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US new home sales up 2.3 percent in April, 2nd highest in 5 years

AP — Thu, 23 May 2013 07:13:28 -0700

The Commerce Department Thursday said sales of new homes rose in April to the second highest level since the summer of 2008 while the median price for a new home hit a record high, further signs that housing is recovering. (Photo: A for-sale sign in Central Los Angeles); Credit: Christopher Okula/KPCC

Sales of new homes rose in April to the second highest level since the summer of 2008 while the median price for a new home hit a record high, further signs that housing is recovering.

New-home sales rose to a seasonally adjusted annual rate of 454,000 in April, the Commerce Department said Thursday. That was up 2.3 percent from March and just slightly below January's 458,000.

Both January and April had the fastest sales rates since July 2008.

The median price of a home sold in April was $271,600, the highest level on government records going back to 1993. The April price was 8.3 percent higher than in March and 13.1 percent higher than a year ago.

Steady job creation and near-record-low mortgage rates are spurring more Americans to buy homes.

With the April increase, sales are now 29 percent higher than a year ago, but sales are still below the 700,000 level considered healthy by economists.

The strength in April was led by a 10.8 percent rise in sales in the West. Sales in the South were up 3 percent but sales fell 16.7 percent in the Northeast and were down 4.8 percent in the Midwest.

Sales of previously owned homes rose in April to a seasonally adjusted annual rate of 4.97 million, the highest level in 3½ years.

Greater demand, along with a tight supply of available homes for sale, is also boosting prices in most markets and encouraging more construction.

Applications for permits to build homes rose in April to the highest level in nearly five years. While construction of new homes and apartments slipped a bit in April, the drop came one month after construction topped 1 million for the first time since June 2008.

Higher prices tend to make homeowners feel wealthier. That encourages consumers to spend more, which accounts for 70 percent of economic activity.

Federal Reserve Chairman Ben Bernanke cited the revival in housing as a significant benefit of the Fed's super-low interest rate policies.

"Higher prices of houses and other assets, in turn, have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment," Bernanke said in an appearance before the congressional Joint Economic Committee.

Several major homebuilders have reported strong annual increases in orders for the first three months of the year, Ryland Group Inc., said that its orders in April jumped 59 percent from a year earlier.

Though new homes represent only a fraction of the housing market, they have a sizable impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the National Association of Home Builders.

Japan gyrations underline economy's vulnerability

AP — Thu, 23 May 2013 06:27:28 -0700

Japan's financial markets gyrated wildly Thursday.Since taking office in December, Prime Minister Shinzo Abe has raised government spending and promised reforms to make the world's No. 3 economy more competitive. (Toyota cars are displayed on the sales lot at Toyota Marin in San Rafael, California. Photo by Justin Sullivan/Getty Images); Credit: Justin Sullivan/Getty Images

Japan's financial markets gyrated wildly Thursday, underscoring the vulnerability of its economy to a loss of investor confidence as Prime Minister Shinzo Abe attempts shock monetary easing to end two decades of stagnation.

Interest rates, or yields, on 10-year Japanese government bonds briefly topped 1 percent for the first time in a year on Thursday, following news that some U.S. Federal Reserve officials are willing to scale back the American central bank's stimulus efforts as soon as June if the economy perks up.

Thursday's spike, which came despite the Bank of Japan's aggressive efforts to keep borrowing costs down, is unnerving some investors at a time when Japan's already overburdened government finances are vulnerable to rises in interest rates. A sustained rise would push up the cost of borrowing for the government.

"Japan really has a long-term debt problem," said Franklin Allen, a professor at the Wharton School at the University of Pennsylvania. "There will be a financial stability problem" if long-term government bond yields rise to 2.5 percent to 3 percent, he said.

The bond gyrations, along with fresh data showing China's recovery is faltering, led to a 7.3 percent tumble in the benchmark Nikkei 225 stock index, as investors cashed in on recent sharp gains. The Nikkei lost 1,143 to 14,483.98, its worst drop since the March 2011 tsunami disaster.

The Bank of Japan has been grappling with unexpected swings in the government bond market since early April, when its new governor, Haruhiko Kuroda, announced a drastic shift in policy aimed at doubling the amount of cash circulating in Japan's economy. That move should in theory stop yields from rising. The central bank's goal is to attain a 2 percent inflation target within two years, the main tenet of Abe's economic program, dubbed "Abenomics."

"We've never seen this volatility ... that we're seeing today in the Japanese market," said Ken Courtis, a former Goldman Sachs vice chairman and investment banker.

Since taking office in December, Abe has also raised government spending and promised reforms to make the world's No. 3 economy more competitive. Like the Fed, the Bank of Japan is buying massive amounts of government bonds, seeking to keep interest rates low to encourage people and businesses to borrow and spend more.

The government has yet to achieve its aim of breaking out of a deflationary rut of sagging prices that has slowed investment and is thought to be discouraging consumers from spending. Since rising prices would mean money spent now will go further than later, the government hopes to get Japanese to step up spending, especially for big ticket items like cars and houses.

The effort to "reflate" the economy has pushed share prices sharply higher, while the value of Japan's currency has fallen by 25 percent against the U.S. dollar since late last year. The yen was trading at about 101.8 to the dollar on Thursday after briefly passing 103 to the dollar.

Some say the success in boosting stock prices and weakening the yen could sap momentum for difficult economic reforms that are crucial to the success of Abenomics. Abe also wants to carry out political reforms such as changing Japan's constitution which enshrines pacifism.

"The incentive to carry out structural reforms is weakening. There might be a sense that nothing more has to be done," said Shinichi Ichikawa, chief market strategist at Credit Suisse in Tokyo.

"It requires a lot of strength for the prime minister to change the constitution. And of course a lot of power is needed to start the structural reform of the economy. I don't believe that one prime minister can achieve both at the same time."

Whether Abenomics succeeds or fails, Japan's government must ultimately reckon with its years of deficit spending and mountainous debt.

If the central bank revives inflation, it eventually will have to raise interest rates to keep price rises in check. Government debt amounts to over twice the size of the economy and higher rates would vastly increase the government's repayment burden as it continually sells new bonds to finance its deficits.

Paying interest on the government debt already consumes a quarter of government spending, said Courtis.

"What will Japan do," he said, "when interest rates go up and debt servicing starts to swallow the entire budget?"

The level of Japan's debt is higher, relative to its economy, than even some of the crisis-stricken European countries. But because it is mostly owned by domestic investors, especially huge banks and insurance companies, the country's credit rating has remained steady.

