Australians in work during this savage global recession

The Paris-based policy advisory authority said that action by governments and central banks had averted a depression. However, it still expected the unemployment rate in advanced countries to average about 10 per cent next year. This would compare with a peak of 7.5 per cent in the 1990s recession.
The OECD said that as imports were a smaller share of the economy in Australia than in other nations, more of the benefit from stimulus spending would stay in the country.
"The jobs impact of fiscal stimulus measures is particularly strong in Australia, Japan and the US, due to the relatively large size of the fiscal packages in these countries and their relatively large fiscal employment multipliers."
The OECD's annual report on the employment outlook said the government's stimulus package would raise employment next year by between 1.4 and 1.9 per cent, or between 160,000 and 210,000 workers. The gains in Australia are as much as double those achieved in other nations.
Wayne Swan welcomed the OECD report yesterday, saying it demonstrated the value of the government's package. "It is heartening to see such powerful evidence that our stimulus measures have led the advanced world in keeping more Australians in work during this savage global recession," the Treasurer said.
"However, the report is also very sobering in its forecast of 57 million people without work across advanced economies. This just highlights the massive challenge we still face as unemployment continues to rise here and around the world, and underscores how vital it is that we stick to our guns on stimulus to keep as many Australians in work as possible."
The OECD said a large proportion of people who became unemployed during economic slumps did not find jobs for years, with many leaving the labour force altogether.
During the last recession, it took three years for Australia's unemployment to rise from its 6 per cent level in 1990 to reach a peak of just above 10per cent. It then took 11 years to get back to 6 per cent. In the 1980s recession, it took two years for unemployment to reach its peak and then six years to go back to its previous level.
The OECD study shows that companies' hiring intentions are more important in driving rising unemployment than layoffs and redundancies.
The pool of unemployment rises as people joining the workforce find they cannot get a job.
It is harder for the unemployed to get work in Australia during slumps than in any other advanced country. Although there is still hiring during downturns, the competition for every job becomes more intense with an unusually large number of jobseekers with good qualifications and stable work histories competing for fewer vacancies.
"Employers can be more selective in their hiring and it is likely that disadvantaged groups will be pushed to the back of the hiring queues and, hence, at an elevated risk of becoming long-term unemployed."

Texas Republican whose latest book

Thousands of Americans are joining protests and lobbying their politicians in pursuit of the ultimate goal of replacing the Fed with a money system backed by gold or other commodities.
Largely inspired by House Representative Ron Paul, the Texas Republican whose latest book, End the Fed, was released overnight (AEST), the movement draws its strength from people who want a sharp shift away from government dependency and toward a truly free-market economy.
Among the activists backing the cause is Isaiah Matos, the superintendent of a luxury high-rise building in New York City. Mr Matos was an antiwar protester earlier this decade before he became a libertarian.
Through neighbourhood groups in Queens organised using Meetup.com, Mr Matos met other Ron Paul backers who shared his distrust for the central bank and a currency backed only by a government's promise.
"I believe in a commodity-backed currency," said Mr Matos, 30 years old. "In college, I didn't understand how we could move from gold to paper."
Mr Paul's entrance into politics was driven by a similar concern. He decided to run for Congress in the early 1970s after President Richard Nixon ended the US dollar's ties to gold. His long-term goal is a return to a commodity-backed dollar, allowing the currency to be redeemed for gold.
Through his constant attacks on the central bank, Mr Paul is drawing backers nationwide who also criticise the Fed for supporting Wall Street and bailing out financial institutions.
Mainstream economists generally credit the Fed for moderating economic cycles and mitigating the fallout from financial shocks. The central bank serves as the nation's lender of last resort, preventing runs on commercial banks by using its ability to create credit. The Fed influences interest rates as part of its mandate to balance inflation and unemployment. Mr Paul and his followers say all of that should be left to market forces.
After last year’s election, Mr Matos helped launch what became a series of rallies outside Fed buildings. The first came on November 22 outside the New York Fed, with a crowd he estimated at 500 after picking up people in a march past Wall Street. He said twice as many people attended a larger rally in April, coordinated with protests outside other regional Fed banks nationwide.
By then Mr Paul had introduced his legislation to audit the central bank, including its monetary-policy operations, which are now outside congressional scrutiny. To draw a wider base of followers, Mr Matos's group changed the name of its rally from "End the Fed" to "Audit the Fed."
"End the Fed is a little too drastic for the mainstream," Mr Matos said. "Sometimes it's not what you say. It's how you say it."
Mr Matos joined other activists on Tuesday in delivering petitions supporting the Fed audit to US Senate offices in Washington and around the country. House politicians are planning to include an audit in legislation this northern autumn, but the path in the Senate is unclear.
Fed officials say opening their monetary-policy deliberations to congressional review would cast doubt on their independence and ability to raise interest rates when necessary. That could stoke inflation, they say, raising borrowing costs for the government and consumers.
Mr Paul's backers share the view that the Fed's ability to create money violates the intent of the Constitution. They say fiat currency, which isn't backed by commodities, threatens civilisation by helping governments finance wars and laying the groundwork for financial crises.
And they expect the vast expansion of the Fed's balance sheet during the financial crisis to spur rampant inflation down the road, even though central-bank officials say they can withdraw the money when needed.
"The Fed will self-destruct," Mr Paul said in an interview. "This economy is going to get worse and this dollar is going to get a lot worse."
Campaign for Liberty, Mr Paul's main political group, which claims 200,000 members, says auditing the Fed is its top legislative priority this year. The congressman calls an audit a "stepping stone" that would shed light on the central bank's operations and ultimately lead to a popular backlash. His audit effort has enlisted more than 300 House and Senate backers and a long list of groups, though few want to kill the Fed entirely.
Skip Cook, 63, a roofing salesman in Little Rock, Arkansas, said he has written to his local newspaper and his politicians "incessantly" to cajole his representatives into backing the audit legislation.
Mr Cook, who spent a decade as a fixed-income broker, said the Fed's actions create long-term risks to the economy instead of preventing them. "What's it going to be like next time when they've put a couple trillion dollars of fiat money into this economy and the chickens come home to roost?" said Mr Cook.
Abolishing the Fed may be a long-term goal, but Mr Cook said more and more people are joining the cause. "The environment now because of the outrage is so ripe for people to entertain this information," he said. "Pain brings a lot of people into the auditorium."

