The number of laid-off workers filing claims for unemployment benefits showed an unexpected upswing last week although another of the key indicators of unemployment hit a four-year high.  The Labor Department reported Thursday that applications for unemployment benefits totaled 357,000 last week, some 18,000 fewer than the previous week. That pushed applications for benefits to their lowest level since mid-April.

However, the four-week average for people receiving benefits edged up to 3.086 million, the highest level since March 6, 2004, when the country was still struggling to recover from a prolonged period of rising unemployment. The increase in so-called continuing claims underscored the problems people are facing with rising layoffs and the difficulty in finding new jobs in a weak economy. Some analysts said the better-than-expected showing was an aberration that reflected problems the government has in adjusting the claims figures around holidays. Last week covered the Memorial Day holiday when state claims offices were closed.

The unemployment report for May will be released on Friday. Analysts are expecting that the overall civilian jobless rate will edge up to 5.1 percent, compared to 5 percent in April, and that businesses will have cut 60,000 jobs, marking the fifth straight month of job losses. This long stretch of job cuts has many economists believing the country has fallen into a recession. However, the overall economy as measured by the gross domestic product has managed to remain in positive territory with the GDP growing at an annual rate of 0.9 percent in the first three months of the year.

In other economic news, reports from major chain stores showed that consumers stepped up their shopping in May after tax rebate checks started appearing in mailboxes. Discount and lower-priced stores such as Costco Wholesale Corp and Wal-Mart Stores Inc. were among the strongest performers. The Bush administration is hoping that the $168 billion economic stimulus program which is mailing checks to some 130 million households and showering businesses with tax breaks will be enough to jump-start the economy and result in stronger growth in coming months.

The drop of 18,000 jobless claims applications last week was much better than the unchanged performance that economists had been expecting. For the week ending May 24, a total of 31 states and territories reported that claims had declined, while 22 reported increases. The states with the biggest increases were Ohio, up 2,390, because of higher layoffs in the auto, transportation and service industries, and Mississippi, with a rise of 2,028, reflecting higher layoffs in the auto industry.

The states with the biggest declines were Michigan, with a drop of 1,880, reflecting fewer layoffs in the auto industry in that state, and Pennsylvania, with a drop of 1,120, reflecting fewer layoffs in petroleum, primary metals and the furniture industry. I wonder when the job market will begin to feel the full brunt of this recession?

U.S. auto sales sank in May as consumers spurned pickup trucks and SUVs because of record gasoline prices, driving General Motors Corp, Ford Motor Co and Chrysler LLC to double-digit declines. Japan’s Honda Motor Co Ltd outsold Chrysler for the first time to emerge as the new No. 4 U.S. automaker, while Toyota Motor Corp closed the gap with GM as the leading player in the U.S. market, despite reporting lower sales than a year before.
Honda’s Civic and Accord and Toyota’s Camry and Corolla sedans outsold Ford’s F-Series pickup truck. It was the first time a sedan outsold the perennial Ford bestseller since 1991. Honda and Nissan were the two major automakers to buck the declining trend, posting sales increases of 11 percent and 4 percent, respectively. The figures boosted shares in Japanese automakers in Tokyo, with Honda shooting up 6.9 percent.
GM sales plunged 30 percent, Ford sales fell 19 percent and Toyota’s fell 8 percent. Sales were adjusted for an additional sales day compared with the year earlier. GM also announced plans to close four pickup and SUV plants in North America and expand output at two car plants to align its production to a market increasingly dominated by concern about fuel efficiency.
Overall, U.S. sales fell to 14.25 million on an annualized basis in May, down from 14.4 million in April and 15.2 million on average in the first quarter. GM’s U.S. market share slid to 19 percent in May, a record low for the embattled automaker that commanded 45 percent in 1980. Car sales, which had accounted for less than half of industry volume in 2007, surged to 57 percent in May. On the losing end, truck sales hit their lowest rate since 1995.

The shift toward more fuel-efficient cars and crossovers has hit Detroit-based automakers and their truck-heavy lineups, particularly hard. Sales for GM’s Hummer SUV line dropped 60 percent in May as the automaker said it would sell or revamp a brand that has become synonymous with gas-guzzling excess.  Personally I can’t figure out how anyone can afford to drive a gas guzzling automobile but I guess I still manage with my v-6.

Lehman Brothers is swinging the ax. Lehman shares fell after CNBC reported the big investment bank will cut 5% of its workforce, or about 1,400 jobs. The news comes as Lehman prepares to report first-quarter results next Tuesday. Wall Street has been bracing for a round of bad news next week from banks including Lehman, Goldman Sachs (GS) and Bear Stearns (BSC), amid a sharp slowdown in dealmaking and a fearful turn in the credit markets. At Lehman, analysts expect first-quarter earnings to fall by more than half, to 91 cents a share from $1.96 a year ago. A particular area of concern at Lehman is the bank’s big commercial real estate loan book, which is expected to see a big writedown as property values decline. With revenue under pressure, Lehman is responding by cutting costs, in a painful process that will no doubt be repeated many times over on Wall Street in the next few months.  I think we should all be prepared for a lot more cost cutting measures in the next few months.

