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WASHINGTON — Union membership jumped to 12.4 percent of the nation’s work force last year, amid widespread job losses and credit woes.

The ranks of organized labor rose by 428,000 workers in 2008, the biggest annual gain since the government began compiling such data in 1983, the Bureau of Labor Statistics reported Wednesday.

It’s the second year in a row unions have added to their ranks. Membership increased by 311,000 in 2007.

Still, union membership remains well below its peak — 35 percent of the work force — that was reached during labor’s heyday of the 1950s. Membership was about 20 percent in 1983, the first year the bureau began compiling the numbers.

Unions have moved aggressively to bolster organizing efforts in recent years, a move that apparently offset the loss of 2.6 million jobs from payrolls in 2008. The Teamsters Union, one of the nation’s largest unions, had its most successful organizing year in decades, with more than 43,000 workers joining.

Gary Chaison, a labor specialist at Clark University in Worcester, Mass., said the figures show the steady decline in union membership might have bottomed out.

"I think the unions are still vulnerable," Chaison said. "It’s almost as if they’ve settled down, but there really hasn’t been any major growth spurt yet."

Public sector unions accounted for most of the increase last year. The union membership rate for government workers rose to 36.8 percent from 35.9 percent in 2007. In the private sector, membership remained steady as union ranks inched up to 7.6 percent from 7.5 percent in 2007.

Unions are hopeful they could experience even more of a resurgence if Congress passes legislation this year making it easier for workers to organize unions. The Employee Free Choice Act would give workers the option of forming a union by simply signing a card or petition instead of holding secret ballot elections payday loan.

The bill passed the House in 2007, but did not survive a Republican filibuster in the Senate. With Democrats expanding their majority in the Senate, union leaders say they are close to securing the 60 votes needed to break a filibuster.

Businesses, already reeling from the economic crisis, are mobilizing fierce opposition to the bill, arguing that without secret ballot elections, workers will be open to union bullying tactics.

Business groups claim passage of the card-check bill will put many of their members out of business.

Chaison said Wednesday’s data could fuel arguments against the card-check bill.

"It will be difficult for unions to claim that they can’t organize enough to offset declining employment because they’ve managed to do it over the last two years," he said.

Keith Smith, a spokesman for the National Association of Manufacturers, said the numbers "reinforce to us that the system is working" and show unions have exaggerated the need for labor-law revision.

But union advocates note that only a fraction of new members last year came from newly formed unions, while the vast majority were already in unionized workplaces.

Stewart Acuff, special assistant to AFL-CIO President John Sweeney, said the 428,000 new members last year is just a small portion of what unions could recruit if the card-check bill passes. He cited union surveys showing nearly 60 million people would join a union "if there was no fear and intimidation."

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Fannie Mae and Freddie Mac could tap the government for up to $51 billion in coming weeks, exceeding some Wall Street estimates, so they can continue to operate as the largest providers of funding for U.S. residential mortgages.

The storm of rising delinquencies and falling securities values that led to the government’s seizure of the companies in September accelerated in the last quarter, requiring Fannie Mae and Freddie Mac to seek more of the stop-gap measures organized by the U.S. Treasury and their regulator. Analysts predicted more capital needs from Treasury through 2009.

Fresh losses in the most recent quarter will probably be the harshest on Freddie Mac (), which holds a larger portfolio of risky mortgage securities, including subprime bonds. The McLean, Virginia-based company said on Friday it may have to seek $30 billion to $35 billion in capital from the Treasury in the form of senior preferred stock.

Washington-based Fannie Mae () said late on Monday that the Federal Housing Finance Agency, the regulator, may request $11 billion to $16 billion, based on estimates for fourth-quarter results.

Signs of larger losses underscore the importance of the Obama administration’s measures to halt foreclosures that are feeding a downward spiral in the housing market, already in its worst downturn since the Great Depression. Until the declines in house prices are broken, the cycle will continue and the economic recession could get worse, economists said.

QUESTIONS ABOUT LOSSES AND RESERVES

Fannie Mae could see greater losses through 2009 than Freddie Mac from guarantees on mortgage-backed securities, according to analysts, including Rajiv Setia of Barclays Capital in New York.

The companies have provisioned for just a third of cumulative losses on guarantees of $45 billion and $80 billion, respectively, he said payday loans.

“The questions are the source of the losses and how much is set aside in reserves for future losses,” said Jim Vogel, a strategist at FTN Financial in Memphis, Tennessee, in a note to clients. “Both will determine, along with further housing performance, the size of the draw at the conclusion of the first quarter.”

Fannie Mae and Freddie Mac guarantee or own nearly half of all U.S. mortgages.

