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For the first time in history, the U.S. Environmental Protection Agency is proposing special water quality standards that would apply to only one state – Florida.

The EPA, responding partly to a lawsuit, plans a series of limits on phosphorus and nitrogen – nutrients that come from fertilizer and wastewater – for Florida waters that are different from the rest of the U.S.

A news release from the agency said the new limits are “to protect people’s health, aquatic life and the long-term recreational uses of Florida’s waters, which are a critical part of the state’s economy.”

But, one group already is slamming the proposal as a costly burden for the state. The Don’t Tax Florida Coalition, made up mostly of agricultural interests, sent out a news release, calling the proposed standards “a de facto water tax from Washington that will impose major economic hardship on Florida’s battered economy, with questionable benefits to our environment.”

The coalition said one study estimates a $50 billion infrastructure bill to comply with the standards, which will result in higher water bills.

“It simply makes no sense to force Florida to spend billions of scarce dollars in excess of what is necessary to meet an arbitrary federal regulation,” said Mark Wilson, president and CEO of the Florida Chamber of Commerce, in the coalition’s news release.

The new proposal is the result of a 2009 consent decree between the EPA and Florida Wildlife Federation.

According to the EPA, nutrient pollution can damage drinking water sources; increase exposure to harmful algal blooms, which are made of toxic microbes that can cause damage to the nervous system or even death; and form byproducts in drinking water from disinfection chemicals, some of which have been linked with serious illnesses, such as bladder cancer.

The EPA also said nutrient problems can happen locally or much farther downstream, leading to degraded lakes, reservoirs and estuaries, and to hypoxic “dead” zones where aquatic life can no longer survive short term personal loans. High amounts of nitrogen and phosphorus in surface water result in harmful algal blooms, dead fish, reduced mating grounds and nursery habitats for fish.

“Florida has led the way with rigorous scientific analysis and data collection needed to address nutrient pollution. By relying on the best science, we can set standards that protect people’s health and preserve water bodies used for drinking, swimming, fishing and tourism,” said Peter S. Silva, assistant administrator for EPA’s Office of Water, in a release. “New water quality standards, developed in collaboration with the state, will help protect and restore inland waters that are a critical part of Florida's history, culture and economic prosperity.”

A 2008 Florida Department of Environmental Protection report assessing water quality revealed that about 1,000 miles of rivers and streams, 350,000 acres of lakes and 900 square miles of estuaries are not meeting the state's water quality standards because of excess nutrients. These represent about 16 percent of Florida’s assessed river and stream miles, 36 percent of assessed lake acres and 25 percent of assessed estuary square miles. The actual number of miles and acres of waters impaired for nutrients is likely higher, as there are waters that have not yet been assessed.

The proposed action, announced Friday, also seeks comment on a new regulatory process for setting standards to drive water quality improvements in already impaired waters. The proposed new regulatory provision, called restoration standards, would be specific to nutrients in Florida.

The EPA will accept public comments on the proposed standards and will conduct three public hearings on the proposed rule. The hearings are scheduled for Feb. 16, 17 and 18 in Tallahassee, Orlando and West Palm Beach, respectively.

The West Palm Beach hearing will be 1-5 p.m. and 7-10 p.m., at the Holiday Inn Palm Beach International Airport, at 1301 Belvedere Road.

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China on Monday made a fresh, thinly veiled criticism of the United States for running lax monetary and fiscal policies that risk undermining the dollar.

Countries whose currencies are held as reserves by global central banks are failing to take sufficient account of the global repercussions of their domestic policy stances, Assistant Finance Minister Zhu Guangyao told a financial forum.

“We call upon major reserve-issuing countries to take responsible monetary policies,” Zhu, who was speaking in English, said.

China holds an estimated two-thirds of its $2.27 trillion in foreign exchange reserves in dollar-denominated assets, and Premier Wen Jiabao urged the United States in March to safeguard the value of China’s holdings.

Zhu, who did not mention the United States by name, was speaking on the first full day of U.S. President Barack Obama’s visit to China.