A global market meltdown and a decelerating economy could shake the steel nerves of the European Central Bank, analysts said Tuesday, as more observers are predicting it will cut borrowing costs as soon as the second quarter of this year.

The ECB has kept its benchmark interest rate on hold at 4 percent since last June _ before August’s credit crisis froze bank lending and threatened to stall major economies.

Its refusal to cut rates _ and encourage reluctant banks to give credit to each other, to companies and to homebuyers _ stood in stark contrast to the U.S. Federal Reserve which in a surprise move Tuesday reduced its rate for the fourth time since last September.

The Fed slashed its benchmark refinancing rate to 3.5 percent from 4.25 percent as stock markets dropped sharply Monday on investor skepticism that the U.S. government’s multibillion-dollar (-euro) tax relief plan could save the U.S. from a possible slide into recession.

But, until recently, ECB President Jean-Claude Trichet has talked instead about raising rates as the 15 nations that share the euro saw inflation spiral in the last two months to match an all-time high.

Trump Entertainment Resorts Chief Financial Officer Dale Black Resigns Effective Dec. 14.  Casino operator Trump Entertainment Resorts Inc. said Monday Executive Vice President and Chief Financial Officer Dale R. Black has resigned to accept a similar position at another gaming company. Black’s resignation will become effective on or about Dec. 14, the company said in a filing with the Securities and Exchange Commission.

Trump Entertainment plans to identify potential succession candidates, but did not say when. Trump Entertainment shares dropped 25 cents, or 4.8 percent, to close at $4.92 after hitting a new low of $4.83 earlier in the session. Shares continued to fall in aftermarket activity, tumbling 82 cents, or 16.7 percent, to $4.10.  It will be interesting to see who takes his place.

I was surfing the web today and came across some interesting news about the billions of dollars being saved each year by folks doing offshore banking. Around 20 years ago I was dating a lovely girl and her brother was quite successful and one the things that helped keep him that way was offshore banking. He helped blaze the trail for it by writing a book on the subject, back then it was mostly big business doing it but now it is quite common for many small and medium sized businesses to take advantage of offshore company formation and reap the financial benefits.

Here is a round-up of some of the most popular finance news items around the world.

-By keeping your car for 15 years, or 225,000 miles of driving, you could save nearly $31,000, according to Consumer Reports magazine. That’s compared to the cost of buying an identical model every five years, which is roughly the rate at which most car owners trade in their vehicles. A pretty good idea but the car manufacturers won’t like it.

-General Motors has quietly dropped a marketing strategy it announced in May where it would bring other automakers’ vehicles to its Chevrolet showrooms for customers to test against its redesigned 2008 Malibu. The company was already running a similar program for its new Saturn Aura sedan - where dealers were bringing Honda Accords and Toyota Camrys into the showroom and allowing customers to inspect and test those vehicles in comparison to the Aura.

-President Bush outlined his plan Friday for helping troubled subprime borrowers keep their homes. The proposals put forward by the president included increasing the help offered by the Federal Housing Authority to troubled borrowers. That may take the form of expanding the pool of borrowers who can apply to the FHA to refinance their loans.

-Christine Lagarde, the first woman finance minister for a G-8 nation, was rated the best minister in President Nicolas Sarkozy’s government last month by one of France’s top-selling newspapers. Great news, keep up the good work.

Stocks moved lower Friday afternoon as crude prices gained over $1 and trading thinned ahead of the weekend rush to get out-of-Dodge before July 4th.

The 30-share Dow industrials (down 10.08 to 13,412.20, Charts), the broader S&P 500 (Charts) and the tech-heavy Nasdaq (Charts) all lost about 0.4 percent with roughly an hour left in the session. At one point the Dow was up over 100 points.

Oil prices rose amid a backdrop of falling U.S. gasoline and heating fuel stocks. U.S. crude for August delivery gained $1.11 to settle at $70.68 a barrel on the New York Mercantile Exchange, its highest closing price since last August.

Earlier in the session stocks rallied on a combination of tame inflation numbers and moderate - but not too fast - economic growth.

In the report, personal spending and income both rose modestly last month, just below analysts’ forecasts.

Separate reports showed construction spending jumped 0.9 percent last month, topping forecasts, while the revised University of Michigan consumer sentiment index for June also topped forecasts, though the reading was down from May.

But it was really the PCE number that mattered most.

Fears over rising inflation and interest rates have recently stung stocks and pushed Treasury yields to a 5-year high, as higher interest rates make borrowing more expensive for companies and hurt profits.

Let’s keep a keen eye out for the movements of the market after the holiday because it could set the tone for the entire Summer.