After taking about $14 billion from the Treasury last year, Freddie Mac would be using about half of its $100 billion Treasury lifeline. Other funding sources have shriveled in the credit crunch, enhancing the importance of liquidity from Freddie Mac, Fannie Mae and the 12 Federal Home Loan Banks, some of which are facing capital shortfalls of their own.

Expected capital needs for the fourth quarter exceed Barclays’ initial estimates of about $26 billion and $10 billion for Freddie Mac and Fannie Mae, respectively. Credit Suisse and FTN predicted about $10 billion and $15 billion in fourth-quarter capital needs, respectively, for Fannie Mae.

DANGER IN DERIVATIVES HEADWIND

Fannie Mae and Freddie Mac are also fighting a headwind of unrealized losses on interest-rate derivatives they use to hedge their mortgage portfolio, Moshe Orenbuch, a strategist at Credit Suisse, said in a research note on Monday.

What’s more, proposed legislation that would make it easier for a bankruptcy judge to tear up mortgage contracts has hurt the value of securities, he said. That could add $20 billion to the Treasury’s costs of buoying the companies, he added. 

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European aerospace group EADS () on Friday denied it was preparing for a possible collapse of the 20 billion euro ($25.6 billion) A400M military aircraft program as it tries to renegotiate late delivery penalties.

EADS has suspended production of the aircraft designed to carry troops and equipment to rugged combat zones like Afghanistan because of a row with engine makers over delays.

The Financial Times Deutschland reported potential losses had forced the Airbus parent company to question its role in Europe’s biggest single arms development.

“According to FTD information, the mass of A400M problems is prompting a discussion at EADS over whether the project should be maintained,” the newspaper reported.

The FTD quoted the head of Germany’s air force as saying deliveries to the Luftwaffe of the troop and cargo plane would be delayed for as much as four years to 2014.

“That is a disastrous development,” he was reported saying.

EADS shares traded 3.10 percent lower at 12.49 euros at 1209 GMT (7:09 a.m. EST), after it had gained 7.15 percent in 2009.

EADS faces steep penalties over A400M delays now stretching beyond three years. It has begun talks with seven European NATO governments to review the penalties and other terms in return for firm pledges on deliveries same day payday loans.

EXPENSIVE DELAYS

The size of the exposure is not known but EADS has already taken charges of 1.7 billion euros and analysts say it faces a potential deficit of billions more — threatening a repeat of financial strains caused by the delays in the A380 superjumbo.

EADS denied any internal scenarios to escape the project.

“There is no discussion within EADS about a scenario to withdraw from the A400M program, contrary to what has been circulated in the press,” the group said.

However, at least one high level EADS executive believes the company cannot continue without relief on the terms of the program, according to sources familiar with the matter.

And executives at Airbus are increasingly outspoken about the impact of the program, which was recently handed to the Toulouse-based planemaker by EADS Chief Executive Louis Gallois in a reorganization of EADS military aircraft activities.

RECIPE FOR DISASTER 

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As President-elect Barack Obama prepares to take office, the incoming administration and Congress continue to shape a massive stimulus package to help the struggling economy.

The proposed $825 billion plan mixes government spending with tax breaks in the hopes of raising gross domestic product by 3.7% and saving or creating 3.3 to 4.1 million jobs by the end of 2010.

While the final breakdown of the package remains to be seen, much of the debate centers on the effectiveness of government spending versus tax cuts as means of reviving the economy. Currently, the plan includes roughly $550 billion in spending and $275 billion in tax cuts.

Most economists support the emphasis on spending, saying government expenditure does more to boost gross domestic product, a key indicator of fiscal health.

In other words, spending delivers more bang for the buck because each dollar paid to a worker building a wind turbine, for example, is then re-spent on groceries or clothing, causing a fiscal ripple-effect. Conversely, a worker might save a third of the money he is given in a tax cut, with some of the spending going toward imports, which would also reduce the stimulus to GDP.

According to a Jan. 6 study by Mark Zandi, chief economist at Moody’s Economy.com, GDP grows by $1.59 for every dollar spent on infrastructure, while the increase from a corporate tax cut is only $0.30.

"The mix between spending increases and tax cuts is roughly right," Zandi says. "Spending packs a bigger economic punch, but tax cuts are helpful because even though they’re not as economically efficacious, they do work more quickly."

Based on Zandi’s study, some of the most efficient ways to spend government money are temporarily increasing food stamps (a $1.73 GDP increase per dollar), extending unemployment benefits ($1.63), increasing infrastructure spending ($1.59) and upping direct aid to financially strapped states ($1.38).