company wanted to joint-venture its large-scale residential projects

The group yesterday confirmed the Brisbane site earmarked for its iconic $900 million French Quarter project in Brisbane was up for sale, with a price tag believed to be more than $80m.
Sources say financiers are erring on the side of caution in situations where, if they lend to a company such as Devine, the banks would be further exposing themselves to a major shareholder, which in this case is Leighton. Leighton owns 57.11 per cent of Devine.
As a result, Devine has been forced to shop around beyond the top four banks to secure finance.
Devine said the move to sell properties was not due to funding issues.
Instead, it was to buy more land in Victoria and South Australia, with five residential development sites under negotiation in Melbourne.
"We have got some large tracts of land in Queensland and we want to sell off parts of those so we can buy more land in Victoria," managing director David Devine said.
"All our broadacres are for sale if the price is right, but they are not aggressively for sale."
But Mr Devine conceded that there had been some debt aggregation issues with certain banks that had already lent money to Leighton.
"Leighton remains a shareholder in Devine and with some banks there are aggregation issues, but we leave those alone and go to others," he said.
Leighton's total debt as at June 30 was $613m. It is widely spread across various institutions and banks, with exposure to all of the top four Australian banks.
Wal King, chief executive of the global construction giant Leighton, struck a deal at the height of the boom in February 2007 to pay $95m ($1 a share) for a stake of more than 40 per cent in Mr Devine's company. As part of the deal, Leighton had first right to buy shares owned by directors Mr Devine and Ken Woodley after this year, representing at the time 26.8per cent of the share register, and 16.2per cent after dilution.
Yesterday, Devine's share price closed steady at 48c.
This week, Leighton chief financial officer Scott Charlton said banks were a lot tighter on lending this year.
"The banks were looking at how they treat their exposure; whether it is aggregation to clients or whether it is aggregation to the whole market," Mr Charlton said.
"Our intentions are that Devine is the residential developer of choice for the Leighton group and we will work through Devine.
"But any decision about whether ... Leighton invests more depends on if Devine can come back to the group and present another opportunity."
Mr Devine said his company wanted to joint-venture its large-scale residential projects. Its focus would be on its $500m, 678-apartment Hamilton Harbour mixed-use development joint venture with Leighton Properties.
An offer was already being considered for the sites planned for its $900m Brisbane French Quarter mixed-use development, which was not expected to proceed until at least the next financial year.
The site was being marketed by Jones Lang LaSalle's Geoff McIntyre and Ray White Transact's Rick Bird.
It was amalgamated by Devine over a number of years for two planned residential towers, a hotel and retail development.
"We have had some interest in it. We are looking at that at the moment," Mr Devine said.
Among the assets for sale was land earmarked for Devine's Redbank Plains development.
"If we can sell half of that and replenish our stock in Victoria, we'd be happy," Mr Devine told The Australian. "Townsville is the same, we have 1000 lots up there.
"If we can sell some of that and replenish our stock elsewhere, that is the plan."
The Queensland-based developer previously flagged in August, when it delivered its full-year net profit of $16.7m, that it had more than 7000 blocks and expected to sell more than 2000 in the year, while seeking joint-venture opportunities with vendors.
But it had not signalled that it would consider selling land for the French Quarter project on the corner of Margaret and Albert streets, or that more Melbourne sites would be snapped up.
Mr Devine yesterday said another site, at 96 Albert Street in Brisbane's CBD, was for sale.
That was after a deal last year to buy the office block for $24.5m collapsed when the buyer could not secure finance.
Expressions of interest closed this week.
Mr Devine said that the group was still negotiating with banks to secure funding for its $300m Ann Street office tower located in Brisbane.

