he said.

Bargain prices for European companies are luring buyers. Listed European technology firms valued at more than $100 million are on average 32 percent cheaper than their North American peers, trading at an average ratio of 15 times earnings compared with 22 times earnings in the U.S. and Canada, according to Bloomberg data.

Nokia’s Plunge

The result is a dearth of mid-sized to large technology companies in Europe. In the U.S., 234 technology companies have a market capitalization of more than $500 million, while in Western Europe just 65 companies meet that criteria, with only six exceeding $10 billion in value. Silicon Valley’s dominance has only become more complete over time: in 2007, there were 100 European companies valued above $500 million, compared with 267 in the U.S.

Nokia’s decline has been the region’s most dramatic. Its market value slumped below $10 billion last week, down from more than $100 billion in 2007. The company this month said it would cut an additional 10,000 jobs as its profitability erodes. The handset maker has been hammered by competition from phones running software from Apple and Google -- two companies that weren’t even in the mobile business six years ago.

Moving Staff

The Finnish company is looking to exit from its Nokia Siemens Networks network-gear unit, according to people familiar with its plans, and attracts frequent speculation about an outright takeover by Microsoft Corp. (MSFT), with which it has an alliance. Among the top 10 global technology companies by market value, none is European. German business-software maker SAP AG (SAP) is 11th with a market capitalization of about $74 billion.

Acquirers routinely promise to preserve jobs and research activities when buying technology businesses. Hewlett-Packard, for example, pledged to maintain Autonomy as an independent unit and avoid any job cuts when it bought the Cambridge, England- based business last year. Yet CEO Mike Lynch transferred to the U.S. following the takeover, before he was ousted last month.

Lynch, who founded Autonomy as a spinoff from the University of Cambridge in 1996, said European companies are losing out due to a lack of early-stage financing, with entrepreneurs selling out earlier than their U.S. counterparts.

Autonomy was different because it sought a public listing early to gain access to additional funds without the need for venture capital, Lynch said.

“If Autonomy had got to a $300 to $400 million valuation and it had still been private, I think you’d have had a hard time” convincing venture-capital backers to say no to an offer from a strategic buyer, he said.

‘Angry Birds’

Today’s startups are the bright spot for the European technology scene. Drawn by the success of young companies including Finland’s Rovio Entertainment Oy, the maker of “Angry Birds” mobile games, and London-based online jukebox Spotify Ltd., venture-capital firms are raising their exposure to Europe, betting that nascent innovation hubs in London and Berlin can deliver the next big thing.

Even the hottest startups, however, face challenges particular to Europe and its topsy-turvy stock markets, which have hosted just 14 initial public offerings of technology companies in the past two years, while U.S. markets have welcomed 21. And Europe’s venture-capital scene remains small compared to that in the U.S.

Europe’s Crisis

“When the private and public capital markets are dislocated, access to equity for earlier-stage companies is more difficult, leaving selling as the only real option to staying the course,” said George Patterson, the head of technology investment banking for Europe, Middle East and Africa at Barclays Capital in London.

Difficulty turning small startups into large, independent engines of employment and growth comes at an inopportune time for European governments slammed by the region’s debt and economic crises. In the U.K., Prime Minister David Cameron has backed plans to build in London a high-tech answer to Northern California. In France, a country with zero economic growth, the government has supported an academy for aspiring entrepreneurs.

That strategy, though, isn’t about to challenge Silicon Valley. Marten Mickos would know. The founder of Swedish database-software maker MySQL AB, which was bought for $1 billion by Sun Microsystems Inc. in 2008, moved to California nine years ago after promising U.S.-based venture-capital investors he would relocate as part of a financing round. He hasn’t looked back.

“It’s such a unique place even for Americans,” Mickos said. “I don’t think it’s a damning indictment especially of Europe. There are many companies in the U.S. that feel they need to move here. Everybody has lost against Silicon Valley, not just Europe.”

To contact the reporters on this story: Matthew Campbell in London at; Jonathan Browning in London at

To contact the editors responsible for this story: Kenneth Wong at; Jacqueline Simmons at


Obama Spends More Than He Raises as Aides See Romney Edge

By Julie Bykowicz and Jonathan D. Salant - Jun 21, 2012 7:44 AM GMT+0700

President Barack Obama spent more on his re-election effort last month than he raised, ending May with $109.7 million cash on hand, according to U.S. Federal Election Commission reports filed today.