China’s top banking regulator, Liu Mingkang, leveled unusually frank criticism at the Federal Reserve on Sunday, describing the U.S. central bank’s pledge to hold down borrowing costs and the weak dollar as a “new systemic risk.”

Zhu did not touch on the main U.S. complaint about China’s policy stance — its firm belief that the yuan is undervalued.

(Reporting by Alan Wheatley; Editing by Jonathan Hopfner)

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Financial regulators on Wednesday told Switzerland’s biggest banks and insurers to defer the bulk of their managers’ bonuses and better match pay against performance under new rules aimed at curbing risky investing.

The new rules, to come into force on January 1, 2010, placed Switzerland in a growing group of countries moving the focus of compensation away from a short-term culture blamed for the financial crisis toward longer-term sustainable profitability.

“Remuneration schemes can create false incentives which may lead to inappropriate risks being entered into, threatening the business and profitability of a financial institution and, at the end of the day, its stability,” regulator FINMA said.

FINMA said there would be no cap on executive bonuses and that the new system would apply to the country’s seven largest banks and five biggest insurers. It did not name them.

The Swiss regulator also said it would welcome the introduction of clawbacks on bonuses when performance was poor, such as was already the case with the country’s top two banks UBS and Credit Suisse.

Responding to criticism from the financial industry, FINMA said the rules were compulsory only for firms with at least 2 billion Swiss francs ($1.98 billion) in equity capital or as solvency.

Analysts said base salaries, stuck for years at large Swiss banks, would rise as the importance of bonuses diminishes. This would limit the flexibility the banks have enjoyed until now and also change the way firms spread compensation costs over time as payouts are made more in cash than shares.

The new rules are expected to apply to UBS, Credit Suisse and also large insurers such as Swiss Life, Swiss Re and Zurich Financial Services, analysts said payday cash advances.

GLOBAL TREND

Leaders from the Group of 20 nations adopted guidelines on curbing bonuses at a meeting in Pittsburgh in September after countries like Germany, Britain and France had already started to take regulatory action to curb excessive bonuses.

“There is a lot of pressure to do something on the compensation front,” said Andreas Venditti, a banking analyst at ZKB. “Different countries are all trying to introduce some new rules. At first sight, the Swiss rules appear to be consistent with international guidelines.”

Credit Suisse last month unveiled a new compensation scheme that it said would fully comply with new G20 standards.

UBS, which received state aid to overcome the subprime crisis last year, has said in an internal memo seen by Reuters it also plans to change its compensation structure. Hefty bonuses and salaries at UBS caused public outcry in Switzerland, leading former chief Marcel Ospel and other ex-board members to return 33 million Swiss francs ($32.71 million) in payments.

UBS was also sharply criticized earlier this year for increasing bankers’ pay. Newly-appointed new Chief Executive Oswald Gruebel said the bank had to pay market level salaries to retain stuff.

(Editing by David Cowell)

($1=1.009 Swiss Franc)

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German investor confidence unexpectedly declined for the first time in three months in October amid concerns that the pace of the nascent recovery in Europe’s largest economy may ease.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months ahead, dropped to 56 from 57.7 in September. Economists had forecast an increase to 58.8, the median of 36 forecasts in a Bloomberg News survey showed.

Germany’s benchmark DAX index has surged around 57 percent since early March as the economy pulled out of the worst recession since World War II. While growth probably accelerated in the third quarter, according to the Bundesbank, the pace of the recovery may be tempered by rising unemployment, the fading of stimulus measures and the euro’s increase against the dollar.

“Enthusiasm is now gradually giving way to realism and the German economy is about to enter calmer waters,” said Carsten Brzeski, an economist at ING Groep in Brussels. Today’s reading is “no reason to fall back into depression.”

ZEW’s gauge of the current economic situation fell to minus 72.2 from minus 74 in September.

The euro pared its gains after the report and was up 0.1 percent to $1.4792 as of 10:43 a.m. in London, having earlier risen to $1.4804. Bonds were little changed, with the yield on the 10-year German bund at 3.17 percent.

