Finance and Economic

Federal Reserve Bank of Chicago President Charles Evans said the drop in the unemployment rate to 8.5 percent may be partially reversed in coming months.

Workers at Top Form International Ltd.

NEW YORK, N.Y.

J.C. Penney Co. named board member Thomas J. Engibous, former head of Texas Instruments, as the department store chain’s new chairman. He succeeds Myron E. Ullman III, former chief executive and chairman, who is finishing up his reign at Penney’s.

The announcement adds the finishing touches to a major management transformation at the mid-price retailer.

Ullman, who became Penney’s CEO in 2004, gave up that title Nov. 1 to Ron Johnson, a former executive at Apple Inc. who took over merchandising and marketing responsibilities and then planned to assume the rest of the responsibilities Feb. 1. During the three-month transition period, Ullman served as executive chairman.

The company said that Engibous will become chairman Jan. 28, which marks the end of Penney’s fiscal year.

Under Ullman, J.C. Penney added popular brands like European clothing line MNG by Mango and Sephora cosmetics. But the department store chain is still struggling to be more inviting. The department store chain posted disappointing holiday sales as it has faced stiff competition from Macy’s Inc. and other clothing sellers.

J.C. Penney reported that revenue at stores open at least a year rose 0.3 percent in December, missing the company’s expectations. This figure is a key indicator of a retailer’s health because it excludes results from stores recently opened or closed. The company also said on Thursday that it expects to lose money in the fourth quarter personal loans for people with bad credit.

Engibous said in a statement on Tuesday that he will help J.C. Penney as it looks to lure more shoppers to its stores.

Engibous is a retired chairman and former CEO of Texas Instruments Inc. He has been a J.C. Penney board member since 1999 and has served as lead independent director and presiding director since 2008.

Johnson said in prepared remarks that Engibous has been invaluable to him in his early days leading the retailer and expects him to assist in the company’s quest to build itself into “America’s Favorite Store.”

The company took one step toward revitalizing itself last month when it announced that it is buying a 16.6 percent stake in Martha Stewart Living Omnimedia Inc. for $38.5 million. Starting in February 2013, mini-Martha Stewart shops will appear inside most of J.C. Penney stores, and the companies will operate a joint website. Later this month, Johnson is expected to unveil plans on a new pricing strategy and other broad-sweeping intitiatives.

J.C. Penney runs more than 1,100 stores in the U.S. and Puerto Rico.

Shares slipped 8 cents to $34.49 in morning trading.

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Canada

U.S. employment likely grew solidly last month, but the jobless rate probably rose from a 2-1/2 year low as improving conditions lured some Americans who had given up looking for work back into the labor market.

The government’s closely watched employment report due on Friday should cement views that economic growth accelerated in the fourth quarter after a tepid performance in the first nine months of 2011.

However, the pace of job creation remains too slow to signal a robust recovery is finally under way. Nonfarm payrolls rose 150,000 last month, according to a Reuters survey, after rising 120,000 in November.

Unusually mild weather during the month may have given employment a boost.

While the unemployment rate is expected to edge up to 8.7 percent from 8.6 percent, the tone of the report will likely be strengthened by upward revisions to the payrolls count for October and November, in keeping with a recent trend.

“Businesses are beginning to feel a little bit better about the future and are hiring, but we cannot get too excited because 150,000 is the minimum we need to keep the job market stable,”

said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California.

The economy would need even faster job growth over a sustained period to make a noticeable dent in the pool of 24.4 million Americans who remain either out of work or underemployed 2-1/2 years after the end of the 2007-09 recession.

Job growth has averaged 131,000 over the past 11 months and even if payrolls rise as expected in December, employment will still be 6.1 million below its December 2007 level.

With the labor market still far from healthy, the debt crisis in Europe unresolved and tensions over Iran threatening to drive up oil prices, the U.S. economy faces stiff headwinds.

Economists predict the recovery will lose a step early this year after expanding in the fourth quarter at what is expected to be the fastest pace in 1-1/2 years.

This should keep alive the possibility of the Federal Reserve embarking on a third round of asset purchases, or quantitative easing, to spur stronger growth.

“We could see QE3 by the middle of the year,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

The employment report will offer little comfort to the Obama administration and could provide Republicans with more ammunition to attack the government’s handling of the economy.

President Barack Obama’s chances of a second term in office could depend on the health of the labor market.

LABOR MARKET TONE IMPROVING

Although the pace of job creation remains mediocre, there is no denying that the market is healing.

Small business hiring is improving and layoffs have subsided, with first-time applications for state unemployment benefits hovering near 3-1/2 year lows.

Over the past several months, the government has consistently revised up earlier payroll counts based on its survey of employers high risk personal loans. In addition, the household survey, from which the unemployment rate is derived, has shown an even more vigorous pace of hiring for each of the last four months.

Economists say the Bureau of Labor Statistics may not be picking up jobs created by small companies and new businesses.