The $39.1 million his campaign took in was outpaced by $44.6 million it paid for television advertisements, employees, offices and other expenses, the reports show. The spending rate is a reversal from the past three months, when the campaign was taking in millions of dollars more than it was spending.

June 20 (Bloomberg) -- Paul Levy, co-founder and managing director at JLL Partners Inc., talks about President Barack Obama's handling of the economy and attitude toward private equity. Levy speaks with Stephanie Ruhle and Matthew Dowd on Bloomberg Television's "Market Makers." (Source: Bloomberg)

June 18 (Bloomberg) -- Ann Romney, wife of Republican presidential candidate Mitt Romney, introduces her husband during a campaign stop aboard a Mississippi River boat today near Dubuque, Iowa. (Source: Bloomberg)

Republican challenger Mitt Romney reported raising $23.4 million last month, bringing his total to almost $124 million, less than half of Obama’s $261 million haul. Romney had $17 million in the bank, one-sixth of the incumbent’s total. The former Massachusetts governor spent $15.6 million, less than he took in during May.

The money is just part of the cash being poured into the campaign. Both candidates are raising funds jointly with national and state political parties, allowing donors to give larger contributions. In addition, nonprofit groups and super- political action committees are taking in unlimited corporate, union and individual donations and spending millions.

Obama’s political advisers told reporters they expect Romney to wind up with a money advantage as the outside groups supporting the presumptive Republican presidential nominee spend as much as $1 billion. The advisers, who asked for anonymity to discuss tactics, said today they are braced for a close election and are counting on their political organization to turn out voters in critical states.

Gay Marriage

Obama’s comments on May 9 that gay couples should be able to marry may have boosted his fundraising, the FEC reports suggest. He raised more than six times as much money on the day of his announcement as he did the day before, $1.8 million compared with $282,404.

“It is important for me to go ahead and affirm that I think same-sex couples should be able to get married,” Obama said in an ABC News interview. That day, his campaign started an e-mail fundraising blitz tied to gay marriage. The money bump continued the next day, with the campaign raking in another $1.6 million.

On May 10, Obama dined at actor George Clooney’s Los Angeles house -- an event that campaign officials said raised a total of $15 million for the president, the Democratic National Committee and state parties.

Intensifying Campaign

In another sign the campaign is intensifying, the $44.6 million that Obama’s re-election campaign spent in May was more than the $42.9 million he spent in the previous three months combined.

Obama received $8.7 million from joint fundraisers with the Democratic National Committee and state parties. The DNC took in $20 million last month, including $13.3 million from the joint fundraising committee.

Romney, in his first full month since being assured of winning the Republican nomination, raised $7.1 million from his joint fundraising committee with the Republican National Committee. The RNC brought in $25.9 million from the joint fundraising committee in May and reported raising $34.3 million in total. The Republican committee also more than doubled the Democrats’ cash on hand, $60.8 million to $29.7 million.

Priorities USA Action, a super-PAC founded by former Obama aides, reported raising $4 million last month. Super-PACs aren’t supposed to coordinate with the campaigns.

One pro-Romney super-PAC, Restore Our Future, reported to the FEC today that it raised almost $5 million in May and had $8.4 million cash on hand as of the end of the month.

Anti-Obama Ads

Restore Our Future has raised a total of $61.5 million since January 2011. During the Republican nomination battle, the group placed television ads attacking Romney’s opponents and it’s now airing anti-Obama ads.

American Crossroads, a Republican super-PAC founded with the help of political strategist Karl Rove, also is set to report on its fundraising today.

Restore Our Future’s largest May contribution of a combined $1 million arrived May 22 from three companies registered to the same post-office box in Dayton, Ohio.

Auto Supplier

Auto supplier executive Robert Brockman is the common denominator of those companies, according to corporate filings. Brockman is chairman and chief executive officer of Reynolds & Reynolds, a Dayton-based company that provides office supplies and professional services to car dealers and automakers.

CRC Information Systems Inc. and Fairbanks Properties LLC each gave $333,333 to the super-PAC, while Waterbury Properties LLC contributed $333,334. Brockman is listed as manager of Fairbanks in filings with the Florida Division of Corporations. He is the registered director of Waterbury, according to Texas tax records. CRC is a Reynolds company.

A spokesman for Reynolds said Brockman wasn’t immediately available to comment. Brockman has given the maximum $5,000 to Romney’s campaign, according to the Center for Responsive Politics, a Washington-based group that tracks political donations.