But many Japanese financial institutions, especially regional banks and credit cooperatives, would be unable to keep such large holdings of government bonds if the value of those bonds drops too far, Allen said. Individual buyers are likewise seeing their retirement savings evaporate.

The BOJ has pledged to help quell the turbulence in the market. On Thursday, it added an extra 2 trillion yen in liquidity, seeking to counter the jump in bond yields. But the volatility raises questions over how much influence the BOJ wields over the market, despite soaking up about 70 percent of all new bond issuance.

Japan's economy expanded at a faster-than-expected annual pace of 3.5 percent in the last quarter, a development many supporters view as a vindication of Abe's approach. The Bank of Japan ended a two-day policy meeting on Tuesday with no change in policy, saying the economy was "picking up," despite the lack of any change in price trends so far.

Critics contend that keeping interest rates artificially low to encourage borrowing merely encourages companies to waste money and avoid improving their efficiency and competitiveness.

Abe's government needs to produce a convincing program for the reforms needed to sustain growth, and to coax business into raising wages and investment, or face further punishment from investors, said Courtis.

"When people see the economics could be very problematic, in effect, if there's no big structural long-term release of domestic demand, all this really amounts to is a big devaluation," he said. "That's the monetary equivalent of a Pearl Harbor."

Flying out of Los Angeles is cheaper from Long Beach

Brian Watt with Ed Joyce — Wed, 22 May 2013 10:19:44 -0700

A Department of Transportation report shows the Long Beach Airport has the second lowest average domestic airfares in the U.S. at $234. The lowest average fare is $157 at Atlantic City's airport.; Credit: Ed Joyce/KPCC

Thinking of flying away this Memorial Day holiday weekend? It could be cheaper out of Long Beach. Recent rankings from the U.S. Department of Transportation (USDOT) show the Long Beach Airport has the second lowest average domestic airfares in the country.

The USDOT ranked 100 airports by average round-trip fares in the 4th quarter of 2012. But one-way fares were included in some instances.

The average domestic airfare at Long Beach was $234, far below the national average at $374. Only Atlantic City’s airport offered a lower average fare of $157.

“This is a very important number for us, because it actually translates into customer service,” said Long Beach Airport Director Mario Rodriguez.

Rodriguez said the customers breakdown into two groups: air travelers and the airlines that operate at the Long Beach Airport.

“An airline pays less here than in most other airports in California and in the United States,” Rodriguez said. “They pay less for gate space, for ramp space, landing fees. We’re a very efficient operation.”

JetBlue offers the most destinations from the Long Beach Airport (LGB), including Boston, New York and Austin. US Airways, Delta, and Alaska/Horizon also offer flights to Phoenix, Salt Lake City and Seattle.

For travelers, the airport offers a new concourse designed like a high-end resort, complete with wine bars, fire pits, and local restaurant vendors that charge street prices “so you don’t get gouged because you’re a captive audience,” said Rodriguez. He adds a traveler can get from curb to gate in 20 minutes.

The airport website features a video animation and pictures of the terminal modernization project.

Iris Himert, executive vice president of the Long Beach Convention and Visitors Bureau, said the airport’s low fares are a powerful marketing tool as the city tries to land more more conventions.

“It’s a huge selling feature for the planners that are coming into our city that are taking a look at us,” said Himert.

She acknowledges competition from Los Angeles International Airport ( LAX) and other airports in the L.A. region. Himert said convention planners often use those airports to reach Long Beach. But when they do, she’s quick to tell them about the Long Beach Airport and the lower fares.

How did the rest of the region’s airports fare in the rankings?

Burbank’s Bob Hope Airport has the country’s sixth lowest average domestic airfare at $282. Ontario ranked 23rd with an average domestic airfare of $338. San Diego International Airport is 37th with an average domestic air fare $362. LAX had the 78th lowest average domestic airfare: $409.

Bernanke signals Fed to maintain stimulus efforts

AP — Wed, 22 May 2013 07:23:07 -0700

Fed Chairman Ben Bernanke told Congress Wednesday the U.S. job market remains weak and it's too soon for the Federal Reserve to end its extraordinary stimulus programs.
; Credit: Alex Wong/Getty Images

Chairman Ben Bernanke told Congress Wednesday that the U.S. job market remains weak and that it is too soon for the Federal Reserve to end its extraordinary stimulus programs.

In testimony to the Joint Economic Committee, Bernanke noted that the economy is growing moderately this year and unemployment has fallen to a four-year low of 7.5 percent. Still, unemployment remains well above levels consistent with healthy economies. And Bernanke said higher taxes and deep federal spending cuts are expected to slow economic growth this year.

Reducing the Fed's efforts to keep borrowing rates low would "carry a substantial risk of slowing or ending the economic recovery," Bernanke said.

Stocks surged on Bernanke's comments. The Dow Jones industrial average was up just 40 points before his comments were released at 10 a.m. EDT. Minutes later, the Dow was up 85 points.

The Fed is pursuing an aggressive program of bond purchases to try to keep long-term interest rates down and encourage borrowing and spending. The Fed has said it plans to continue its $85 billion-a-month in Treasury and mortgage bond purchases until the job market improves substantially.

Investors have been closely scrutinizing policymakers' comments in recent weeks for clues about the pace of the bond purchases. The Fed said after its April 30-May 1 meeting that it could increase or decrease the pace depending on how the job market and inflation fare.

Bernanke's comments suggest the Fed is not ready to taper its purchases. He has had solid support for the bond purchases among the voting members of the Fed's interest-rate setting committee. At each of the Fed's three policy meetings this year, the committee has approved the purchases 11-1.

In recent months, the job market and the broader economy have shown renewed vigor. The economy has added an average of 208,000 jobs a month since November. That's up from only 138,000 a month in the previous six months.

The economy has benefited from a resurgent housing market, rising consumer confidence and the Fed's stimulus actions, which have helped ignite a stock market rally. The Standard & Poor's 500 stock index has jumped 17 percent this year to a record high. Higher stock prices tend to make many people feel wealthier and more inclined to spend.

Those gains, in part, are why critics of the bond purchases, including some Fed regional bank presidents, have questioned the need to continue them at their current pace. They argue that keeping interest rates too low for too long could send inflation surging or inflate dangerous bubbles in assets such as stocks or real estate. Such a bubble could burst with the same destabilizing effects that the housing bust caused.