They have focused on the need for banks

"We're not so narrow-minded to the point that we want a number," Ms Lagarde said. "But we want something that can be nailed down to solid parameters ... something that effectively limits and frames compensation." She said leaders at the meeting of the Group of 20 countries in Pittsburgh next week would tackle a wide range of issues aimed at putting the global financial sector back on sound footing, including capital requirements for banks, regulations for the over-the-counter derivatives market and oversight of tax havens. Ms Lagarde emphasised that pay packages shouldn't be treated as a "trivial" issue, but instead as a way to encourage financial institutions to adopt more prudent risk-management practices. A global commitment to curbing excessive pay packages that many people blame as a cause of the financial crisis is also an issue the broader public can understand and appreciate, she said. Bonuses "are both the icing on the cake and the yeast," Ms Lagarde said. "What drives people is how much they end up with individually." Ms Lagarde's remarks suggest a softening of the French position and could provide the basis for compromise among governments on how to tackle the bonus issue. Most countries agree that bank remuneration should be reined in, and have suggested that bonuses be forfeited if performance deteriorates. But there are differences on how far to go. France and Germany, facing broad discontent over the amount of public money that has been pumped into their banking sectors, have been pushing for the variable part of pay packages to be capped - perhaps as a share of banks' profits. Last month, French President Nicolas Sarkozy said he would urge other nations to consider strong measures, such as a tax or an absolute cap on bonuses. The UK and the US have argued that banks would find ways around such strict curbs. They have focused on the need for banks to strengthen their capital resources. Officials want new rules in place before bonuses are paid out at year-end. In view of the discord, an international body of bankers and regulators suggested on Tuesday that bonus pools could be limited when banks don't meet certain capital requirements. That position - which the Financial Stability Board is to present at the summit as part of broader financial-regulation guidelines - could bring the diverging views closer together heading into the meeting. The FSB was charged by G-20 finance ministers this month with coming up with recommendations for the Pittsburgh gathering. Ms Lagarde, who met with FSB chairman Mario Draghi on Tuesday, said she would wait for the group's full report over the next few days. "I don't think it should be a French formula, but a detailed formula that could be applied across borders," she added. The other contentious issue on the table next week will be capital requirements for banks, many of which have been bailed out by national governments over the 18 past months. There is international agreement that banks around the world need more and better-quality capital. However, there is divergence over how capital levels should be measured. Europeans in particular are worried that a US proposal to introduce absolute metrics to gauge leverage at international banks would effectively force European banks to raise more capital to catch up with their US rivals. Most European banks don't accept the US's one-size-fits-all approach; instead they differentiate their capital levels according to how risky regulators consider their assets. Ms Lagarde voiced concerns with the US approach, saying it should be only one of the criteria used to assess banks' strength. "All the banks in the world will need to be more capitalised than they were pre-crisis," she said. "We don't want to favour one group of institutions that had to massively rely on public funding to be recapitalised." Separately, Michael Froman, a senior White House aide, said he expected that the G-20 summit would produce a "framework" for shifting global growth patterns. So-called rebalancing would reduce China's dependence on exports, US reliance on debt and European labour policies to produce what economists consider a more sustainable pattern.

