Week in Review

U.S. Economy Adds 144,000 Jobs in August

U.S. employers added a net 144,000 payroll jobs in August and the nation’s unemployment rate dropped a notch to 5.4%, the government said in a report fraught with political as well as economic implications

The pace of hiring was double that of the previous month but slightly below expectations and not quite enough to erase the Bush administration’s remaining job deficit by year-end.

The new figures show that the recovery is proceeding at a slower pace than during the spring, when job growth averaged 295,000 a month from March through May. But the pace of hiring is picking up: August’s gain follows a net increase of 73,000 in July, which was revised up from last month’s initial estimate of 32,000.

Employers need to add a net 125,000 to 150,000 jobs every month just to keep up with population growth. It would take even more growth to reabsorb workers who lost jobs during the downturn and substantially reduce the unemployment rate, which climbed to a post-recession peak of 6.3% in June 2003 from 3.8% in April 2000.

*

Stocks End on Mixed Note Before Holiday

A brighter jobs picture wasn’t enough to boost major stock indexes, which fell lower Friday in light trading at the start of the long holiday weekend.

The technology-heavy Nasdaq composite index was especially hard hit, largely because of the drop on Intel Corp., which cut revenue and profit forecasts after the close of trading Thursday. For the week, Nasdaq was down 1%, ending at 1,844.48.

But the Dow Jones industrial average was up 0.6% for the week, ending at 10,260.20, and the Standard & Poor’s 500 gained 0.5% to 1,113.63.

Friday’s losses on Wall Street might have been even worse were it not for the payroll report, one investment strategist said.

Trading was about 30% below normal levels. Many Wall Street pros who had not left town before the Republican National Convention made early getaways for the Labor Day weekend.

*

As Demand Slows, Intel Cuts Its Sales Forecast

Slowing consumer demand for high-tech gear prompted chip powerhouse Intel Corp. to reduce its sales forecast.

The world’s largest computer chip maker, often viewed as a proxy for the overall health of the technology sector, said fiscal third-quarter revenue was likely to be $8.3 billion to $8.6 billion, down from its July forecast of $8.6 billion to $9.2 billion.

With softer demand for its computer processor and memory chips, Santa Clara, Calif.-based Intel said its gross profit margin -- revenue minus the cost of goods sold, divided by sales -- would be about 58% for the quarter, off from its previous estimate of about 60%.

The company offered no outlook for profit in the quarter ending Sept. 25.

Chief Financial Officer Andy Bryant attributed the “vast majority� of the downturn to consumers as opposed to business customers.

Before Intel’s announcement, Wall Street analysts surveyed by Thomson First Call had been expecting a profit of 30 cents a share on sales of $8.88 billion.

*

Big Retailers Report Disappointing Sales

U.S. retailers reported disappointing sales for August, the third straight month of sluggish business, as high gasoline prices and job insecurity cut into family spending, analysts said.

Overall, retail sales rose just 1.1% at stores open at least a year, according to the International Council of Shopping Centers. That was sharply below some forecasts of a 2.2% gain.

Wal-Mart Stores Inc. posted a 0.5% gain, compared with predictions of a 1.8% increase.

Apparel was the only category in the report to exceed expectations. San Francisco-based Gap Inc. said same-store sales fell 1%, beating analysts’ expectations of a 2.5% decline.

Los Angeles jeans maker Guess Inc. reported a 5.9% gain -- less than the 7.4% analysts expected. Wet Seal Inc., based in Foothill Ranch, saw sales drop 14.8%, but that was slightly less than Wall Street estimates.

Target Corp. posted a 1.8% gain, compared with the 1.2% rise analysts were looking for.

Higher-end stores were the standouts. Nordstrom Inc. and Neiman Marcus Group Inc. beat analysts’ sales estimates, and their stocks rose.

*

U.S. to Consider Limits on Chinese Textiles

Faced with fierce election-year pressures, a Bush administration official said his agency would give “serious consideration� to petitions from U.S. manufacturers seeking to restrain Chinese textile and apparel imports and would urge officials in Beijing to voluntarily cut sales to the United States.