‘Too Much’

The performance of the DAX has been matched across Europe, where the Dow Jones Euro Stoxx 50 has risen around 60 percent since early March. In the U.S., the S&P 500 has surged 59 percent.

The stock-market gains may reverse if the recovery isn’t sustained. Nouriel Roubini, the New York University professor who predicted the financial crisis, on Oct. 3 said that markets have “gone up too much, too soon, too fast.”

“Analysts have given the recovery an early round of applause, which the economy has to live up to now,” said Andreas Scheuerle, an economist at DekaBank in Frankfurt who correctly forecast the ZEW reading bad credit pay day loans. “The recovery is still a fragile little plant but overall, it’s doing well.”

Economic Support

Germany’s economy probably expanded around 0.75 percent in the third quarter from the second, when it grew 0.3 percent, Bundesbank President Axel Weber said Oct. 3. Still, the recovery “continues to rely on support from fiscal and monetary policies, and that shouldn’t be withdrawn too quickly,” Weber said.

The government is spending 85 billion euros ($125 billion) to revive growth, including a 2,500-euro payment for people who scrap an old car to buy a new one. The 5-billion-euro car- purchase fund ran dry last month. The Bundesbank projects unemployment will rise to 10.5 percent in 2010 from 8.2 percent in September.

The euro-area economy is also facing rising unemployment and a “bumpy” recovery, European Central Bank President Jean- Claude Trichet said on Oct. 9.

In addition to joblessness, the euro’s appreciation against the dollar may hinder the recovery by eroding export competitiveness. Aurelio Maccario, chief euro-area economist at UniCredit Group in Milan, estimates that the euro’s 2 percent appreciation in trade-weighted terms since the start of the third quarter is enough to shave 0.2 percentage points off euro- area growth through 2010.

“We’ve had quite a remarkable summer with catch-up processes that boosted economic activity,” said Laurent Bilke, an economist at Nomura in London. “Now we expect a normalization and a come-back toward the underlying trend, which is obviously lower. But it won’t be a relapse.”

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German business confidence rose to a 12-month high in September, indicating Europe’s largest economy will gather strength after exiting its worst recession since World War II.

The Ifo institute in Munich said today its business climate index, based on a survey of 7,000 executives, rose to 91.3 from 90.5 in August. That’s the highest reading since September last year. Economists expected a gain to 92, the median of 40 forecasts in a Bloomberg News survey showed. The index reached a 26-year low of 82.2 in March.

“There are more positive impulses for the economy,” said Stefan Muetze, an economist at Helaba in Frankfurt. “Inventory rebuilding has started and, combined with investment and improving exports, that will drive things in the third and fourth quarters.”

The confidence report comes as Chancellor Angela Merkel enters the final leg of her re-election campaign. The government’s “cash-for-clunkers” program and improving global trade helped the economy expand 0.3 percent in the second quarter from the first. While the Bundesbank predicts a “strong pickup” in the third quarter, the recovery could falter when stimulus measures expire and as unemployment rises.

Election Looms

Merkel, who leads opinion polls for the Sept. 27 election, has approved spending of about 85 billion euros ($126 billion) to rekindle growth. The measures include tax breaks, infrastructure investment, and a 2,500-euro payment to people who scrap an old car and buy a new one. The car-scrappage fund ran dry earlier this month.

Ifo’s gauge of the current situation rose to 87 from 86.2, while an index of executives’ expectations advanced to 95.7 from 95, the institute said.

“Expectations have run so far ahead of current conditions that it makes me pause for thought as to whether this is sustainable,” said David Milleker, chief economist at Union Investment in Frankfurt. “Germany is very dependent on exports to euro-area countries, and there are structural problems in Spain and elsewhere.”

The Spanish and Irish economies will contract 0.9 percent and 1.5 percent respectively in 2010, according to the Organization for Economic Cooperation and Development.

By contrast, Germany’s will grow 1.5 percent next year after contracting about 4.5 percent in 2009, the IW economic institute in Cologne forecast on Sept. 21.

German investor confidence rose to the highest level in more than three years in September, and the benchmark DAX share index has rebounded more than 50 percent from its March trough.