Apple's CEO Cook facing Senate questions on taxes

AP — Tue, 21 May 2013 08:25:48 -0700

A U.S. Senate panel says Apple Inc. is avoiding billions of dollars in U.S. taxes by shifting profits to foreign affiliates and is prepared to question Apple CEO Tim Cook Tuesday about the "loopholes." (A view of the main entrance to Apple Inc. in Cupertino, California. Photo by Ryan Anson/AFP/Getty Images); Credit: AFP/AFP/Getty Images

A Senate panel says Apple Inc. is avoiding billions of dollars in U.S. taxes by shifting profits to foreign affiliates and is prepared to question the company's chief executive Tuesday about the "loopholes."

Apple CEO Tim Cook is expected to explain the company's tax strategy to the Senate Permanent Subcommittee on Investigations, which released a detailed report Monday on the company's practices.

The world's most valuable company says it complies with the laws and pays "an extraordinary amount" in U.S. taxes.

Sen. Carl Levin, D-Mich., the panel's chairman, says Apple's use of loopholes in the U.S. tax code is unique among multinational corporations.

"Apple is exploiting an absurdity," Levin said at the start of the hearing.

The tone of the hearing turned tense before the Apple executives were scheduled to appear, as Sen. Rand Paul, R-Ky., an anti-tax hawk who reflects tea party sentiment, insisted that the subcommittee apologize to Apple for unfair scapegoating.

"If anyone should be on trial here it should be Congress ... for creating a bizarre and byzantine tax code," said Paul. "If you want to assign blame, this committee needs to look in the mirror and see who created that mess."

Levin countered angrily that no such apology would be forthcoming. "Apple's a great company, but no company should be able to determine how much it's going to pay in taxes ..... by using gimmicks," he said.

The spotlight on Apple's tax strategy comes at a time of fevered debate in Washington over whether and how to raise revenues to help reduce the federal deficit. Many Democrats complain that the government is missing out on billions of dollars because companies are stashing profits abroad and avoiding taxes. Republicans want to cut the corporate tax rate of 35 percent and ease the tax burden on money that U.S. companies make abroad. They say the move would encourage companies to invest at home.

Cook and the other Apple executives are expected to face tough questions. Levin and other panel members could hold up Apple as an example of a powerful company using its privileged position to avoid taxes while ordinary Americans must pay them. The subcommittee last fall derided executives from other technology giants over similar allegations.

Apple is holding overseas some $102 billion of its $145 billion in cash, according to the subcommittee's report.

Apple's strategies are legal, and many other multinational corporations use similar tax techniques to avoid paying U.S. taxes on profits they reap overseas. But Apple uses a unique twist, the report found. The company's tactics raise questions about loopholes in the U.S. tax code, lawmakers say.

Apple refuted the subcommittee's assertions in testimony prepared for the hearing. Apple said it employs tens of thousands of Americans and pays "an extraordinary amount" in U.S. taxes, citing the roughly $6 billion it paid in fiscal 2012.

Apple "complies fully with both the laws and the spirit of the laws," the testimony says. "And Apple pays all its required taxes, both in this country and abroad."

"Apple does not use tax gimmicks," the statement says.

The company has made clear that given current U.S. tax rates, it has no intention of repatriating its overseas profits to the U.S. Apple reiterated in its testimony its support for comprehensive tax reform as a way to support economic growth and boost U.S. companies' competitiveness.

The subcommittee also has examined the tax strategies of Microsoft Corp., Hewlett-Packard Co. and other multinational companies, finding that they too have avoided billions in U.S. taxes by shifting profits offshore and exploiting weak, ambiguous sections of the tax code. Microsoft has used "aggressive" transactions to shift assets to subsidiaries in Puerto Rico, Ireland and Singapore, in part to avoid taxes. HP has used complex offshore loan transactions worth billions while using the money to run its U.S. operations, according to the panel.

The subcommittee's report estimates that Apple avoided at least $3.5 billion in U.S. federal taxes in 2011 and $9 billion in 2012 by using the strategy. The company, based in Cupertino, Calif., paid $2.5 billion in federal taxes in 2011 and $6 billion in 2012.

Apple uses five companies located in Ireland to carry out its tax strategy, according to the report. The companies are located at the same address in Cork, Ireland, and they share members of their boards of directors. While all five companies were incorporated in Ireland, only two of them also have tax residency in that country. That means the other three aren't legally required to pay taxes in Ireland because they aren't managed or controlled in that country, in Apple's view.

The report says Apple capitalizes on a difference between U.S. and Irish rules regarding tax residency. In Ireland, a company must be managed and controlled in the country to be a tax resident. Under U.S. law, a company is a tax resident of the country in which it was established. Therefore, the Apple companies aren't tax residents of Ireland nor of the U.S., since they weren't incorporated in the U.S., in Apple's view.

The subcommittee said Apple's strategy of not declaring tax residency in any country could be unique among corporations.

Levin and Sen. John McCain of Arizona, the subcommittee's senior Republican, are proposing legislation to close loopholes in the tax code.

Yahoo's other billion-dollar bets: Where are they now?

Elise Hu | NPR — Mon, 20 May 2013 15:27:47 -0700

GeoCities employees pose for a picture in 1999 after the Yahoo acquisition was announced. Yahoo quietly shut down GeoCities a decade later.; Credit: Mark J. Terrill/AP

Yahoo's $1.1 billion purchase of Tumblr could be considered a bargain compared with its other big-dollar bets. The company's history is dotted with pricey purchases of once-hot Web properties that had more promise than eventual purpose. A look back:

GeoCities, 1999: $3.7 Billion

When Yahoo! bought GeoCities for $3.7 billion in 1999, CNN Money called it a move that would "solidify Yahoo!'s position as a front-runner in the online popularity contest." History shows us otherwise. Back then, GeoCities was the third most visited "site" on the Web. But it really served as a platform for online communities and for users to create their own homepages on the Internet — much like what Tumblr does today.

Geocities never quite figured out monetization and scale.

"Sometimes it's market forces, sometimes the fire just gets snuffed out," said Scott Appleby, a tech industry analyst who was bullish on the GeoCities acquisition in 1999. "There was a thought then that everyone would have their own Web page, and they realized we don't really need that."

By the time Yahoo closed down the service, users had defected so widely to blogs, Twitter and, frankly, Tumblr, that the term "Geocities" became a verb for taking your website back in time to the way they looked in the late 1990s. (No, really. There is a Geocities-izer in which "you can give any site on the Web that straight-out-of-1998 look and feel.")

Yahoo has not yet responded to requests for an interview on the GeoCities history, or its other previous acquisitions.