“The payrolls survey has a hard time picking up smaller employers and births of new start-ups, and that’s where we expect to see a lot of job creation,” said Stephen Bronars, senior economist at Welch Consulting in Washington.

“It’s always going to be harder for the BLS to pick up those because they are measuring employment at companies that are included in their survey and those tend to be the bigger, well established companies.”

In Friday’s report, the government will revise the household series going back five years. Analysts will watch this survey closely to see if the recent improvements will hold.

A broad measure of unemployment that includes people who want to work but have stopped looking and those working only part time but who want more work hit a 2-1/2-year low in November.

GOVERNMENT A DRAG

All the anticipated job gains in December will come from the private sector, where payrolls are seen rising 165,000. Government employment is expect to shrink 15,000, weighed down by budget cuts at state and local governments.

However, the worst of the belt tightening is over and some states have reporting increases in revenue.

In November, a measure of the share of industries that showed job gains during the month fell sharply and economists will be watching to see if it recovers.

Job gains in December are expected to come from construction, where unseasonably mild weather has boosted groundbreaking for new homes. Transportation and warehousing payrolls could also benefit from the mild temperatures.

Manufacturing could post a third consecutive month of job gains, but a moderation in retail employment is expected after recording the biggest increase in seven months in November as retailers geared up for a busy holiday shopping season.

Healthcare and social assistance hiring is expected to pick up after adding the smallest number of jobs in five months in November. Temporary hiring — seen as a harbinger of future hiring — is expected to show more gains.

Even though employment probably picked up last month, a modest gain in hourly earnings is likely, indicating that most of the jobs being created are low paying. The high unemployment rate also means wages cannot grow much.

This is a potentially troubling sign for consumer spending, which has been largely supported by a reduction in savings.

The average work week is seen steady at 34.3 hours.

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After four leaderless months, Yahoo named Scott Thompson as its new CEO on Wednesday — choosing an outsider to take over the helm despite shareholders’ calls to sell the company.

Thompson was previously the president of PayPal, an eBay (, Fortune 500) subsidiary. His appointment, which becomes official January 9, follows the ouster of former CEO Carol Bartz — who was unceremoniously fired by the company’s board via phone in September.

Shares of Yahoo (, Fortune 500) closed 3.1% lower Wednesday.

In a prepared statement, Thompson called Yahoo "an industry icon" with a "rich history." Although that’s true, Yahoo has struggled mightily in recent years. The company gave up on search two years ago, a market that it once led. It is also losing ground with its other cash cow, display advertising, to new entrants to the market such as Google (, Fortune 500) and Facebook.

On a conference call following the announcement, journalists and analysts hammered Thompson on those points. He said he needs time on the job to develop strong answers.

"It’s too early for me to have any informed opinion as to the display space, what’s going on there and what’s happening next," Thompson said on the call. "I have a lot to learn, and it’s still very early days … but down in that data we’re going to find ways to innovate and compete."

Roy Bostock, chairman of Yahoo’s board of directors, was also on the call and jumped in to answer many of the hardball questions.

"What we’re doing at Yahoo, you can call it a turnaround, but it’s really building on strong assets," Bostock said.

Will Yahoo sell itself? Despite Bostock’s insistence Yahoo can stand alone, the company’s weakness has attracted buyout interest from a long list of both private equity firms and tech titans. Reports in late October said Google was preparing a bid, in addition to Microsoft (, Fortune 500), which offered to buy Yahoo for more than $47 billion in 2008 and was turned down no checking account payday advance. Reports last month said Chinese Internet company Alibaba, of which Yahoo owns a stake, is preparing a takeover bid.

Yahoo co-founder Jerry Yang and other board members have privately told four major private equity firms that the board would not support a takeover offer for the entire company, Fortune reported on Wednesday.

Several groups of activist shareholders had pushed Yahoo’s board to sell the company, but bringing in an outside CEO makes that possibility more remote.

An analyst on the conference call asked Thompson whether he "see[s] Yahoo as public or private" in the future.

Thompson got out half a word before Bostock jumped in: "We are a public company, with roughly a $20 billion market cap. We don’t see that changing right now."

But earlier in the call, Bostock said Yahoo is "considering a wide range of business investments" and other options. He stressed several times during the call that "the primary focus will be on core business."

That leaves Yahoo room to shed more of its vast product portfolio. It began winnowing in late 2010, killing off struggling services like its Buzz community news site and aging AltaVista search engine. Yahoo also thinned its blogs and sold off bookmarking service Delicious.

Thompson said his aim is "to return this business to one of the great iconic brands. I have a core belief that what happens in the next five years, and the next ten, is almost impossible to imagine."

He closed the call by saying, "I’m genuinely excited to be here. I would not be here if I didn’t think the future of this brand could be spectacular."

Yahoo chief financial officer Tim Morse had been serving as interim CEO, and he will return to his former position once Thompson takes the helm. Morse will also join the company’s board. 

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TORONTO

Construction spending jumped in November as builders spent more on single-family homes, apartments and remodeling projects.