Restore Our Future also collected $428,400 from the family that owns a 33-square-mile retirement community near Ocala, Florida. Billionaire developer H. Gary Morse, chief executive officer of The Villages of Lake Sumter, and his wife, Renee Morse, contributed $200,000, while three of his children gave the rest, FEC reports showed.

Morse Family

The Morse family made its contributions on May 1, according to the FEC reports. Sumter County, home of The Villages, has almost twice as many registered Republicans as Democrats and is a regular fundraising stop for Republican candidates. Developer Morse is part of Romney’s Florida finance team.

Representative Ron Paul of Texas raised $1.8 million in May, more than half of it in contributions of $200 or less, bringing his total to $40.8 million. He had $3.3 million in the bank.

Paul announced May 14 that he would no longer spend money to compete in the Republican presidential primaries. He reported $969,622 in expenditures for the month.

Former U.S. House Speaker Newt Gingrich of Georgia and former U.S. Senator Rick Santorum of Pennsylvania made little dent in retiring their Republican presidential campaign debts. Gingrich raised $495,233 last month and still owed $4.7 million. Santorum took in $454,328 and reported debts of $1.9 million.

The pro-Gingrich super-PAC, Winning Our Future, refunded $5 million to Miriam Adelson, wife of casino executive Sheldon Adelson. The Adelson family had given $21.5 million to the PAC.

To contact the reporters on this story: Julie Bykowicz in Washington at; Jonathan D. Salant in Washington at

To contact the editor responsible for this story: Jeanne Cummings at


U.S. Stocks Decline as Fed Reduces Growth Estimates

By Rita Nazareth - Jun 21, 2012 4:10 AM GMT+0700

U.S. stocks dropped, following a four-day gain in the Standard & Poor’s 500 Index, as the Federal Reserve cut its estimates for growth amid a slowdown in hiring.

A trader works on the floor of the New York Stock Exchange. Photographer: Jin Lee/Bloomberg

Adobe Systems Inc. (ADBE), the largest maker of graphic-design software, declined 2.7 percent after forecasting sales and profit that trailed estimates. Procter & Gamble Co. (PG) tumbled 2.9 percent as the world’s biggest consumer-goods company reduced its earnings and revenue forecasts for the second time in less than two months. JPMorgan Chase & Co. (JPM) rallied 3 percent.

The S&P 500 retreated 0.2 percent to 1,355.69 at 4 p.m. New York time. The Dow Jones Industrial Average decreased 12.94 points, or 0.1 percent, to 12,824.39. Trading volume for exchange-listed stocks in the U.S. was about 6.6 billion shares, or almost in line with the three-month average.

“It’s not all bad news, but caution is warranted,” said Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4.5 billion in Raleigh, North Carolina. He spoke in a telephone interview. “If the Fed saw significant deterioration, the policy response would have been on a larger scale. Yet there’s increased risk to the economic outlook.”

Stocks fell as the central bank cut its estimates for growth and said it sees little progress on unemployment during the rest of the year. The Fed lowered its central tendency estimate for U.S. 2012 gross domestic product growth to 1.9 percent to 2.4 percent from 2.4 percent to 2.9 percent in April.

The Fed will expand its program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012. That “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said.

‘Additional Steps’

“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference after the FOMC’s two-day meeting. He said those steps might include additional asset purchases.

Expectations for further policy action gave stocks their first back-to-back weekly gain since April on June 15. The S&P 500 earlier this month was on the brink of a so-called correction, or a 10 percent drop from a recent peak, on concern about a global slowdown and a worsening of Europe’s crisis.

Investors also watched Europe’s latest attempts to tame its debt crisis today. Antonis Samaras, head of Greece’s New Democracy party, was sworn in as prime minister after Greek political leaders agreed on a coalition that will seek relief from austerity measures tied to international loans.


European policy makers are unlikely to solve the region’s problem unless they have a crisis “moment” like Lehman Brothers Holdings Inc.’s bankruptcy, said Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer.

“My personal view is we’re going to need a moment” because the issues are political, Cohn, said in an interview with Erik Schatzker on Bloomberg Television’s “Market Makers.”

Eight out of 10 groups in the S&P 500 fell today as utility and consumer staples companies had the biggest losses. Technology and financial shares advanced.

Adobe slumped 2.7 percent to $31.99. It reduced the high end of its annual sales growth forecast range to 7 percent from 8 percent, which is “anemic” for a technology company, said Barbara Coffey, an analyst with National Securities.