Broadcast.com, 1999: $5.7 Billion

The search giant purchased the Internet video streaming service for $5.7 billion. It promised to "integrate multimedia services throughout the Yahoo! network." Today, it's no more. After the acquisition, Yahoo! split the services previously offered by Broadcast.com into separate music and video services — Launchcast and Platinum — but both have quietly folded. Key in broadcast.com today and it is a redirect to the main Yahoo site.

But the legacy of Broadcast.com can be considered long, depending on how you look at it. The sale helped make co-founder Mark Cuban $1 billion richer — and famous. He wound up buying the NBA's Dallas Mavericks for $307 million, investing in ventures like HDNet, and getting a whole storyline on HBO's Entourage.

Overture, 2003: $1.63 Billion

Overture is credited as a pioneer in the sale of advertising linked to online search results, but Yahoo struggled to absorb the once-thriving company into its larger culture. Overture's patent for a system to sell advertising displayed next to Web searches was at issue in a years-long legal battle against Google that ended in a settlement in which Yahoo received $365 million in Google shares. But in the decade following the settlement, Google went on to capitalize on paid search and become an industry behemoth while Yahoo has seen its users and its revenue sources dwindle.

Explaining the quiet shutdowns of once-thriving companies acquired by Yahoo, Appleby said, "Sometimes it's hard for these companies to grow and survive and thrive in a larger hierarchical company ... The only way for these [acquisitions] to make sense for larger companies is for the large company to continue to grow and make money."

Flickr, 2005: $30 Million

The $30 million acquisition of what was then a leading photo sharing service seems paltry, but the history of what happened after the acquisition sounds similar to the bigger dollar purchases. Tech site Pando Daily writes:

"For the first couple of years, things were fine. [Flickr co-founder Caterina] Fake told Gizmodo that 'Yahoo was a good fit initially' and 'in the subsequent two years after the acquisition, Flickr blossomed.' Then Yahoo's Corporate Development department began to bleed Flickr dry, denying it resources because it didn't generate sufficient revenue. 'The money goes to the cash cows, not the cash calf,' as one anonymous Yahoo employee told Gizmodo. Instead of constantly innovating, Flickr management found itself in meetings defending the product."

History As A Teacher?

While Yahoo's historically large purchases didn't pan out, it could benefit from lessons of a rocky past. "Unlike 1999, when Yahoo didn't necessarily need to do a deal like Geocities, 2013 seems to present itself as a time when a Yahoo/Tumblr tie-up would make sense," writes Tristan Lewis in Forbes. "Yahoo and Tumblr may be looking at the Facebook/Instagram blueprint and hoping for the same magic."

And Yahoo is not the same company it was in 1999, or even 2011.

Still, when CEO Marissa Mayer, who joined the company last year from Google, held a conference call Monday morning to explain the decision, Wall Street analysts had lots of questions about how Tumblr would pay for itself.

"Tumblr is now at a point...where they do know what it is, and it makes sense to monetize it, if it is very tasteful and seamless," Mayer said.

She's following a path tread by many other tech companies: First, attract huge audiences; and only after hundreds of millions of users are engaged with the service do you begin to think about how to make money from it. Mayer said Tumblr is now ready for that final step.

"Tumblr is at the point where they do know what it is, and it makes sense to monetize it in a way that is very tasteful and seamless," Mayer said.

The inclusion of Tumblr into its numbers could bump Yahoo's traffic by 50 percent a year, Mayer estimated. If advertising can be married with users of that scale, the deal could be profitable.

"It's too early to say, 'Hey, she paid too much for this company,' " Appleby said. She's made a lot of changes, and many of which for the good of the culture."

One thing the Tumblr acquisition does have in common with all its predecessors: It's making the original founders and investors boatloads of cash, and the people behind the acquired companies seem thrilled about it. Tumblr CEO David Karp wrote that he's "elated" and "couldn't be more excited."

NPR's Steve Henn contributed to this story.

Yahoo takes big leap with $1.1B deal for Tumblr

AP — Mon, 20 May 2013 06:20:28 -0700

Yahoo President and CEO Marissa Mayer said the company is buying online blogging forum Tumblr for $1.1 billion. Mayer is trying to rejuvenate an Internet icon that had fallen behind the times.The deal announced Monday represents Mayer's boldest move yet since she left Google 10 months ago to lead Yahoo's latest comeback attempt.; Credit: Brad Barket/Getty Images

Yahoo is buying online blogging forum Tumblr for $1.1 billion as CEO Marissa Mayer tries to rejuvenate an Internet icon that had fallen behind the times.

The deal announced Monday represents Mayer's boldest move yet since she left Google 10 months ago to lead Yahoo's latest comeback attempt. It marks Yahoo's most expensive acquisition since the Sunnyvale, Calif., company bought online search engine Overture a decade ago for $1.3 billion in cash and stock.

Yahoo is paying all cash for Tumblr, dipping into some of its remaining stash from a $7.6 billion windfall reaped last year from selling about half of its stake in Chinese Internet company Alibaba Holdings Group. Taking over Tumblr will devour about one-fifth of the $5.4 billion in cash that Yahoo had in its accounts at the end of March.

While hailing Tumblr as fount of creativity that attracts 300 million visitors per month, Yahoo pledged "not to screw it up." David Karp, a high school dropout who started Tumblr six years ago, will remain in control of the service in an effort to retain the same "irreverence, wit and commitment to empower creators," Yahoo said.

Karp, 26, who may now have a managerial mentor in Mayer, 37. Tumblr, which will remain based in New York, has about 175 employees while Yahoo has 11,300 workers.

Mayer, who worked closely with Google co-founders Larry Page and Sergey Brin, had high praise for Karp in a statement. She described him "as one of the most perceptive, capable entrepreneurs I've ever worked with."

In his statement, Karp predicted Yahoo would help Tumblr grow even faster as he strives "to make the Internet the ultimate creative canvas. "

Tumblr now figures to play a pivotal role in Mayer's attempt to reshape Yahoo. To take on the challenge, Mayer ended a highly successful 13-year career at Google, which she helped surpass Yahoo as the Internet's most influential company. Since coming to Yahoo, Mayer has concentrated on improving employee morale, redesigning services and bringing in more engineering talent through a series of small acquisitions that have collectively cost less than $50 million.

Her efforts have been well-received on Wall Street so far, although most of the 69 percent surge in Yahoo's stock price under Mayer's leadership has been driven by the rising value of Yahoo's remaining 24 percent in Alibaba. When Alibaba goes public within the next few years, analysts have estimated Yahoo could collect another $10 billion to $20 billion by selling the rest of its Alibaba stock.