The Commerce Department said Tuesday that spending on construction projects rose 1.2 percent in November, following a revised 0.2 percent drop in October. The increase was the third in four months and the largest since a 2.2 percent rise in August.

The November increase pushed spending to a seasonally adjusted annual rate of $807.1 billion, still barely half the $1.5 trillion that economists consider healthy. Analysts say it could be four years before construction returns to health levels.

Home construction has begun a gradual rebound and likely added to the nation’s economic growth in 2011. The chief reason is apartments are being built almost twice as fast as two years ago. Renting is the only option for many people who have lost their jobs, their homes or both.

For November, private residential construction increased 2 percent in November to a seasonally adjusted $522.3 billion. It was the fifth consecutive gain.

Single-family construction rose 1.5 percent while multi-family construction including apartments rose 1.3 percent. The category that covers home remodeling rose 9.5 percent.

Nonresidential construction was unchanged at an annual rate of $243.7 billion, Spending on hotels and hospitals rose but those gains were offset by weakness in other areas. Spending on office buildings dropped 1.3 percent and the category that includes shopping centers fell 0.8 percent.

Spending on government projects rose 1.7 percent to an annual rate of $284.9 billion. That followed a 1.8 percent drop in October. State and local construction gained 1.3 percent and federal building activity increased 5.3 percent. But even with those gains, activity in the government sector was down 5.3 percent from a year ago.

The construction industry was hit hard by the housing bust and has had trouble recovering since the recession ended more than two years ago.

Severe budget problems have squeezed state and local governments while the federal government has come under pressure to get control of soaring budget deficits.

Private builders haven’t fared much better. While their spending increased, they have scaled back on construction plans and are working from depressed levels.

Builders in November broke ground on homes at a seasonally adjusted annual rate of 685,000. That was a 9.3 percent jump from October and the fastest pace since April 2010.

Builders should start at least 600,000 homes this year. That’s up from 587,000 last year and 554,000 in 2009 _ the worst year on record. Still, that’s half the number that economists expect in a healthy market.

While construction may be turning around, home sales are still weak. This year will likely end up as the worst for new-home sales in history.

While new homes represent less than one-fifth the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Builders are struggling to compete with weak demand because of still-high unemployment and a glut of homes on the market because of foreclosures and short sales _ where lenders accept less for a house than the mortgage on the home is worth. Those homes are selling for at an average discount of 20 percent, which is lowering neighboring home values.

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President Barack Obama will waste little time getting back in front of voters following a 10-day Hawaiian vacation spent largely out of the spotlight.

Air Force One was due to land in Washington on Tuesday morning after an overnight flight from the island of Oahu. The president is returning from vacation the same day Republican presidential candidates square off in the Iowa caucuses, the first nominating contest of the 2012 campaign.

Obama plans to make his presence in the campaign known quickly.

The president will host a live web chat with supporters in Iowa on Tuesday night as the caucuses are unfolding. The following day, Obama will travel to Cleveland for an event focused on the economy.

Obama aides said the president will seek to draw a contrast with his GOP challengers during Wednesday’s trip to Ohio, a state sure to figure prominently in the presidential campaign.

Obama returns to Washington facing further debate on extending payroll tax cuts, the same issue that consumed Washington during the final days of December.

Congress broke through a stalemate just days before Christmas, agreeing to extend the cuts for two months. Lawmakers will get back to work later this month to negotiate a full-year extension of the cuts, which Obama supports.

White House officials say the tax cut extension is the last “must-do” legislative item on Obama’s agenda this year. His strategy for his fourth year in office will focus largely on taking executive actions that do not need approval from lawmakers as he seeks to break away from a deeply unpopular Congress.

The payroll tax cut debate almost prevented Obama from taking his annual Christmas trip to Hawaii faxless pay day loans. He delayed the trip nearly a week, finally departing on Dec. 23, just hours after Congress finalized the two-month extension.

The president, wife Michelle and daughters Malia and Sasha stayed largely out of the public eye during their trip to Oahu, the island where Obama was born and mostly raised.

The Obamas stayed in a multimillion-dollar oceanfront rental on Kailua Beach, near Honolulu, and surrounded themselves with a close-knit group of family and friends. That included Obama’s sister, Maya Soetoro-Ng, who lives on Oahu, and several of the president’s childhood friends.

Obama’s outing consisted largely of trips to the gym and golf course at Marine Corps Base Hawaii near his vacation rental. The first family also made a few outings around the island, including a snorkeling trip to popular Hanauma Bay and a stop for shave ice, a Hawaiian snow cone.

The president also took his family to the East-West Center, a research and exhibition center that is displaying the anthropological work of his late mother.

Aides say Obama spent a bit of time on vacation brainstorming ideas for his Jan. 24 State of the Union address, where he will lay out an agenda that also will serve as the basis for his campaign message. He also was briefed by a small cadre of traveling advisers on some of the international issues looming in 2012, including renewed threats from Iran and a request from Yemen’s outgoing, autocratic president to come to the U.S. for medical treatment.

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