P&G lost 2.9 percent to $60.39. The reduced forecasts illustrate the difficulties faced by consumer-products makers as rising unemployment in Europe and North America restricts spending. Danone, the world’s biggest yogurt maker, cut its profitability forecast yesterday. Europe is “difficult for everybody,” Jean-Marc Huet, chief financial officer of Unilever, said at the Paris conference yesterday.

Walgreen Slumps

Walgreen Co. (WAG) retreated 2.9 percent to $29.21. The biggest U.S. drugstore chain was downgraded to neutral from outperform at Macquarie Group Ltd. by equity analyst Dane Leone. The 12- month share-price estimate is $34.

JPMorgan gained 3 percent to $36.45. Trading in the credit derivatives index that contributed to the bank’s losses in its London chief investment office soared to a record yesterday in a sign that the biggest U.S. bank may be unwinding its position, according to data cited by Credit Suisse Group AG.

The lender is seeking to stem at least $2 billion in trading losses from the U.K. operation, where Bruno Iksil, known as the London Whale, managed a portfolio of credit derivatives so large it distorted the market.

A strategy by the unit to reduce risks from hedges backfired and left the bank with even bigger and harder-to- manage exposures, Chief Executive Officer Jamie Dimon said last week. JPMorgan has sold 65 to 70 percent of its losing position and is still selling the rest, CNBC reported.

Airlines Rally

The Bloomberg U.S. Airlines Index advanced 2.3 percent as oil dropped to an eight-month low after the Energy Department reported that U.S. crude inventories climbed to the highest level in 22 years.

Cisco Systems Inc. (CSCO) rallied 1.9 percent to $17.51. The biggest maker of computer-networking equipment was raised to outperform from market perform at BMO Capital Markets.

Applied Materials Inc. (AMAT) gained 3.4 percent to $11.55. The largest producer of chipmaking equipment was raised to overweight at Barclays Plc.

Tesla Motors Inc. (TSLA) jumped 5.3 percent to $33.78 as the electric-car maker prepares to begin deliveries of Model S sedans and Goldman Sachs raised its price target for the shares.

To contact the reporter on this story: Rita Nazareth in New York at

To contact the editor responsible for this story: Nick Baker at


Fed Expands Operation Twist by $267 Billion Through 2012

By Jeff Kearns and Joshua Zumbrun - Jun 21, 2012 3:46 AM GMT+0700

The Federal Reserve will expand its Operation Twist program to extend the maturities of assets on its balance sheet and said it stands ready to take further action to put unemployed Americans back to work.

Policy makers led by Chairman Ben S. Bernanke are taking steps to shore up the world’s largest economy as faltering growth leaves it vulnerable to fallout from the European debt crisis and looming fiscal tightening in the U.S. Photographer: Andrew Harrer/Bloomberg

Ben S. Bernanke, chairman of the Federal Reserve, at a Joint Economic Committee hearing in Washington. Photographer: Andrew Harrer/Bloomberg

The central bank will prolong the program through the end of the year, selling $267 billion of shorter-term securities and buying the same amount of longer-term debt in a bid to reduce borrowing costs and spur the economy.

“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference in Washington following a two-day meeting of the Federal Open Market Committee. “Additional asset purchases would be among the things that we would certainly consider.”

Policy makers moved to shore up the world’s largest economy as faltering growth leaves it vulnerable to fallout from the European debt crisis and looming fiscal tightening in the U.S. Fed officials today lowered their outlook for growth and employment, foreseeing a jobless rate of at least 7.5 percent at the end of 2013.

The yield on the 10-year Treasury note rose to 1.65 percent at 4:35 p.m. in New York from 1.62 percent late yesterday. The Standard & Poor’s 500 Index fell 0.2 percent to 1,355.69 after declining as much as 0.9 percent.

Easing Bias

“Clearly, the bias is still towards even more easing,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “Our base case would still be that we’ll probably see some more easing before year end,” said Coronado, a former Fed economist.

The continuation of Operation Twist “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the FOMC said.

Policy makers repeated their view that economic conditions will probably warrant keeping interest rates “exceptionally low” at least through late 2014. The FOMC has kept the main interest rate in a range of zero to 0.25 percent since December 2008.

“Growth in employment has slowed in recent months, and the unemployment rate remains elevated,” the FOMC said. “The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.”