If this deal pays off the way Mayer envisions, Tumbler could help Yahoo finally get its stock price to $33. That would be a major coup because many investors soured on Yahoo after a previous regime led by co-founder Jerry Yang squandered an opportunity five years ago to sell the entire company to Microsoft for $33 per share. The stock spent more than four years trading below $20 before the recent surge that lifted the price to $26.52 through last week.

The deal could backfire though if Yahoo's effort to make more money alienate a Tumblr user base that so far has been subjected to hardly any advertising during the service's six-year history.

"Yahoo has to manage this acquisition in a way that keeps Tumblr's user base while trying to add advertising, which historically tends to turn off a lot of people," said Forrester Research analyst Zachary Reiss-Davis.

Yahoo said it will work with Tumblr to create ads that "are seamless and enhance the user experience."

Mayer is betting that Tumblr will provide Yahoo with a captivating hook to reel in more traffic and advertisers on smartphones and tablet computers. That rapidly growing market is expected to become even more important during the next decade as people increasingly consume digital content on mobile devices instead of laptop and desktop machines.

Besides offering one of the top mobile apps, Tumblr also runs one of the world's busiest websites, featuring 75 million daily posts about everything from politics to pets. Advertising has been a missing ingredient so far as Tumblr, like many online services in their early stages, focused on building a loyal audience before turning its attention to making money.

The deal also has some symbolic significance for Yahoo, an 18-year-old company that had spent much of the past decade aimlessly drifting under different management teams while Google Inc. overtook it in terms of size and influence. At the same time, newcomers such as Facebook Inc. and Twitter began to command the attention of people who found themselves spending less and less time on Yahoo.

Part of Yahoo's problems stemmed from missed chances to improve its service and technology.

Yahoo flirted with potential acquisitions of Google and Facebook in those two companies' early days, only to have the talks unravel because Yahoo wasn't prepared to pay asking prices that were far below the current market values of Google ($300 billion) and Facebook ($63 billion). Yahoo also considered buying YouTube in 2006, only to be outbid by Google, which snapped up the world's leading online service for $1.76 billion - a price that now looks like a bargain.

Even when Yahoo did pull off deals, the company has been criticized for mismanaging a list of acquired services that includes photo-sharing Flickr, online help-wanted service HotJobs and content-sharing service Del.icio.us. Yahoo ended up selling HotJobs and Del.icio.us, but Mayer has been looking at ways to spruce up Flickr and blend its photos into more of Yahoo's other services. Mayer is expected to discuss more changes for Flickr at an event in New York Monday evening.

Tumblr could help Yahoo recapture some of its cachet with teens and adults in their early 20s, a demographic that has become tougher for Yahoo to reach in recent years as it fell behind the technological curve and struggled to develop compelling services.

While Facebook has turned into a mainstream social network where even grandparents now connect family and friends, Tumblr has become one of the places where the cool kids hang out.

"Tumblr is redefining creative expression online," Mayer said. "On many levels, Tumblr and Yahoo! couldn't be more different, but, at the same time, they couldn't be more complementary."

Tumblr emerged as a trendy online hangout by providing a service that makes it easy to share blog posts, photos, video and other content in an enthralling mosaic. The service says it has amassed more than 50 billion posts from 108 million blogs. Tumblr users rely on a dashboard to pinpoint the kinds of blogs that they want to track and also have tools to pass along the posts that interest them.

That wealth of content could be interwoven into Yahoo's other services that provide coverage of general news, sports, finance and entertainment. Tumblr also will fill Yahoo's gaping void in the realm of social media. Yahoo so far has had to connect its services to Facebook and Twitter to give its users a social networking outlet.

Having its own social networking service will also give Yahoo more insights into the things that people like - a key to distributing ads to consumers most likely to be interested in a specific products. That data, in turn, should help Yahoo sell more ads and accelerate its revenue growth. After three successive years of declines, Yahoo's revenue rose slightly last year, but lagged far behind the growth at Google and Facebook. Mayer has vowed to bring Yahoo's revenue growth back to at least the level of the overall Internet ad market.

Yahoo's acquisition will deliver a jackpot to Karp, who dropped out of high school to concentrate on computer programming. He ended up being home schooled while taking classes in Japanese and working on gambling software. Later, he became a product executive at a parenting website called UrbanBaby. After CNet bought the site in 2006, Karp set up his own a development service called "Davidville" before deciding to create an outlet for personal expression - an endeavor that hatched Tumblr.

Karp's cut from the Yahoo deal is about $275 million. Most of the rest of the money will be paid to the venture capitalists that invested about $125 million into Tumblr. That list includes Spark Capital, Sequoia Capital, Greylock Partners, Union Square Ventures and Insight Venture Partners.

WSJ: Yahoo board approves $1.1 billion purchase of Tumblr

Eyder Peralta | NPR — Sun, 19 May 2013 10:57:38 -0700

Yahoo President and CEO Marissa Mayer.; Credit: Brad Barket/Getty Images

The Wall Street Journal has this breaking news from the tech world:

"The Yahoo board has approved a deal to pay $1.1 billion in cash for the blogging site Tumblr."

The Journal, the only outlet reporting the approval, is sourcing its story to "people familiar with the matter." Lauren Armstrong, a Yahoo spokeswoman, told us in an email that they "don't comment on rumors or speculation."

The Journal's sister site, All Things D, had reported the deal to buy the blogging site was imminent. All Things D explained:

"Sources said that the Silicon Valley Internet giant's CEO Marissa Mayer has decided that buying Tumblr was going to be 'the stake in the ground of what her strategy is going forward for Yahoo.'

"And that is to attract younger audiences with just the kind of user-generated content Tumblr has pioneered to huge growth.

"As with all big-time acquisition deals, this one could certainly fall apart at the last minute, but source said the agreement was still in place as of today. If approved by Yahoo's board, it will be announced Monday. Yahoo has already said it has news to announce then."

It's always worth noting that these kinds of deals can fall apart.

Giga Om, by the way, ran a good story that looks at the many aspects of the deal. One of them: A $1 billion valuation for Tumblr may be a stretch. Last year, the company had revenues of less than $15 million.

Giga Om adds:

"... The painful fact is that Yahoo doesn't just look desperate — in many ways it is desperate. Mayer has made some changes since she took over the ailing former web portal, including the acquisition of Summly and a number of other mobile-focused startups and services, but the company still needs to make some aggressive moves if it is going to jump-start any growth at all. And since Yahoo has about $4 billion in cash on hand, it can arguably afford to make a big bet."