“We do see light at the end of the tunnel, there are more and more signs that the economy is improving,” HeidelbergCement AG Chief Executive Officer Bernd Scheifele said in an interview on Sept. 22. The cement maker, which this week raised 2.25 billion euros selling new shares, will benefit “noticeably” from the government’s stimulus programs, Scheifele added.

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Home sales and orders for long- lasting goods probably rose in August, extending gains that have signaled the U.S. is emerging from the worst recession since the 1930s, economists said before reports this week.

Purchases of new and existing houses climbed to a combined 5.79 million annual pace last month, the most in almost two years, according to the median forecast of economists surveyed by Bloomberg News. Bookings for durable goods likely rose 0.4 percent, the fourth advance in five months, the survey showed.

Housing and manufacturing, two areas that deepened the slump, are stabilizing as stimulus measures such as credits to first-time homebuyers and “cash for clunkers” revive demand. While acknowledging the economy is healing, analysts project Ben S. Bernanke and his colleagues at the Federal Reserve will commit to keeping interest rates low when they meet this week.

“We are coming out of recession and we are in the early stage of a very fragile recovery,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “It’s an infant recovery that needs a lot of care and nurturing, and that means no rate hikes from the Fed.”

Bernanke, the Fed’s chairman, last week said the recession “is very likely over.” The central bank will maintain the benchmark interest rate near zero at least through the middle of next year, according to the median estimate of economists surveyed earlier this month. The policy-making Federal Open Market Committee’s announcement is due Sept. 23.

Fifth Gain

Existing-home sales, which make up more than 90 percent of the market, probably rose 2.1 percent to a 5.35 million unit pace, a fifth consecutive gain, economists forecast before the Sept. 24 report from the National Association of Realtors. As of July, purchases were down 28 percent from the record reached in September 2005.

Data on new houses, due the following day from the Commerce Department, will probably show sales rose 1.6 percent to a 440,000 rate, according to the survey median. They reached a record-low rate of 329,000 in January instant payday loan.

The Obama administration’s $8,000 tax credit for first- time buyers, combined with the plunge in prices as foreclosures climbed, have helped lift sales this year, prompting builders such as Toll Brothers Inc. to get back to work.

Housing starts rose to a nine-month high in August, the Commerce Department reported last week, indicating residential constriction may soon add to growth after subtracting from gross domestic product since 2006.

Builder Shares

The Standard & Poor’s Homebuilder Supercomposite is up 40 percent so far this year, compared with an 18 percent gain for the broader S&P 500. The S&P 500 rose 2.6 percent last week, the best weekly performance in almost two months.

Just as the first-time buyer credit is boosting home demand, the government’s $3 billion cash-for-clunkers incentive to trade in gas-guzzlers for more fuel-efficient vehicles boosted auto sales and production last month.

The projected gain in orders for goods meant to last several years would follow a 5.1 percent surge in July that was the biggest gain in two years. Excluding transportation equipment such as cars and aircraft, orders probably rose 1 percent, economists forecast the Commerce Department will report on Sept. 25.

Carmakers including General Motors Co. and Ford Motor Co. are planning to keep boosting output through the second half of 2009 to rebuild depleted inventories.

More Production

Dealers are “looking for us to take up production,” Mark LaNeve, chief of North America sales at GM, said on a conference call Sept. 1. “We’re continuing to look for ways to squeeze out some more production.”

In another sign the economy is recovering, the index of leading economic indicators probably rose in August for a fifth consecutive month, economists forecast the Conference Board will report tomorrow. The increases mark the gauge’s best performance since 2004.

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Global leaders meeting at the Group of 20 summit in Pittsburgh next week are moving toward a compromise on compensation rules that fall short of the political rhetoric branding banker pay a worldwide disgrace.

Pay caps, once pushed by French President Nicolas Sarkozy, were excluded from recommendations made by finance officials this month. European leaders now may be willing to endorse linking bonuses to a bank’s capital level, moving closer to a U.S. position that avoids specific limits.