Fed officials lowered their forecasts for growth and raised their predictions for unemployment in each of the next three years.

Growth Outlook

Policy makers now see 1.9 percent to 2.4 percent growth in 2012, down from their April forecast of 2.4 percent to 2.9 percent. The unemployment rate will end the year at 8 percent to 8.2 percent, up from 7.8 percent to 8 percent in April.

Unemployment will end 2014 at 7 percent to 7.7 percent, up from a 6.7 percent to 7.4 percent in April, according to their so-called central tendency estimates, which exclude the three highest and three lowest forecasts.

The Fed said today it will sell Treasury securities with remaining maturities of about three years or less. It will purchase securities with six years to 30 years remaining.

The existing maturity-extension program was announced Sept. 21 and expires this month. Under that program, the Fed is selling $400 billion of short-term government debt and replacing it with the same amount of longer-term Treasuries.

Borrowing costs have fallen since the Fed announced Operation Twist. The yield on the 10-year Treasury note fell to a record low 1.4387 on June 1.

Little Concern

Today’s Fed statement and policy makers’ projections show that there is little concern over inflation.

Inflation “has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable,” the Fed said. Oil prices have slumped 23 percent to $84.03 a barrel yesterday since reaching a high of $109.77 a barrel in February.

Central banks across the world are considering steps to stimulate their economies.

Bank of England Governor Mervyn King and three other policy makers were overruled this month as they pushed to expand their bank’s bond-purchase program, meeting minutes showed today. European Central Bank President Mario Draghi left the door open for a rate cut at a June 6 press conference.

Bank of Japan

The Bank of Japan should be ready to “take appropriate actions without ruling out any options in advance” if the European crisis worsens, some of its board members said in May, according to minutes released today. The People’s Bank of China cut borrowing costs for the first time since 2008 earlier this month and loosened controls on banks’ lending and deposit rates.

Europe’s debt crisis has intensified since the FOMC’s meeting in April, roiling financial markets. The Standard & Poor’s 500 Index was down by 4.3 percent as of yesterday from its 2012 peak on April 2.

“The Federal Reserve is very much involved with talking with European leaders,” Bernanke said today. “We are prepared to work together if that can be done constructively, but at this point we’re mostly in consultation mode.”

The Fed’s two rounds of asset purchases totaling $2.3 trillion and record-low interest rates since December 2008 have left the central bank short of its full-employment goal.

The economy added 69,000 jobs in May, the fewest in a year, and the unemployment rate unexpectedly climbed to 8.2 percent from 8.1 percent, its first increase in almost a year.

Companies are cutting back as the economy shows signs of slowing. FedEx Corp., operator of the world’s largest cargo airline, is restructuring its express business and retiring 24 jet freighters.

Slowing Growth

“We believe U.S. domestic and global economic conditions will be impacted by the European debt crisis, slowing growth in Asia and the uncertainty these issues create on the global economy and the demand for our services,” FedEx Chief Financial Officer Alan Graf said yesterday on an earnings call.

Also taking a toll on the economy: concern that Congress will fail to reach a compromise in time to avoid $600 billion in tax increases and budget cuts next year.

Among government contractors coping with delayed procurements and agency cost-cutting is Preferred Systems Solutions, a Vienna, Virginia-based engineering and information technology provider.

“I’m feeling more of a pinch and squeeze than I ever have before,” said Scott Goss, president and chief executive officer. “As soon as they start these massive cuts, they’re going to impact the economy.”

Economic data in recent weeks have pointed to slowing growth.

Sales Fell

Retail sales fell 0.2 percent for a second month in May, according to a June 13 report from the Commerce Department, as elevated unemployment and the smallest wage gains in a year prompted consumers to curtail their spending.

Industrial production unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods, data from the Fed showed last week.

Fifty-eight percent of economists in a June 18 Bloomberg News survey said the FOMC would prolong Operation Twist, with an additional 8 percent predicting the Fed would announce the move at its meeting on July 31-Aug. 1.

Richmond Fed President Jeffrey Lacker dissented for the fourth meeting in a row, saying he doesn’t support extending Operation Twist. He said last month he believes the central bank will probably need to raise the main interest rate next year.

It was the first meeting for Governors Jeremy Stein and Jerome Powell, who joined the Fed last month, raising the Washington-based board to its full, seven-member strength for the first time since 2006.

To contact the reporter on this story: Jeff Kearns in Washington at

To contact the editor responsible for this story: Chris Wellisz at