Tesla rides high, but faces formidable foe: Car dealers

Liz Halloran | NPR — Sun, 19 May 2013 08:53:30 -0700

The Tesla Model S, Motor Trend Car of the Year, is introduced at the 2013 North American International Auto Show, in Detroit in January. Tesla's attempts to sell its cars without going through dealerships is meeting resistance.; Credit: Stan Honda/AFP/Getty Images

Tesla Motors, the American maker of luxury electric cars, has been riding a wave of good publicity.

Its Model S sedan (base priced at $62,400, after federal tax credits) was just named Motor Trend Car of the Year. Reviewers at Consumer Reports gave the lithium-ion battery powered vehicle a rave.

And the company, headed by billionaire innovator Elon Musk, 41, posted a profit for the first time in its 10-year history — powered in part by zero-emission environmental credits.

But Tesla also finds itself, and its business model, under sustained attack by a formidable foe: the National Automobile Dealers Association, one of the most powerful lobbying groups in Washington with a strong network of state chapters.

The dealers say they have no quibble with the quality and allure of Tesla's products. What they object to is the Palo Alto-based manufacturer's efforts to sell the electric car directly to consumers rather than through independently owned dealer franchises.

Tesla's model is often compared to the one used by consumer electronics giant Apple.

"We want to cut out the middleman," says Diarmuid O'Connell, vice president for business development at Tesla. "We're a bad fit for the dealer system."

The dealers' response?

"Buying an iPad is not buying a car," says David Hyatt of the national association, which, along with member chapters, has taken their franchise fight to the courts and to state legislatures across the nation.

It's a battle between a deep-pocketed interest group, which last year contributed more than $3.2 million to candidates, and a fearless entrepreneur.

And it's just heating up.

Battles Emerge State By State

A bill being considered in North Carolina, where there are currently 80 Teslas on the road and another 60 expected, would prevent the company from selling vehicles online. In Virginia, the state denied the company a dealer license to open a store.

Texas lawmakers are expected to ignore an effort by Tesla to gain an exception to strict franchise laws that prohibit factory-owned dealerships. Last year, there were only 43 registered Teslas in the state.

In both Massachusetts and New York, legal efforts by franchise dealers to block Tesla's efforts were rejected — including attempts to shut down three Tesla stores and two service centers in New York.

Wrote New York Supreme Court Justice Raymond J. Elliott III: "Dealers cannot utilize the Franchised Dealer Act as a means to sue their competitors."

An effort in Minnesota to rewrite franchise law to prevent vehicle manufacturers from operating a dealership died in the Legislature.

But these are expected to be the early rounds.

The franchise fight in Massachusetts has moved to the Legislature. Minnesota dealers plan to submit new legislation next year. And there are also private battles about which O'Connell declined to elaborate.

"We don't underestimate the dealers," he said. "The franchise dealer system was, at its inception, set up to protect the dealers from manufacturers coming in and competing with them."

Tesla, which paid off early a $465 million low-interest government loan it received in 2009, insists that it presents little competition to the dealers. O'Connell characterizes the 10,000 to 15,000 cars it will sell this year domestically a "rounding error" for the big guys.

"This is absurd on its face," he said.

The company currently has 37 stores and galleries worldwide, 27 of them in the U.S., says Tesla spokeswoman Shanna Hendriks. It plans to open about 15 more locations this year with about half the openings in Europe and Asia.

It also has 24 service centers in the U.S. and 41 worldwide. Hendriks says the company plans to add approximately 30 service locations worldwide in 2013 – about half in the U.S.

Tesla argues that its electric product would get lost on a combustion engine lot; that its service needs are low and different than those at traditional franchises; its employees specifically trained and immersed in the car's technology; and its one-price, no-haggle policy anathema to the franchisee legacy.

"Ultimately," O'Connell says, "our ambition is to build a great car company, and our mission is to catalyze a mass market for electric vehicles."

"Why is it the [dealer franchise] market needs to be protected in this absolutist fashion?" he says. "There's a future out there where we might sell our product through a franchise dealer, but we're not there yet."

The Dealers Choice

Road & Track magazine describes the advent of the franchise system of independently owned and operated auto dealers as a way to enable "early automakers to get paid as soon as they shipped vehicles to the dealer."

The system long worked well, with dealers selling at a markup that brought healthy profits, according to the magazine, and the birth of muscular state laws preventing manufacturers from directly competing with the dealers.

And though the nature of the nation's economy has changed dramatically (why can't consumers buy cars online like everything else, Tesla asks), the dealers are holding tight to a structure as American as apple pie and essential to the health of communities.

"If manufacturers control dealership networks, there won't be dealerships in small towns — they'd just be where the big box stores are," says Bill Wolters, longtime head of the Texas Automobile Dealers Association. "Every year, there are bills that would weaken the franchise laws." Tesla's effort to change a state statute that prohibits manufacturers of new motor vehicles from operating a dealership, he says, is just the latest.

But perhaps the most persistent.

Both sides are not underestimating the determination of the other to prevail.

"I sat down in Palo Alto with Elon Musk, hat in hand, and said we want to partner with you, you can have it exactly as you want it — 'Tesla of Austin,' " said Wolters of the Texas dealers association. "You can do it just as you want to, within our law, you just can't own the showroom."

Musk, Wolters recalled, didn't cotton to the suggestion, leaving the room quickly, but not before pledging to spend an inordinate amount of money to battle automobile franchise laws.

Wolters noted, however, that he was taken for a nice drive in one of Musk's Teslas before heading back to Texas.

"He's just determined to do it his own way," Wolters says.

Unemployment rate declines in Southern California

Wendy Lee — Fri, 17 May 2013 19:30:57 -0700

A line of job seekers wait to get into a Walmart hiring event at the Metropolitan Baptist Church in Altadena on Dec. 8, 2012. ; Credit: KPCC

California’s unemployment rate dropped to 9 percent last month, which analysts say is a sign that the economy is steadily improving. It's the state's lowest unemployment since November 2008.

Just a year ago, the unemployment rate was 10.7 percent.

“It’s great to be able to report that we are able to make such progress in the unemployment rate,” said Robert Kleinhenz, chief economist with the Los Angeles County Economic Development Corp.

Why is the state’s unemployment rate declining?

Last month, California employers added 293,100 jobs, an increase of 1.9 percent, according to Bureau of Labor Statistics. The industries with the highest gains by number of jobs were in professional and business services, leisure and hospitality and education and health services.

There are also fewer people looking for jobs. The civilian labor force in California has dropped by 139,000 people compared to a year ago, according to Bureau of Labor Statistics.

“There are large numbers of people who have totally given up looking for work,” said Alec Levenson, a labor economist at University of Southern California. “That’s a concern for us as a society.”