Buffett maintained a positive outlook

CARLSBAD, California (Reuters) - The U.S. economy has not begun to climb out of the worst recession since the Great Depression, but the "terror" that followed last year's near-collapse of the financial system is gone, due in part to government intervention, Warren Buffett told Reuters on Tuesday.
Buffett maintained a positive outlook on the government's much criticized Troubled Asset Relief Program (TARP) for banks, saying it may ultimately turn a profit for the government.
"At the moment we don't see (the economy) getting better or worse, but that's better than you could say six months ago," said the billionaire known as The Sage of Omaha for his long history of successful investments. "The terror of last year is gone and that's thanks in part to the government."
Buffett spoke to Reuters in a brief interview at the Fortune Most Powerful Women conference in Carlsbad, California.
U.S. President Barack Obama said on Tuesday that measures undertaken by his administration to rescue the economy -- including a $787 billion stimulus package -- were working, but warned a complete recovery would take "some time."
Federal Reserve Chairman Ben Bernanke also gave a fairly upbeat view, saying the longest and deepest recession since the 1930s was likely over, but added it would "feel like a very weak economy for some time."
Data released on Tuesday showed U.S. retail sales rose in August at the fastest pace in 3-1/2 years and a gauge of New York State manufacturing hit a near two-year high.
Economists generally agree that the U.S. economy is in the early phase of recovery but many remain worried about lackluster consumer demand, with rising unemployment crimping incomes.
"The economy has not turned up but it will turn up ... I just don't know when," Buffett said.
"It could be tomorrow," he added.
He said the Obama administration was "making progress with TARP and may end up making a profit. It certainly won't be a disaster."
Some of the largest U.S. banks will remain in the government's financial bailout program for months, as officials do not expect to grant the next wave of exit approvals until near the end of the year, according to a source familiar with the matter.
Ten banks received approvals in June to repay $68 billion in federal bailout funds, but there have been few clues about when the other large banks would be allowed to exit the program.
Banks such as Citigroup Inc and Bank of America Corp have been chafing under the government's reins and want out of the program, which delivered capital infusions to banks along with limits on pay, share repurchases and dividends.
"The banks want to get out of TARP ... they will all get out of TARP," Buffett said, adding that the time frame for exiting the program "is not a crucial

Nokia, on a Linux-based operating system

HELSINKI (Reuters) - Intel has slashed the power consumption of its new "Moorestown" chip platforms for mobile devices, a big boost for its efforts to grab a slice of a booming market for chips in cell phones and other consumer electronics.
Anand Chandrasekher, a senior vice president at Intel and general manager for the ultra mobility group, also said the company is open to joining forces with the world's largest cell phone maker, Nokia, on a Linux-based operating system.
Analysts have previously said Intel's chip-and-chipset platforms will be too power-hungry for portable consumer electronics and cell phones, when compared with rival platforms based on ARM Holdings Plc architecture.
But Chandrasekher told Reuters the company has almost kicked the problem.
Battery life -- hurt most by large screens and powerful processors -- is one of the most crucial metrics in the phone industry. Last month, a senior Nokia executive said ARM is today "miles and miles" ahead of Intel on energy management.
"We're gonna be very close and almost match," Chandrasekher said of the power consumption of Intel's Atom-based "Moorestown" platform.
He said Intel's average power usage is improving as the company has been able to sharply cut the amount of power the chip uses, and have it idle between tasks.
"This is really their first foray into mobile and smartphones. This is the scouting party if you will," said Real World Technologies analyst David Kanter.
"Their 32 nanometer process is really going to make some quite compelling products for cell phones."
Intel's next mobile platform, codenamed "Moorestown" and due out in 2010, is based on a 45 nanometer Atom chip. Its 32 nanometer Atom-based mobile platform, codenamed "Medfield," is due out in 2011.
Chandrasekher said the Moorestown platform should also help to boost Intel's position in the market for mobile Internet devices, or "MIDs."
MIDs -- an emerging segment with devices envisioned as being larger than smartphones but smaller than netbooks -- provide an inexpensive way to get online to watch videos, send instant messages, email and use a variety of applications without having to peck at the tiny keys on a smartphone or cart around a PC.
"This market is very large. There is a vacuum here. When we come to mid-next decade, it's a 400 million to 500 million unit category," Chandrasekher said.
This year, Intel unveiled a deal with Korea's LG Electronics on developing a MID based on "Moorestown" and Linux-based Moblin 2.0 software.
In June, Intel unveiled a technology partnership with Nokia on mobile devices and analysts had said the deal gave Intel a chance to take on leading cellphone chip makers Qualcomm Inc and Texas Instruments Inc, a big Nokia supplier.

