Financial Headline News for Friday 10/7

It was a rare day without a swing of over 100 points in either direction as the markets were down minimally. Today was like a throwback to the days of normalcy range wise when the stock market just plodded along without the extremes. Of course Europe and the jobs report were at the center of today's activities.

As expected, the employment situation in the US remains stagnant as hiring and the unemployment rate of 9.1% remains unchanged.

Maybe companies like Otis will start solving this crisis by moving plants back to America as the elevator company is doing by relocating a plant from Mexico to South Carolina.

Here are the top financial stories of the day:

1) Stocks turn down on mixed jobs, Europe downgrades-From the AP

A three-day rally in the stock market faded after a mixed jobs report and cuts to the credit ratings of Italy and Spain.

The Dow Jones industrial average dropped 20 points, or 0.2 percent, to 11,103.

The S&P 500 index fell 10 points, or 0.8 percent, to close at 1,155. The Nasdaq composite index fell 27, or 1.1 percent, to 2,479.

U.S. employers added 103,000 jobs last month, about double what economists had expected. The report countered short-term fears that the U.S. might be entering another recession. Yet it offered few signs that strong growth will return soon.

More than two stocks fell for every one that rose on the New York Stock Exchange. Trading volume was average at 4.7 billion.

2) US employers likely added few jobs in September-From the AP

The U.S. economy will likely show its fifth straight month of slight or no job creation when the government issues its September employment report Friday. Another weak month would underscore the sluggishness of the economy and the risk of another recession.

Economists forecast that employers added just 56,000 net jobs in September. That isn't enough even to keep pace with population growth or lower the unemployment rate. The rate is expected to remain at 9.1 percent for a third straight month, according to a survey of economists by FactSet.

The faltering economy has led many employers to reduce hiring. The economy grew at an annual rate of just 0.9 percent in the first six months of the year. Since then, Europe's debt crisis and stock market declines have heightened fears that the economy will struggle to grow enough to avoid a recession.

In the first four months of this year, employers added an average of 180,000 jobs a month. But in the four months since, job gains have averaged just 40,000. In August, employers didn't add any jobs — the worst showing since September 2010.

The economy must create at least 125,000 net jobs a month to keep up with a growing population. At least twice as many are needed to rapidly shrink the unemployment rate. Unemployment has topped 8 percent for the past 31 months. It's the longest such stretch on record.

The economy desperately needs more hiring to boost the overall incomes of Americans, who would likely then spend more. Consumer spending accounts for 70 percent of the economy.

It would require robust job growth to put the many long-term unemployed Americans back to work. Nearly 4.5 million people have been unemployed for more than year. That's equal to about one-third of the total unemployed — a record.

The job total for September should receive a boost from the return of about 45,000 Verizon workers who ended a three-week strike in late August. Their absence reduced the August job totals by 45,000, and their return should bolster the September number by a similar amount.

Slower hiring has put pressure on President Barack Obama little more than a year before the 2012 election.

On Thursday, Obama urged Congress to embrace his job-creation proposal, which he called an insurance plan against a return to recession. Obama said that without his nearly $450 billion package of tax cuts and public works spending, hiring and growth will be weaker. He said the bill could help prevent another downturn if Europe's debt crisis worsens.

Republicans have resisted Obama's plan, saying they oppose the higher taxes that he and other Democrats would use to pay for it.

The economy has sent mixed signals this week about the job market. But most signs point to only slight hiring.

On Thursday, the government said more people sought unemployment benefits last week, evidence that layoffs remain elevated. Weekly applications rose to a seasonally adjusted 401,000. Applications would need to fall consistently below 375,000 to signal sustainable job growth.

Still, the increase followed a sharp decline the previous week, and applications have trended lower in the past month. In addition, factories hired more workers in September, according to the Institute for Supply Management, a group of purchasing managers.

But a more troubling note came from the ISM in a separate survey released Wednesday. It said service companies cut staff in September. Consumers have been holding back on spending, reducing business for service providers such as restaurants, hotels, retailers and financial service firms.

On Tuesday, Federal Reserve Chairman Ben Bernanke warned that the economic recovery "is  close to faltering." Bernanke said that the economy is growing more slowly than the Fed had expected and that the biggest factor depressing consumer confidence is poor job growth.

3) Otis Shifts Work Closer to Home-From The Wall Street Journal 

Globalization has come full circle at Otis Elevator Co.

