ECONOMY

PRODUCTIVITY GROWS AT 2.5% RATE IN SPRING, SLOWEST SINCE 2002

Workers’ productivity increased at an annual rate of 2.5% in the spring, the smallest gain since late 2002, reflecting the economy’s slowdown.

The increase in productivity – the amount an employee produces for every hour on the job – was down from an initial estimate of a 2.9% growth rate for the April-to-June quarter and marked a deceleration from the 3.7% pace posted in the first three months of this year, the Labor Department reported yesterday.

The new reading on second-quarter productivity was slower than the 2.8% pace some analysts were forecasting.

“Although productivity is slower than it has been, it is still in good shape,” said Clifford Waldman, economist at Manufacturers Alliance/MAPI, a research group. A major factor restraining the increase in productivity in the second quarter was a big slowdown in overall production. Gross domestic product, which measures the value of all goods and services produced in America, rose at an annual rate of 2.8% in the second quarter, compared with a 4.5% growth rate in the first quarter.

In other economic news:

The start of the back-to-school shopping season was a disappointment for major retailers. Wal-Mart Stores Inc., Limited Brands, Talbots Inc. and Costco Wholesale Corp. were among the companies issuing reports of sluggish sales for August. New claims for unemployment benefits rose for the second week in a row, reflecting the lingering impact of Hurricane Charley, the Labor Department said. For the week ending August 28, new applications increased by a seasonally adjusted 19,000 to 362,000. A little less than half of the rise was blamed on the storm, which ripped through Florida on August 13, a government analyst said.

-Associated Press

STATE

IBM TO PAY HOMEOWNERS FOR LOST PROPERTY VALUE AFTER SPILL

IBM Corp. will pay $10,000 to most homeowners and up to $50,000 each to commercial property owners whose land was polluted by groundwater near the company’s plant outside Binghamton, according to a program announced yesterday.

The 480 property owners in Endicott will receive either a $10,000 payment or 8% of the full market value of their property, whichever is greater, according to state Attorney General Eliot Spitzer, whose office negotiated the program. Most are expected to receive $10,000.

“IBM is offering a voluntary property benefit program which encourages investment in Endicott,” said IBM’s vice president for environmental affairs, Wayne Balta. “This program has the potential to inject millions into the local economy and will provide substantial benefits to property owners and the community.”

Homeowners who participate agree not to make a future claim against IBM for property damage, although they will be free to make injury or other claims related to the pollution, Mr. Spitzer said.

The homes were chosen after state tests found they need ventilation systems. IBM paid for the systems to protect against gases seeping in from the ground through cellars, said Assistant Attorney General David Munro, who handled the 12-month negotiations. Property owners, however, aren’t required to spend the money on any additional anti-pollution measures.

The pollution, from leaks and spills of a class of chemicals called volatile organic compounds, was discovered in 1979.

In August, IBM agreed with the state Department of Environmental Conservation to plan and take additional steps within a year to clean pollution affecting hundreds of properties in the village caused by the computer company’s former circuit board manufacturing plant. The company agreed to eliminate underground pollution near the plant, 65 miles south of Syracuse.

– Associated Press

NATIONAL

METRO-GOLDWYN-MAYER DOWN AS PRICE NEARS TAKEOUT VALUE

Shares of Metro-Goldwyn-Mayer Inc. were down more than 9% yesterday as the price neared the reported value the company would get if it were acquired by Time Warner Inc. or a group led by Sony Corp.

Time Warner has changed its all-stock offer for movie studio MGM to a cash offer worth $4.5 billion to $4.6 billion, The Wall Street Journal reported in its Thursday edition, citing people familiar with the matter. That would still be under the Sony offer, which is shy of $5 billion.

Based on MGM’s outstanding share count of about 235.9 million shares and the assumption of $2 billion of debt, the Time Warner deal would value MGM at $10.50 to $11 a share. The Journal said the Sony bid was about 50 cents to 75 cents higher than that.

Shares of MGM, which closed at $12.10 Wednesday and reached a 52-week high of $12.95 on April 27, were down $1.10, or 9.1%, at $11 a share, on composite volume of 1.56 million shares, compared with average daily volume in the New York Stock Exchange-listed stock of 822,078 shares. The stock hit a 52-week low of $8.72 on Sept. 2, 2003.

– Dow Jones Newswires

CONTINENTAL AIR TO CUT 425 JOBS, $200 MILLION IN COSTS

Continental Airlines Inc., the fifth-largest American carrier, said it will eliminate 425 jobs, mostly managers and clerical workers, to help reduce annual costs by $200 million.

Unless fares rise, the Houston-based carrier also will have to cut wages and benefits, Continental’s chief executive, Gordon Bethune, said in a statement, without giving details. The company said it’s negotiating savings from suppliers and is seeking to trim expenses for fuel, facilities and ticket distribution.

Continental is trying to trim expenses by $1.1 billion because of high fuel prices and growing competition from discount carriers that’s holding down fares. Those trends also are hurting other major airlines, with US Airways Group Inc. seeking pay and benefits reductions to avoid a second bankruptcy and Delta Air Lines Inc. negotiating cuts with its pilots.

On May 18, Continental said it might have to ask workers for wage, benefit and pension-funding concessions, though the airline hasn’t pursued that option yet.

The airline’s job cuts are 7.3% of the 5,850 management and clerical positions the company said it had at the end of last year. Continental said most of the reductions are being made immediately through firings and attrition. Spokesman David Messing declined to say how many are firings.

– Bloomberg News

INTERNATIONAL

JAPAN, E.U. TO COORDINATE ANY SANCTIONS ON U.S. IMPORTS The European Union and Japan said they will work jointly with six other countries in an effort to overturn illegal American antidumping rules by possibly imposing sanctions approved this week by the World Trade Organization. The eight nations won WTO authorization to impose tariffs worth more than $150 million a year on American imports. WTO approval came after Congress failed to repeal a law that distributes import duties to companies such as Timken Co. and Micron Technology Inc. that complain foreign rivals undercut their markets, rather than the U.S. Treasury. The Japanese government said the ruling gives it the green light for retaliation worth as much as $78 million a year. Japanese exporters, the hardest hit by the four-year-old American law known as the Byrd Amendment, last year paid $81 million to their American competitors under the legislation.

– Bloomberg News

REGULATORY

COMMERCE BANK PROBED BY NASD OVER POLITICAL DONATIONS

Commerce Bancorp Inc., the fastest-growing American bank over the past five years based on deposits, is being investigated by the National Association of Securities Dealers for possible violations of a rule banning the use of political donations to win municipal bond business.

“If they’re doing these things in the industry that are known as pay for play, we want to look at it,” said William Horn, a senior compliance officer in Philadelphia for NASD, a self-regulatory agency, in an interview.

Current and former employees are being asked whether anyone at the bank’s municipal unit solicited contributions, discussed what candidates would receive the donations, and whether donors were told where their money was going, according to a letter sent by the NASD. The responses are due back by September 7.

Commerce, the no. 1 manager of New Jersey debt sales in 2002, quit arranging bond sales for municipalities in July after two bankers were charged with making favorable loans to former Philadelphia Treasurer Corey Kemp in exchange for steering municipal deposits to Commerce and taking out a $30 million line of credit.

Officials at Commerce said in July that they expect the corruption allegations to have little effect on earnings.

– Bloomberg News