“It’s a way of getting both sides to the same place,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics in Washington and former International Monetary Fund economist. “The Germans and French are taking a firm stance that we need concrete steps. The U.S. wants higher capital levels, and if this is necessary to get higher capital, they can sign onto it.”

Europe’s leaders have been assailing bankers and their pay while President Barack Obama says setting a specific limit is impractical. Sarkozy, who vowed last month to block banks from state business unless pay is capped, may be open to compromise, a French official said yesterday. European Union leaders Sept. 17 agreed to tie bonuses to bank performance and said guaranteed pay should be avoided. French Finance Minister Christine Lagarde in July called such bonuses an “absolute disgrace.”

Obama, Sarkozy, U.K. Prime Minister Gordon Brown and Chinese President Hu Jintao, meeting in Pittsburgh Sept. 24-25, will discuss proposals for banks to retain more assets in economic expansions and satisfy a leverage ratio, which measures equity as a proportion of total assets. They will consider how to sustain the recovery, avoid protectionism and improve accounting rules.

‘Excessive Risk-Taking’

“There is consensus on a set of principles for compensation that discourage excessive risk-taking and tie compensation to a firm’s long-term performance,” said Daniel Price, who organized a G-20 summit in Washington in November for President George W. Bush and is now a partner at law firm Sidley Austin LLP in Washington.

The principles include paying a higher percentage of compensation in stock, requiring that bonuses are paid over time and be subject to so-called clawbacks if a company’s performance worsens, and eliminating multiyear pay guarantees, Price said.

With a concentration of financial firms in New York and London, the U.S. and U.K. “don’t want to do anything that would make firms migrate out,” Goldstein said.

Executive pay came under scrutiny after the U.S. bailed out financial institutions amid the global crisis last year. Lawmaker outrage over pay reignited in July when New York-based Goldman Sachs Group Inc. set aside a record $11.4 billion for compensation and benefits in the first half of this year.

‘Set of Rules’

“It’s hard for the U.S. to say we don’t agree with what you’re trying to do because I think politically that would look bad,” said Mark Borges, a principal at Compensia Inc., a Corte Madera, California-based compensation consultant. “The U.S. might say they’re willing to sign on to the principles the G-20 is trying to establish, but when it comes to implementing those principles we have our own set of rules.”

U.S. bank employees at 28 of the largest holding companies may face curbs on their pay under proposals being considered by the Federal Reserve. The plan is at the core of the Obama administration plan to let the Fed monitor risks to the financial system, according to people familiar with the matter.

European leaders have been outspoken on pay remedies since the onset of the financial crisis.

‘Bubble Burst’

“The bonus bubble burst tonight,” Swedish Prime Minister Fredrik Reinfeldt said Sept. 17 after the European Union agreed that the G-20 should adopt binding rules on bonuses backed by the threat of sanctions.

Linking bonuses to bank capital might be the way to curb compensation, said Sarkozy, who has softened his rhetoric as the summit approaches.

“The idea of raising capital requirements in proportion with speculative activities, which are generating these so- shocking bonuses, seems a more efficient capping method,” he said after the EU meeting.

Mario Draghi, chairman of the Financial Stability Board, a group of bank regulators asked by the G-20 for proposals before the summit, said Sept. 14 that regulators are within their rights to limit banker bonuses and salaries.

“It used to be they were told it was a private contract,” said Draghi, governor of the Bank of Italy. “It’s now quite clear that when compensation is not aligned with risk-taking incentives, regulators have the right to have their say.”

U.S. officials, including Obama, advocate policies that focus on practices rather than setting specific pay ceilings.

‘Best Check’

Shareholders are the “best check” on pay practices, and government shouldn’t dictate standards when firms avoid taking taxpayer funding, Obama told Bloomberg News on Sept. 14. “You have to start asking yourself: ‘Well, why is it that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or NFL football players?’”

The rhetoric reflects “a philosophical difference between the way Europe considers markets and how the U.S. considers markets,” said Paul Hodgson, a senior research associate on compensation at the Corporate Library in Portland, Maine.