The U.S. manufacturer, whose elevators zip up and down structures as diverse as the Empire State Building and the Eiffel Tower, is moving production from its factory in Nogales, Mexico, to a new plant in South Carolina.

More startling: Otis says the move will save it money.

What's happening at Otis is part of a broader shift in the way manufacturers tally costs.

Their outlook has been changing as the cost of producing abroad has risen and they have devised more efficient ways to make things close to where they want to sell them.

International companies ranging from Ford Motor Co. to General Electric Co. have started returning to the U.S. some jobs that they had previously shipped offshore, a process sometimes dubbed as "reshoring."

"It's a trickle, it's not a trend—but clearly companies are now thinking more about it," says Scott Paul, executive director of the Alliance for American Manufacturing, a nonprofit alliance of business and labor groups that lobbies for domestic production.

A number of forces are behind the modest influx. Wages and other costs are going up in foreign countries—especially China—while pay in many industrial sectors inside the U.S. has risen slowly or even fallen in many cases. Transportation costs have grown, as have the costs of holding large stocks of inventory, a common precaution when producing goods far from their end market.

Companies also recognize how moving jobs to the U.S. at a time of high unemployment can enhance their image. "A lot of companies still don't publicize plant closures in the U.S.-which they're still doing," says Mr. Paul, while going out of their way to tout moving jobs back into the country. But longer term, he says, there should be genuine gains for the American economy and workers.

Stephen Maurer, the head of the manufacturing practice at consultants AlixPartners LLP, says some things will always be made in low-cost places, like clothes, "because they involve tons of labor."

But for many other goods, the numbers are shifting. In new study, Mr. Maurer found that it's still cheaper to make a long list of basic industrial goods in places like Vietnam, Russia, or Mexico, but the gap has shrunk.

Some analysts say this trend is accelerating and will eventually make the U.S. the cheapest place to produce a wider range of goods. Otis thinks that's already the case for its elevators.

When Otis moved production down to Mexico in 1998, "it clearly was for cost-oriented reasons," says Didier Michaud-Daniel, chief executive of the United Technologies Corp. unit. "But since then, logistics costs have increased a lot."

Otis declined to disclose all its cost calculations, but it said the new South Carolina plant will undercut the costs of producing in Mexico.

Among other things, the plant will be closer to many of the company's customers, about 70% of whom are on the East Coast of the U.S.

The company figures that will lower its freight and logistics costs 17.3%.

Another 20% of savings, the company says, will come from "efficiencies" of having all its white-collar workers associated with elevator design and production located at the new factory.

The company, which is based in Farmington, Conn., had only final-assembly operations in Mexico, keeping design and engineering jobs in the U.S.

That meant toolmakers from Dallas and engineers and designers based in Indiana and Arizona had to travel across the border.

"We really needed to rationalize our supply chain, and the way to do that was to have everything in one place," says Mr. Michaud-Daniel.

At the new Florence, S.C., plant, designers and engineers will be close at hand, helping with a planned launch of a new generation of elevator designs.

It also will be easier for customers to visit the plant. Nogales is 65 miles from the nearest U.S. commercial airport, in Tucson, Ariz.

The new factory will have 360 workers, about the same total number as the Nogales facility, though that will include white-collar jobs and fewer factory-floor positions.

The facility will use more automation, including designs developed in Otis's European factories, to reduce the need for production workers, says Mr. Michaud-Daniel.

Many U.S. producers, meanwhile, remain committed to Mexico—in part because they view manufacturing there as a way to keep production close to U.S. customers while still benefiting from cheaper labor.

That's the view of John Heppner, chief executive of Master Lock Co., of Milwaukee.

Citing rising costs in China, the company has moved some production back to the U.S., as well as to its large factory in Nogales—not far from Otis's plant.

"We don't just have a maquiladora in Nogales," says Mr. Heffner, using the term for border plants that do mostly basic assembly work, "but a world-class manufacturing operation."

Indeed, Master Lock's plant in Nogales employs 1,100 and is its largest plant in North America. It also serves as the distribution hub for the western half of the U.S.

Master Lock, like many American companies, moved work to Mexico and China to survive an onslaught of foreign competition over the past decade.

"But a lot of those dynamics have turned," says Mr. Heppner.

For now, he says, Mexico makes sense for a big chunk of his company's production.

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