Clear and convincing evidence of fraud

KABUL (Reuters) - As many as a third of votes cast for Afghan incumbent Hamid Karzai in last month's presidential election are suspect and must be checked for fraud, the head of a European Union election observer mission said on Wednesday.
The announcement by the largest foreign observer team in Afghanistan suggesting fraud on a massive scale came hours before authorities were due to issue a preliminary final tally expected to show Karzai with enough votes to win in a single round.
The fraud accusations have come at a particularly difficult time for U.S. President Barack Obama, who has already ordered thousands of additional troops to Afghanistan and is expected to make a decision in coming weeks about whether to send more.
The war is already becoming increasingly unpopular at home, and Obama may find it more difficult to persuade Americans to send soldiers to die to defend a government whose legitimacy could be called into question.
The preliminary final result can still be overturned by a separate body, the U.N.-backed Electoral Complaints Commission, which has already ordered a recount of 10 percent of polling stations after finding "clear and convincing evidence of fraud."
Phillippe Morillon, head of the EU observer team, told Reuters his team believed 1.5 million votes were suspicious, including 1.1 million cast for Karzai and 300,000 cast for his main rival, former foreign minister Abdullah Abdullah.
In near-complete figures issued last week, Karzai had slightly more than 3 million votes, or 54.3 percent of the 5.54 million valid votes counted.
"UNSCRUPULOUS"
Were all the votes described by Morillon as "suspicious" to be removed from that preliminary tally, Karzai would fall just short of the 50 percent needed to win in a single round, and would instead face a run-off against Abdullah.
Morillon said fraud had been carried out by "unscrupulous, overzealous supporters ... from every camp," and that fraudulent ballots needed to be removed from the count before any result could be considered final.
"Any claim for any count or of victory will be premature and not credible," he said.
Four weeks after the election, Afghanistan remains mired in political limbo, with results trickling out as fraud accusations mounted, undermining faith in the vote both in Afghanistan and among Western nations with troops fighting there.
The U.N.-backed ECC must sign off on any final result, and its fraud probe could potentially force a second round if it invalidates enough ballots to put Karzai below the 50 percent threshold needed to win in a single round and avoid a run-off.
The recount process has only just begun and could take weeks or even months.
A second round, if needed, would have to be held within two weeks of the final result being declared, although there has been some concern that this could be difficult if it is delayed into winter when travel is difficult in

LOW INSTITUTIONAL OWNERSHIP

NEW YORK (Reuters) - Citigroup Inc is slowly regaining favor among institutional investors, a development that could help the U.S. government unload its 34 percent stake in the still-troubled bank.
A series of bailouts has put taxpayers on the hook for tens of billions of dollars of potential losses, but left Citigroup with some of the strongest capital ratios in banking.
Citigroup may also have suffered many of the steepest losses it faced in its consumer loan and lease portfolio. The government is covering some potential losses on the bank's most toxic assets, and Citigroup shares trade at a lower valuation than many of its competitors.
That seems to be translating to investor demand. Citigroup shares have more than quadrupled since early March, closing Tuesday at $4.12.
Even hedge fund manager John Paulson, who famously shorted banks and brokers going into the financial crisis, has been buying the bank's shares, a source familiar with the matter said.
Three other fund managers who long shunned the stock said they may start buying. They requested anonymity because they do not want to disclose investment positions they have not taken.
"If you've got a one-to-two year time horizon, the stock could trade into the teens," said Marshall Front, chairman of Front Barnett Associates in Chicago, who also bought Citigroup stock recently. "The possible reward looks good compared to the risk."
In the near term, there are risks.
The bank has been profitable in each of the last two quarters because of one-time gains and accounting items, but has not posted a quarterly profit from its main operations since 2007.
There is also the risk of the government selling a large number of shares into the market. Concerns about such a sale drove Citi shares down 8.85 percent on Tuesday.
LOW INSTITUTIONAL OWNERSHIP
Sources told Reuters the bank is talking to the government about how the U.S. should shed its 7.7 billion Citi shares.
The bank may sell another $5 billion of shares to raise funds to start buying back about $27 billion of other Citi securities that the government owns, the sources said. Those securities, known as trust preferreds, are a hybrid of stocks and bonds. These sources requested anonymity because the talks are private.
But demand for Citi shares may be larger than naysayers fear.
The government's holdings are not outrageously large compared to the nearly 1 billion Citi shares that have traded daily on average over the last month, according to a report from Sandler O'Neill & Partners LP.