The summit presents an opportunity to push through changes that may become increasingly difficult to make, Hodgson said. “As the economy begins to recover and banks start to make money, the strength of the position that things need to change weakens,” he said.

Kenneth Feinberg, Obama’s “special master” on executive pay, is to rule this year on pay proposals from New York-based Citigroup Inc., Bank of America Corp. in Charlotte, North Carolina, and five other companies that received U.S. aid more than once in the past year.

The House in July passed a bill letting regulators ban Wall Street incentive pay that encourages excessive risk-taking. The bill authorizes bank agencies and the Securities and Exchange Commission to bar practices that threaten the sustainability of financial companies and “could have serious adverse effects on economic conditions.” The bill may fail in the Senate, which has been reluctant to expand government’s role on compensation.

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The Federal Reserve said 11 of its 12 regional banks reported signs of a stable or improving economy in July and August, adding anecdotal evidence that the worst U.S. recession in seven decades is over.

Five districts, including San Francisco, home to the biggest regional economy, “mentioned signs of improvement,” the Fed said today in its Beige Book business survey, published two weeks before officials meet to set monetary policy. The exception was the St. Louis district, which said the contraction’s pace “appeared to be moderating.”

The central bank survey indicates that while the worst of the downturn may be past, the economy has yet to show broader growth. The Fed reported “flat” retail sales and “weak” labor markets, and cited some auto-industry contacts as saying the sales increases from government “cash-for-clunkers” subsidies may be temporary.

“We are slowly on the road to recovery,” former Fed Governor Robert Heller said in an interview with Bloomberg Television. The Beige Book “confirms that we have turned the corner,” he said.

The Standard & Poor’s 500 Index increased 0.5 percent to 1,030.20 at 2:40 p.m. in New York after rising as much as 1.1 percent.

The outlook among many business contacts was “cautiously positive,” the Fed said. “Loan demand was described as weak, and many districts reported that credit standards remained tight.”

Phase Out

The Fed report reflects information collected through Aug. 31 and summarized by staffers at the Atlanta Fed. The Federal Open Market Committee next meets in Washington Sept. 22-23. At their prior meeting in August, officials decided to phase out their $300 billion Treasuries-purchase program through the end of October, extending buying by one month, and considered a similar move for the $1.45 trillion program to buy housing debt.

The Fed lowered its main interest rate almost to zero in December while switching to asset purchases and credit programs as its main policy tools. Investors expect the central bank to begin raising rates next year, according to trading in futures contracts.

Gross domestic product shrank at a 1 percent annual rate from April to June, following a 6.4 percent pace of contraction in the first three months of the year.

Chicago Fed President Charles Evans said in remarks in New York today that the economic recovery is “beginning to start” and he expects growth of 2 free credit report.5 percent to 3 percent over the next 18 months. At the same time, the jobless rate will rise, peaking at a “little over 10 percent” and staying “high for an uncomfortable period of time.”

Low Levels

A chief exception to the Beige Book’s reports of stabilization was the market for commercial real estate. Demand for space “remained weak,” and construction, already at “very low levels,” kept declining in all districts, the Fed said.

Fed officials expressed concern about the commercial property market at last month’s policy meeting. “Several participants noted that banks still faced a sizable risk of additional credit losses and that many small and medium-sized banks were vulnerable to deteriorating performance of commercial real estate loans,” minutes of the session said.

The residential housing market, by contrast, “remained weak” while showing “signs of improvement,” including higher sales in some areas, the Fed said. Pending sales of existing homes rose more than forecast in July, according to a report last week.

‘Cautiously Optimistic’

Manufacturing showed “modest improvements” in most regions, the Fed said today. Companies were “cautiously optimistic,” with New York among three districts reporting that contacts “expect modest growth later this year or early 2010.”

A recent report showed that in August, manufacturing expanded in the U.S. for the first time in 19 months.

Capacity utilization, the proportion of factory volume in use, remains near its historic low. It rose in July to 68.5 percent from 68.1 percent in June, its lowest level since record-keeping began in 1967.

The labor market “remained weak across all districts,” while some regions reported an “uptick in temporary hiring and a decline in the pace of layoffs,” the Fed said.

