The unemployment rate of the eurozone reached 10.8% in February, up from 10.0% a year ago according to EuroStat. Unlike the in United States, the trend is in the wrong direction. The lowest rates were in Germany (5.7%) and the Netherlands (4.9%), as would be expected. Also expected were the horrendous rates in Spain (23.6%) and Greece (21.0%). These two figures were up sharply from a year ago. It remains impossible to believe that the economies of Spain and Greece can recover. It is entirely possible that they will get worse and that gross domestic product will plunge at a more rapid rate than last year. The European Union’s new rescue package, set at more than $1 trillion dollars, is to help bailout countries with debt problems. None of it is meant to go to stimulus — which may be the only hope for the region’s most troubled economies.
Pinnacle Air Bankruptcy
Another airline has filed Chapter 11. This time it is Pinnacle Airlines (NASDAQ: PNCL), a small U.S. carrier. The firm announced that it will continue to operate. Most airlines use the Chapter 11 process to shed debt, fire employees and reset deals with airplane manufacturers. Pinnacle in no exception. In a press release the airline said:
Pinnacle expects to accomplish several key initiatives during the restructuring process to help ensure that it returns to profitability and remains viable over the long term as the regional airline industry continues to contract and transform. These initiatives include restructuring its key operating agreements with Delta Air Lines, winding down its operations with United Airlines, completing the wind-down of its Essential Air Service (EAS) flying with US Airways, achieving cost savings from its workforce, identifying additional opportunities across the organization to reduce costs, and ensuring that it has the appropriate fleet, staffing levels and network to operate profitably on an ongoing basis.
This means most unions, banks and manufacturers that do business with Pinnacle will suffer. Other airlines may have to do the same as Pinnacle and AMR, which declared bankruptcy earlier, as fuel costs rise to unsustainable levels.
Brent Crude Trades Higher
Oil moved higher again after a week of losses. China’s strong PMI figures and concerns about supply were the primary causes as Brent Crude traded near $123. Despite a drop at the end of last quarter, crude prices rose 4.2% for the quarter. Gasoline prices, based on a national average for a gallon of regular, held steady yesterday at an extremely high $3.925. Based on the same calculation, gas was $3.757 a month ago and $3.645 a year ago.
Another round of car recalls is likely, in what has quickly become a year of recalls. The National Highway Traffic Safety Administration has reported fires in engine of the General Motors’ (NYSE: GM) 2011 Chevy Cruz and Chrysler’s 2010 Jeep Wrangler. The announcement came a day after Honda (NYSE: HMC) said it would have to recall 554,000 vehicles to fix possible problems in their headlight wiring. These include certain CR-V compact SUVs from the 2002 through 2004 model years and Pilot large SUVs from 2003. The company said if the low beams of these vehicles stop working, it could cause crashes.
Douglas A. McIntyre