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U.S. Consumers Remain on a Spending Streak

ABI Bankruptcy Brief

October 31, 2019

 
ABI Bankruptcy Brief
 
 
NEWS AND ANALYSIS

U.S. Consumers Remain on a Spending Streak

Households increased spending headed into the fourth quarter, suggesting consumers have continued to help prop up U.S. economic growth, the Wall Street Journal reported. Personal-consumption expenditures, or household spending, rose a seasonally adjusted 0.2 percent in September from August, the Commerce Department said today. Outlays rose at a similar pace in August after growing more briskly in the first half of 2019. Consumers are helping lift the economy while manufacturing and business investment falter. They are, however, spending at a less robust pace than last year, aligning with a broader slowdown in economic growth that economists expect to continue. A modest rise in labor costs also helped keep U.S. inflation low in September, suggesting that a pickup in prices over the summer might have been short-lived. (Subscription required.)

In Manufacturing Midwest, Signs of Trouble Amid Good Times

Even as the $21 trillion U.S. economy continues growing and unemployment hovers at a half-century low, factory activity has contracted for two consecutive months, according to the closely watched Institute for Supply Management index, the Washington Post reported. Many consumer-goods makers are still humming. But manufacturers that serve global markets are being buffeted by trade wars and profound uncertainty over the future. Already, plants in several Midwestern states are shedding workers. Manufacturing employment is down by almost 9,000 in Pennsylvania over the past year and 6,800 in Wisconsin. Michigan, Indiana and Minnesota also have lost factory jobs, though in Ohio, assembly lines continue to add them. The president’s tariffs on China, Canada, Mexico and the European Union — and those trading partners’ retaliations against the U.S. — are sapping manufacturers’ strength, economists said. Through August, Wisconsin companies’ exports to China of $822 million were 25 percent less than in the same period in 2018, according to the Census Bureau.



Commentary: Coal Jobs Are About to Take Another Hit as Consumption Continues to Plummet

Before the 2000s, job losses in coal mining were mainly about better mining equipment and the rise of less-labor-intensive above-ground mining operations. For the past decade, though, the main driver has been falling U.S. coal consumption, according to a Bloomberg commentary. Natural gas pushed coal aside to become the main fuel used in electricity generation, and renewables gained ground, even as demand for electricity remained flat. There was a brief uptick in consumption in 2016 and early 2017 as rising natural gas prices drove some utilities to switch temporarily from gas back to coal, but after that the consumption slide resumed. Lately it has even accelerated: In July, according to numbers released last week by the Energy Information Administration, coal consumption was 11.6 percent lower than in July 2018. Yet coal mining employment has held up due to a revival in U.S. coal exports after a global economic slowdown in 2015 and 2016. But the main driver of the employment gains seemed to be that U.S. coal was emerging after years of retrenchment and lots of bankruptcies as a consolidated, leaner industry with a friend in the White House and hopes for better times ahead, according to the commentary. Robert Murray, whose privately held Murray Energy Corp. had bought several bankrupt mining operations, predicted just after President Trump’s inauguration in January 2017 that Trump would put the industry on a path to revival “in three months” thanks to environmental deregulation and resurgent demand from steelmakers and other manufacturers. This week, Murray Energy filed for bankruptcy protection. The biggest U.S. coal miner, Peabody Energy Corp., which emerged from bankruptcy in April 2017, announced a 21.7 percent revenue decline for the quarter ending in September. In its earnings release, Peabody also said it planned to “reweight its investments” away from the U.S. “to capture higher-growth Asian demand.” Some U.S. mine shutdowns and layoffs have been announced already, and all signs point to more cutbacks soon.

Analysis: WeWork Falls Furthest in a Year of Clipped Wings for Hot Startups

WeWork, Lyft, Uber, Peloton: To their early backers, these are companies that would transform the way the world works, works out or gets around. To public stock investors, they are companies with inflated valuations and real questions about when they will start making money. The two views have collided this year, disastrously in WeWork’s case, according to an analysis in the New York Times. After it failed to sell its stock to the public last month, throwing its funding plans into disarray, the company was bailed out Oct. 22 by SoftBank, its largest outside investor. SoftBank’s takeover values WeWork, which leases office space to co-working tenants, at about $7 billion. That is a far cry from the $47 billion that the company was valued at in January. WeWork, which is based in New York, might be the most extreme example of the rebuke that public stock investors have delivered to high-flying start-ups, but it is hardly alone. Across Wall Street, in Silicon Valley and at some of the world’s largest companies, a reckoning is unfolding as valuations slide for the so-called unicorns — start-ups worth at least $1 billion — that everyone was once so eager to buy.

For Seniors Hoping to Age in Place, the Cost of In-Home Care Just Got a Lot More Expensive

A new survey by Genworth Financial found that the fastest-rising long-term care cost is not for the most skilled care at a nursing home or assisted-living facility, but in-home services, the Washington Post reported. Genworth reported that the cost of homemaker services — in which an aide may help with tasks such as cooking, cleaning and running errands — has increased 7.14 percent in the past 12 months. That’s four times the increase in the median cost of a private room in a nursing home, which rose 1.82 percent. The cost of a home health aide — who assists someone in eating, getting dressed or taking medication — increased 4.55 percent. On an annual basis, the median cost for homemaker services is $51,480 based on 44 hours per week ($22.50 an hour). The yearly cost of home health-aide services is $52,624 ($23 an hour). The median yearly cost of care in an assisted-living facility is $48,612.

Judicial Conference’s Public Comment Period for Proposed Rules on SBRA Open Until Nov. 13

On February 19, 2020, the Small Business Reorganization Act of 2019, P.L. 116-54 (SBRA), will go into effect – long before the normal three-year rules amendment process runs its course. As a temporary measure, the Advisory Committee on Bankruptcy Rules has drafted Interim Bankruptcy Rules that can be adopted by courts as local rules or by general order when the SBRA goes into effect. The Advisory Committee has also drafted amendments to the Official Forms to address the SBRA. The Standing Committee now seeks comment on the proposed SBRA rules and forms for a short four-week period prior to making final recommendations.

- Interim Bankruptcy Rules 1007(b), 1007(h), 1020, 2009, 2012(a), 2015, 3010(b), 3011 and 3016.
- Official Forms 101, 201, 309E, 309F, 314, 315, 425A, and new Official Forms 309E2 and 309F2

The comment period is open until November 13, 2019. Because of the short publication period for the Interim Rules and related Official Forms, there will be no public hearings.

Read the text of the proposed amendments and supporting materials.

Written comments are welcome on each proposed amendment. The Advisory Committee on Bankruptcy Rules will review all timely comments, which are made part of the official record and are available to the public. The comment period closes on November 13, 2019. Click here to submit a comment.

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New on ABI’s Bankruptcy Blog Exchange: Fed's Powell Says Revamp of Capital, Liquidity Rules Not under Consideration

Federal Reserve Chairman Jerome Powell said yesterday that he does not think revamping capital or liquidity requirements is necessary, despite recent volatility in the repurchase markets, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
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