That reflects last week’s Labor Department report that employers cut payrolls by 216,000 in August, after a 276,000 drop in July. The jobless rate, at 9.7 percent, is the highest since June 1983, when it registered 10.1 percent. The so-called underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — reached a record 16.8 percent.

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The U.S. trade deficit was probably little changed in July as imports and exports both grew, signaling a revival of commerce as the global slump eased, economists said before reports this week.

The gap between imports and exports increased 1.5 percent to $27.4 billion from $27 billion the prior month, according to the median of 63 estimates in a Bloomberg News survey ahead of the Commerce Department’s Sept. 10 report. Labor Department data released the next day may show the cost of imports rose in August for the fifth time in six months on higher fuel prices.

Rising demand for U.S.-made goods from trading partners such as China, Mexico and the European Union is combining with domestic stimulus measures to help to pull the economy out of a recession. Finance chiefs from the Group of 20 nations meeting in London last week vowed to sustain efforts to boost the global economy.

“Importers and exporters alike had the wind taken out of their sails last year and are only just now starting to pick up the breeze of recovery,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. In New York.

The U.S. trade gap may have widened again last month as the “cash-for-clunkers” program sparked a surge in purchases of vehicles made overseas. Rising oil prices probably also added to the cost of imports. With economists predicting the U.S. economy will grow at an average 2.1 percent rate in the second half of this year, imports will probably climb further.

The $26 billion trade deficit in May was the smallest since November 1999.

Import Prices

Import prices probably rose 1 percent in August from the prior month, led by oil and other commodities, economists surveyed by Bloomberg forecast a Labor Department will report on Sept. 11. From a year earlier, import prices probably fell 16 percent, according to the survey.

With demand picking up, crude oil on the New York Mercantile Exchange averaged $71.14 a barrel in August, up from $64.29 in July and an average $69.70 in June.

Alcoa Inc., the largest U.S. aluminum producer, is among companies profiting from rising demand for commodities. Alcoa last week raised its 2009 forecast for global aluminum consumption because of demand triggered by China’s 4 trillion yuan ($590 billion) in stimulus spending cash advance america.

Chief Executive Officer Klaus Kleinfeld said he expects China’s consumption of the metal to rise 4 percent this year, compared with an earlier prediction of zero growth.

China ‘Back’

“China is back,” Kleinfeld said in an interview. “They had a lot of shovel-ready projects” planned for 2011 that are being started now in response to the global economic slowdown. “Also, the perceived deficiencies in the social network have been improved with the stimulus program, and that directly leads to people looking to upgrade from motorcycles to cars.” shocks.”

The Paris-based Organization for Economic Cooperation and Development cut its estimate for contraction this year in the world’s leading industrialized countries to 3.7 percent from 4.1 percent, while predicting a “modest” return to growth.

U.K. Prime Minister Gordon Brown yesterday warned against a premature end of emergency spending and rescue programs aimed at pulling the global economy out of its worst slump since the Great Depression.

“It would be an error of historic proportions if we were to repeat the errors of the 1930s,” Brown told Group of 20 finance ministers at the opening of their meeting in London. “The risks still very much remain. To start now reversing the extraordinary measures would be a serious mistake.”

Consumer Confidence

Economists say a gauge of U.S. consumer sentiment is likely to show an increase on prospects for renewed growth. The Reuters/University of Michigan preliminary survey of consumer confidence for this month, to be released on Sept. 11, will rise to 67.5 from 65.7 at the end of August, according to the Bloomberg survey.

U.S. stocks have surged since March on signs the recession is easing. The Standard and Poor’s 500 Index has gained 50 percent from a 12-year low reached on March 9, and the Dow Jones Industrial Average has gained 44 percent. The S&P 500 closed at 1,016.40 Sept. 4 in New York; the Dow closed at 9,441.27

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The pace of U.S. job losses slowed in August while the unemployment rate reached a 26-year high, signaling the recovery from recession will be slow to develop.