The world economy is indeed recovering

PARIS (Reuters) - The economic downturn will likely cost as many as 25 million people their jobs by end-2010 as the unemployment rate nears a record 10 percent in the OECD group of countries, according to a report released on Wednesday.
The Organization for Economic Co-operation and Development said 15 million jobs were lost between end-2007 and July 2009 and 10 million more could go by the end of next year despite signs the economy is picking up.
"A major risk is that much of this large hike in unemployment becomes structural in nature," the report said.
"The world economy is indeed recovering. We've thrown trillions and trillions and trillions at it and of course we're seeing results," OECD Secretary General Angel Gurria said.
"(But) employment is the bottom line of the current crisis. We cannot claim victory because we see economic indicators going up. We should not assume that (renewed GDP) growth will take care of this," he told a news conference.
The OECD-wide unemployment rate has already hit the highest on records going back to World War Two, surging to 8.3 percent by June 2009 from 5.6 percent at the end of 2007, the annual report from the Paris-based OECD said.
The latest aggregate readout, for July, is 8.5 percent.
Spain, Ireland and the United States were worst hit, with unemployment rates rising by 9.7 percentage points, 7.8 percentage points and 4.5 percentage points respectively between the start of 2007 and mid-2009, it said.
"The labor market outlook would be even worse if governments has not pursued expansionary monetary and fiscal policy," said the OECD, estimating that government spending on anti-recession projects will raise total employment next year by about 0.8-1.4 percent more than would otherwise have happened.
This downturn is destroying considerably more jobs than other recessions since the early 1970s, the report says.
Most of the world's high-income countries and a few others are members of the OECD but others such as China and India are not.

The risk of inflation remained low as the economy

WASHINGTON (Reuters) - U.S. consumer prices rose in August from July on a spike in gasoline costs, the Labor Department said on Wednesday, but the underlying trend pointed to muted inflation pressures.
Analysts said the risk of inflation remained low as the economy crawled out of its worst recession in 70 years.
The Consumer Price Index rose 0.4 percent last month after having been flat in July, a touch above market expectations for a 0.3 percent gain.
Gasoline prices surged 9.1 percent after falling 0.8 percent in July. Compared to the same period last year, consumer prices declined 1.5 percent. Prices have been falling on an annual basis since March this year.
"We're in the part of the economic cycle where inflation is not an imminent concern, not to say there won't be long-term issues with the Fed's balance sheet," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.
U.S. stock index futures remained higher after the data, while Treasury debt prices trimmed gains.
Stripping out volatile energy and food prices, the closely watched core measure of consumer inflation rose 0.1 percent in August after rising 0.1 percent in July.
This was as prices for new vehicles fell 1.3 percent, the largest decline since October 1972, reflecting government-sponsored incentives that gave discounts to consumers to trade in their old gas-guzzling cars for new, fuel-efficient ones. The Labor Department said the program that ended in August could potentially impact CPI into September.
Markets had expected core CPI to rise 0.1 percent last month. Compared to August last year, the core inflation rate rose 1.4 percent, the smallest rise since February 2004, after increasing 1.5 percent in July.
Analysts are closely watching consumer prices for signs of inflation pressures in the wake of massive efforts by the government and the Federal Reserve to rescue the economy from the worst recession since the Great Depression of the 1930s.
Government data on Tuesday showed a jump in producer prices in August as energy costs soared, but analysts reckon labor market slack and weak domestic consumption will keep price pressures in check for a while.
A report from the Commerce Department showed the U.S. current account shrank in the second quarter to $98.8 billion, the smallest deficit since the fourth quarter of 2001.
The deficit contracted from an upwardly revised $104.5 billion in the first quarter and compared with analysts' forecast for a second-quarter gap of $92.0 billion.
Separately, demand for U.S. home loans fell last week as fixed mortgage rates rose in the holiday-shortened week, the Mortgage Bankers Association said.
Total applications were, however, at one of the highest levels seen since early June, with borrowers still eager to take advantage of the government's first-time home buyer tax credit incentive before the program expires at the end of November.
(Reporting by Lucia Mutikani; Additional reporting by Doug Palmer in Washington and Lynn Adler in New York; Editing by Andrea Ricci)