What is the April unemployment rate in LA County’s largest cities?

Source: Los Angeles County Economic Development Corp.

April 2013 December 2012

Los Angeles 10.3 percent 11.3 percent

Long Beach 10.2 percent 11.2 percent

Glendale 8.1 percent 8.9 percent

Santa Clarita 5.7 percent 6.2 percent

Torrance 4.6 percent 5.1 percent

Pasadena 7 percent 7.8 percent

Pomona 10.3 percent 11.3 percent

Burbank 7.5 percent 8.3 percent

Santa Monica 7.6 percent 8.4 percent

West Covina 8.2 percent 9 percent

Downey 7.4 percent 8.2 percent

Palmdale 11.6 percent 12.7 percent

Lancaster 13.1 percent 14.4 percent

What is the April unemployment rate for Southern California counties?

Source: State of California Employment Development Department

Riverside 9.6 percent

San Bernardino 9.6 percent

Los Angeles County 9.3 percent

Ventura 6.9 percent

Orange 5.7 percent

California unemployment rate drops to 9 percent in April

Ed Joyce — Fri, 17 May 2013 08:11:33 -0700

The unemployment rate in California dropped to 9 percent in April 2013, according to the U.S. Bureau of Labor Statistics. The BLS said Friday that the decline is one of the largest from April 2012. The national unemployment rate is 7.5 percent.
(Photo: Current and former military personnel stand in line for interviews at the Opportunity Job Fair in San Diego).; Credit: Sandy Huffaker/Getty Images

California's unemployment rate dropped from 9.4 percent to 9 percent in April, the U.S. Bureau of Labor Statistics reported Friday. The state's jobless rate is the fourth highest in the U.S. according to the BLS.

The BLS said regional and state unemployment rates were generally little changed in April.

Forty states and the District of Columbia had unemployment rate decreases, three states had increases, and seven states had no change, the BLS reported.

Forty-three states and the District of Columbia had unemployment rate decreases from a year earlier, while seven states had increases. The national jobless rate was little changed in April, at 7.5 percent, but was 0.6 percentage point lower than a year earlier.

The report shows Nevada with the highest unemployment rate among the states in April, 9.6 percent. The next highest rates were in Illinois (9.3 percent), Mississippi (9.1 percent), and California (9.0 percent).

The April 2013 California unemployment rate of 9 percent is a drop from the 10.7 percent rate in April 2012. The BLS report said the the year-over-year decline in the state's jobless rate was the third largest among states. California and Florida 1.7 percentage points each. The largest declines from April 2012 were Nevada and Rhode Island.

The report said 30 states added jobs in April, while 18 reported fewer jobs.

Nationwide, employers added 165,000 jobs in April and the unemployment rate fell to a four-year low of 7.5 percent. The economy has added an average of 208,000 jobs a month since November. That's up from only 138,000 a month in the previous six months.

North Dakota reported the nation's lowest unemployment rate, at 3.3 percent. The state has benefited from an oil and gas drilling boom.

Gauge of US economy's future health up in April

AP with Ed Joyce — Fri, 17 May 2013 07:31:11 -0700

A measure of the U.S. economy's future health rose in solidly in April, buoyed by a sharp rise in applications to build new homes and apartments. The Conference Board index is intended to signal economic conditions three to six months out. (Photo: A construction worker installs a window in a new home at the Arbor Rose housing development in San Mateo, California. Photo by Justin Sullivan/Getty Images); Credit: Justin Sullivan/Getty Images

A measure of the U.S. economy's future health rose in solidly in April, buoyed by a sharp rise in applications to build new homes and apartments.

The Conference Board says its index of leading indicators (LEI) increased 0.6 percent last month to a reading of 95. That followed a 0.2 percent decline in March.

The index is intended to signal economic conditions three to six months out.

Conference Board economist Ken Goldstein said the index is 3.5 percent higher at an annual rate than it was six months ago, suggesting expansion for the economy. He said the biggest risk at the moment is the drag from cuts in federal spending.

“The biggest positive factor is the potential for improvement in the recovering housing and labor markets, said Goldstein. "The biggest unknown is the resiliency in confidence, both consumer and business.”

Another economist at The Conference Board, Ataman Ozyildirim, said housing permits and the interest rate spread helped the index in April.

"Labor market conditions also contributed, although consumers’ outlook on the economy remains weak," said Ozyildirim. "In general, the LEI points to a continuing economic expansion with some upside potential. Meanwhile, the CEI, a measure of current conditions, has returned to a slow growth path, despite declining industrial production in April.”

The index is composed of 10 forward-pointing indicators. Strength in April came from the surge in building permits, a drop in applications for unemployment benefits and a rising stock market.

Holding the index back in April: Weaker consumer confidence and a decline in the average hours worked at U.S. factories.

The job market has also improved over the past six months. The economy has added an average of 208,000 jobs a month since November. That's up from only 138,000 a month in the previous six months.

Unemployment has fallen to a four-year low of 7.5 percent.

A rebound in housing, along with a limited supply of homes for sale, has lifted the construction industry.

Construction cooled off in April, as builders broke ground on fewer homes after topping the 1 million mark in March for the first time since 2008. But most of the decline was in apartment construction, which tends to vary sharply from month to month.

The most encouraging sign for the industry last month was that applications for new construction reached a five-year peak. That suggests the housing revival will be sustained.

Builders are benefiting from a sustained rebound in housing that began a year ago. Steady job growth, rock-bottom mortgage rates and rising home values have boosted demand.

The overall economy grew at an annual rate of 2.5 percent in the January-March quarter, up from a rate of just 0.4 percent in the October-December quarter. The fastest expansion in consumer spending in more than two years drove economic growth in the first quarter.

Many economists expect growth is slowing slightly in the current April-June period to around 2 percent. Still, cheaper gas prices helped consumers boost spending at retail businesses last month. Consumer spending accounts for nearly 70 percent of economic activity.

Southern California homes sold at a fast-pace in April

Wendy Lee — Thu, 16 May 2013 12:39:10 -0700

San Diego-based DataQuick said Wednesday that California's median home prices surged to the highest level in nearly five years. The research firm said the median price paid for a home in California was $324,000 - the highest since June 2008. (Photo: A home for sale in Central Los Angeles.); Credit: Christopher Okula/KPCC

Southern California homes sold at a robust pace for the month of April, at the highest level in seven years, according to San Diego-based research firm DataQuick. The increase was due to fewer homes for sale.