Employers cut payrolls by 216,000, fewer than forecast, after a 276,000 drop in July, Labor Department data showed today in Washington. The jobless rate rose to 9.7 percent; the so- called underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — reached a record 16.8 percent.

Today’s figures stoke concern that the recovery forecast to take hold in the second half of the year won’t prompt a turnaround in the job market until 2010. With the ranks of long- term unemployed nearing 5 million, workers are at risk of losing skills, making it even tougher for them to eventually find work.

“The economy is no longer detonating, but we are still losing jobs,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Radio. “It’s going to be a very tough environment for the consumer.”

Stocks fluctuated after the release, and the Standard & Poor’s 500 Index was up 0.3 percent at 1,005.99 as of 11:23 a.m. in New York. Treasuries were lower, with benchmark 10-year notes yielding 3.38 percent from 3.35 percent late yesterday.

Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment this week that it’s “too early” to start exiting from the unprecedented stimulus measures aimed at stabilizing the economy.

Lowering Costs

AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s.

“The labor market lags behind the rest of the economy, so we are first going to have to see positive GDP growth,” Christina Romer, chairman of the White House Council of Economic Advisers, said in a Bloomberg Radio interview. While 9.7 percent unemployment is “a tragedy,” Romer noted that the pace of job losses has slowed from 741,000 in January.

Romer said the Obama administration’s $787 billion fiscal stimulus is working to boost growth and declined to comment on whether a second effort will be needed.

Revisions subtracted 49,000 from payroll figures previously reported for July and June. The drop for July is now calculated at 276,000, compared with the 247,000 previously reported.

Payrolls were forecast to fall 230,000 in August according to the median of 79 economists surveyed by Bloomberg News. The jobless rate was projected to rise to 9.5 percent. Analysts in a monthly Bloomberg survey projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent next year.

Recession’s Toll

The latest numbers brought total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump.

Among the 14.9 million unemployed Americans in August, 4.99 million were out of work for more than 26 weeks. The percentage of jobless who weren’t classified as on temporary layoff rose to 53.9 percent, up from 39.1 percent a year ago business cards.

“Layoffs that we’re having are more structural and not cyclical, and that makes it more difficult to have a meaningful rebound in income growth, which is a key ingredient as I said for sustainable self re-enforcing expansion,” said Tony Crescenzi, a market strategist and portfolio manager at Pacific Investment Management Co., manager of the world’s biggest bond fund.

Breadth of Declines

All major job categories recorded losses in August, with construction payrolls tumbling 65,000, factories cutting another 63,000 and retailers firing 10,000 people.

Whirlpool, the world’s largest appliance maker, is among those firms still eliminating positions. The Benton Harbor, Michigan-based company said Aug. 28 it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs.

Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put 244 more on involuntary leave.

Federal Reserve officials had “particular” concern about the job market when they met Aug. 11-12, minutes of the gathering showed this week.

“Long-term unemployment and permanent separations continued to rise, suggesting possible problems of skill loss and a need for labor reallocation that could slow recovery in employment begins to expand,” the Fed said in the minutes released Sept. 2.

Fed Rate Changes

Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions.

Chairman Ben S. Bernanke, credited with preventing a second depression in winning nomination by President Barack Obama for a second term last month, has overseen a $1.2 trillion expansion of the central bank’s balance sheet to combat the credit crisis.

Today’s report also showed the average work week held at 33.1 hours in August. Average weekly hours worked by production workers remained unchanged from the month before, at 39.8 hours, while overtime also held at 2.9 hours. That brought the average weekly earnings up to $617.32 from $615.33.

“We’re still going to see some months of job cuts,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “There is a whole range of options, like adding shifts or hours, that companies can put in place until it becomes necessary to hire people back.”

Workers’ average hourly wages rose 6 cents, or 0.3 percent, to $18.65 from the prior month. Hourly earnings were 2.6 percent higher than August 2008. Economists surveyed by Bloomberg had forecast a 0.1 percent increase from the prior month and a 2.2 percent gain for the 12-month period.

The U.S. recession “is bottoming out” and the economy is poised for “a slow return,” Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings “positively” this year.

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