Commerce Undersecretary Grant Aldonas, traveling to Beijing this week, said he would step up pressure on China to negotiate an agreement that would restrict exports of “sensitive� items such as cotton trousers or knit shirts to the United States or risk being hit with a slew of more punitive measures.

U.S. industry officials said they would file petitions soon. They claim the protections are necessary to prevent China from taking over the world market after the end of the year, when global quotas restricting trade in apparel and textiles are lifted.

U.S. apparel importers, who oppose new restrictions and support the quota phaseout, argue that efforts to seek protection based on the threat of harm rather than actual injury are not valid under global trade rules.

*

Pimco Stock Fund Arm Reaches Settlement

The Securities and Exchange Commission and the state of California have reached a tentative deal with the Pimco mutual fund group to settle probes into whether the company sent stock trades to brokerage firms that aggressively pushed their funds to investors, according to people familiar with the matter.

Pimco would pay $10 million to $12 million to resolve the parallel investigations into so-called directed brokerage arrangements. The settlement is expected to be finalized in the next two weeks, sources said.

A Pimco spokesman said “discussions with federal and state regulators are continuing and we are hopeful we can settle outstanding issues promptly.�

The probe has focused on the stock trading activity of PEA Capital, the sister firm of Newport Beach-based Pacific Investment Management Co., or Pimco. Pimco’s much larger bond fund operation has not been affected.

*

Riverside Credit-Repair Firm Accused of Fraud

A Riverside credit-repair firm bribed workers at credit bureaus in an unprecedented scheme to inflate the financial standing of hundreds of clients, causing lenders to lose at least $6 million, federal prosecutors said.

Prosecutors said insiders expunged damaging credit information from files at TransUnion, Equifax Inc. and the Experian subsidiary of GUS -- companies whose credit scores are crucial to lenders and other businesses across the country.

A federal indictment returned by a Santa Ana grand jury last month named three Southern Californians and two New Jersey residents in the alleged fraud that took place for a year beginning in February 2001.

Costa Mesa-based Experian said it triggered the probe in 2002 after it fired a Dallas employee who was part of the scam.

The Aug. 4 indictment, listing 16 counts of fraud and conspiracy, named Mickey Lynn Manning and her husband, Ross Smith, whose Riverside-based firm, Second Chance Financial Services, specialized in improving people’s credit ratings.

The couple’s attorney said they planned to plead not guilty.

*

AT&T;, Adelphia Sign Deal for Internet Calls

A month after it stopped marketing conventional residential service, AT&T; Corp. inked a deal to sell Internet calling over Adelphia Communications Corp.’s cable lines.

The agreement makes Adelphia the preferred high-speed Internet provider to deliver AT&T;’s CallVantage service to Southern California homes. The companies hope that the deal will help speed adoption of broadband connections.

Adelphia, the largest cable provider in Los Angeles, serves 1.5 million residents from Ventura County to San Diego. The Denver company has 5.3 million customers nationwide.

CallVantage is AT&T;’s form of voice over Internet protocol, or VOIP, which sends calls over high-speed lines.

*

Earnings Dive 83% at Eatery Operator

Worldwide Restaurant Concepts Inc. said its fiscal first-quarter earnings plunged 83% as it continued to feel the effects of last year’s E. coli outbreak at its Pat & Oscar’s chain.

The Sherman Oaks-based company earned $595,000, or 2 cents a share, in the quarter ended July 25, down from $3.6 million, or 12 cents, a year earlier. Revenue grew 5% to $82 million.

Worldwide operates 23 Pat & Oscar’s eateries in California, 312 Sizzler steak outlets in the U.S. and Australia and 112 franchised KFC units in Australia.

Sales at Pat & Oscar’s stores open at least a year dropped 12% in the latest first quarter. At company-owned Sizzler restaurants in the U.S., same-store sales fell 2.2%. Chief Executive Charles Boppell said he expected Pat & Oscar’s sales to turn around by the third quarter.

*

For a preview of this week’s business news, please see Monday’s Business section.