There were 21,415 homes and condos sold in Southern California last month, up 9.5 percent from a year ago, DataQuick said. The pace was the highest for the month of April in seven years. The median price was $357,000 in April, up 23 percent from a year ago, the research firm said.

“There’s a lot of pent-up demand out there,” said Kimberly Ritter-Martinez, an economist with Los Angeles County Economic Development Corp.

Why are home prices rising?

Ritter-Martinez said there are fewer foreclosures and distressed properties, which means less rock-bottom prices for homes. Demand for homes is outpacing the supply. Many buyers were reluctant to buy a home during the recession. As unemployment decreases, people are now feeling more ready to purchase a home, but there are fewer homes for sale.

There is only a 2.8 month supply of homes for sale in Southern California, said Sara Sutachan, manager of broker and real estate finance outreach for the California Association of Realtors. That is way below the normal supply of six to seven months, she said.

"We are well below that and have been well below that for quite some time," Sutachan said.

But if home prices are increasing, why aren’t more people selling their homes?

Some homebuyers still owe more money on their homes than what the property is worth, said Andrew LePage, an analyst with DataQuick.

LePage said some home owners may also be waiting for home prices to rise even more before selling their properties.

Who are buying these homes?

Absentee buyers: The majority of this group are made up of investors who buy the homes and then rent out the properties, DataQuick said. This group represents about one-third of homebuyers and many pay in cash.

First-time homebuyers: This group of buyers should expect to encounter challenges in purchasing their first home. They compete with absentee buyers and may need to place a larger down payment or pay in cash in order to secure the home.

Existing homeowners: People who are ready to move to a different home or area.

What are the average home prices in Southern California?

Source: DataQuick

Los Angeles $395,000, up 27 percent

Orange $535,000, up 17 percent

Riverside $248,000, up 24 percent

San Bernardino $195,000, up 25 percent

San Diego $400,000, up 21 percent

Ventura $420,000, up 17 percent

US housing starts fell in April but permits surged

AP — Thu, 16 May 2013 05:51:08 -0700

The Commerce Department said Thursday that U.S. builders broke ground on far fewer homes in April, one month after topping the 1 million mark for the first time since 2008. But applications for new construction reached a five-year peak, evidence that the housing revival will be sustained.
(Photo: A construction worker cuts a piece of wood on the top of a home under construction at a new housing development last year in Petaluma, California. Photo by Justin Sullivan/Getty Images); Credit: Justin Sullivan/Getty Images

U.S. builders broke ground on far fewer homes in April, one month after topping the 1 million mark for the first time since 2008. But applications for new construction reached a five-year peak, evidence that the housing revival will be sustained.

The Commerce Department said Thursday that builders started construction at a seasonally adjusted annual rate of 853,000, a 16.5 percent drop from the March pace of 1.02 million. Applications for building permits rose 14.3 percent to a rate of 1.02 million, the most since June 2008.

Builders are benefiting from a sustained rebound in housing that began a year ago. Steady job growth, rock-bottom mortgage rates and rising home values have boosted demand.

New construction of single-family homes declined 2.1 percent in April to an annual rate of 610,000. Multi-family construction, which is volatile, plunged 39 percent to a rate of 243,000. That drop more than reversed a 26 percent surge in March.

Housing starts fell last month in every region except the Midwest, where it rose 11 percent compared with March. New construction dropped 28 percent in the South. It fell 13 percent in the Northeast and 6 percent in the West.

Even with the sharp drop in construction last month, confidence among builders is rising. The National Association of Home Builders says its builder confidence index rebounded in May to a reading of 44, up from 41 in April. The outlook for sales reached its highest point in more than six years.

New-home sales rose 1.5 percent in March to a seasonally adjusted annual rate of 417,000. That's still below the 700,000 pace considered healthy. But sales are 18.5 percent higher than a year ago.

Several major homebuilders have reported strong annual increases in orders for the first three months of the year. That includes the start of the spring home-selling season, the traditional peak period for sales.

Ryland Group Inc. said this week that orders in April jumped 59 percent from a year earlier. And over the first three months of this year. orders have jumped 54 percent.

Though new homes represent only a fraction of 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 tax revenue, according to data from the homebuilders' group.

US jobless claims jump to highest level in 6 weeks

AP — Thu, 16 May 2013 05:39:45 -0700

The Labor Department said Thursday that the number of Americans seeking unemployment aid rose 32,000 last week to a seasonally adjusted 360,000, the most since late March. The jump comes after applications fell to a five-year low. (Photo: A "we are hiring" sign is displayed on a table during a job fair in San Francisco, California.)
; Credit: Justin Sullivan/Getty Images

The number of Americans seeking unemployment aid rose 32,000 last week to a seasonally adjusted 360,000, the most since late March. The jump comes after applications fell to a five-year low.

The Labor Department said Thursday that the less volatile four-week average rose just 1,250 to 339,250, a level consistent with modest job gains.

Julia Coronado, an economist at BNP Paribas, said the small increase in the average "highlight(s) the need to take volatile weekly readings with a grain of salt.... The underlying story in jobless claims continues to be one of gradual improvement."

Weekly applications are a proxy for layoffs. The big increase might mean companies are cutting more jobs, possibly because of steep government spending cuts that kicked in March 1.

Applications tend to fluctuate sharply from week to week and economists typically focus more on the four-week average. That remains 9 percent lower than it was six months ago.

The job market has improved over the past six months. The economy has added an average of 208,000 jobs a month since November. That's up from only 138,000 a month in the previous six months.

Still, much of the job gains have come from fewer layoffs - not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years and have risen only modestly since then. Overall hiring remains far below pre-recession levels.

The unemployment rate has also fallen to a four-year low, although it remains high at 7.5 percent.

The number of people receiving benefits fell 30,000 to 4.8 million in the week ended April 27, the latest data available. That's down from 6.3 million a year ago. Some of those recipients have probably gotten jobs, but many have simply used up all their available benefits.

Companies may not be confident enough in the economic outlook to rapidly boost hiring. Some businesses may be concerned about the impact of the federal spending cuts and tax increases. An increase in Social Security taxes at the beginning of this year could slow consumer spending, which drives nearly two-thirds of economic activity.

Still, consumers appear to be shrugging off the tax hikes, helped by cheaper gas and steady job gains.

Consumer spending rose from January through March at the fastest rate in more than two years. And Americans boosted their spending at retailers in April, from cars and clothes to electronics and appliances.

Some analysts raised their growth forecasts for the April-June quarter after the April retail sales report. Even so, most expect growth has slowed to an annual rate of around 2 percent, down from the 2.5 percent growth rate reported for the January-March quarter.