The draft bill reflects that emphasis on spending. The approximately $550 billion in government spending includes: $159 billion to education; $154.5 billion for health care; $92 billion to infrastructure; $58 billion to investments in energy; $71.5 billion in aid to the poor and unemployed; and billions more to science, technology and housing.

Still, tax cuts can work quickly get bipartisan support among lawmakers, and the current bill contains $275 billion in breaks for business and individuals. For companies, cuts include savings on capital investment and past profits; individuals will likely get $500 of relief ($1,000 for families), a $2,500 college tuition tax credit, and home-buyers will owe less bad credit payday advance.

Some research shows the positive effect of tax cuts on GDP gets short shrift. Christina Romer, who studied the subject while a professor at the University of California, Berkeley - and who Obama chose as Chairwoman of his Council of Economic Advisers - says don’t underestimate them as an effective means of stimulating the economy.

Many conservatives want to adjust the tax section of the package, although most acknowledge that government spending is necessary. Norman Ornstein, a resident scholar at the American Enterprise Institute, agrees with the two-to-one spilt between spending and tax cuts, but he believes the mix of tax breaks currently proposed will not have the "major simulative effect" that’s intended.

"It’s difficult to get money out there and moving into the pipeline as quickly as you would like," he says on the spending programs. "What you want to do at this point is to get money into the hands of people who need to money to spend on their daily existences."

James Galbraith, an economist at the University of Texas, says payroll tax cuts are better than rebates, but won’t do a lot for the GDP immediately because most people will use the money to pay off credit card debt or mortgages. "A fair amount of this money," he says, "will just go into shoring up the balance sheets of households."

Other observers want far less spending. "Any increase in government spending is a bad idea," says Daniel Mitchell, a senior fellow at the Cato Institute, noting that the best stimulus is to downsize government and implement a flat tax. The most wasteful part of the Obama plan, he says, is to aid states and local municipalities: "It’s like giving an alcoholic the key to a liquor cabinet."

Regardless of the final balance between spending and tax cuts, the two-year stimulus package’s goals are ambitious: lowering unemployment by nearly two percentage points, doubling U.S. production of alternative energy in three years, modernizing 75 percent of federal buildings, and making two million homes more energy-efficient.

But those big goals and big spending come with a hefty price tag. The government projects the federal deficit will reach $1.2 trillion this year for a total national debt of $11.5 trillion - and that’s not including the proposed stimulus package. 

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Financial markets must be made more transparent - with closer attention paid to risk management - in order to prevent another global economic collapse, according to a report released Thursday by a body of top economists led by former Federal Reserve Chairman Paul Volcker.

Volcker, the head of President-elect Barack Obama’s special economic recovery advisory board, presided over the Fed from 1979 to 1987, a period of extreme financial unrest. He is known for raising interest rates to historic highs under the Carter and Reagan administrations in order to combat out-of-control inflation.

"The issue posed by the present crisis is crystal clear," said Volcker. "We [must] restore strong, competitive, innovative financial markets to support global economic growth without once again risking a breakdown in market functioning so severe as to put the world economies at risk."

The economists’ group, named the Group of 30, called for tighter regulation of the financial sector, improving coordination between government and international regulators. They also suggest regulators be allowed to work independently from politics, as political and market pressures can compromise their goals.

Central banks should be strengthened, according to the report, but not just in times of crisis. It says the Fed and other central banks should promote and maintain financial stability even when the economy is at its strongest, since market participants often make their riskiest deals during those periods.

For instance, the current credit crisis stems from unscrupulous lending practices of banks and mortgage lenders during the peak of the housing boom, which passed through without stringent government regulation. Only when the housing market collapsed were the risky deals widely uncovered.

Regulators should pay particularly close attention to relatively new and largely unregulated financial instruments such as credit default swaps, collateralized debt obligations and over-the-counter derivatives, the group said payday loans. Many analysts have said that regulators have failed to keep up with the growing complexity of Wall Street investment techniques, leading to shady and mostly unnoticed dealings.

The report also said the United States should establish a regulator that deals exclusively with non-bank financial institutions and create a way of dealing with failed non-depository financial institutions. Currently the government will take over failed depository banks, guaranteeing a certain amount of deposits through a Federal Deposit Insurance Corporation’s fund.

But the government needed to make up new rules to save other kinds of failing institutions, such as American International Group Inc. (AIG, Fortune 500), during the credit crisis.

Furthermore, the Group of 30 said the largest and most complex financial institutions should be subject to the most regulation and forbidden from engaging in activities that pose particularly high risk to the overall market.

With the financial markets tangled like a web, the biggest banks have become the most systemically important, hence the multi-billion dollar bailouts of Bear Stearns, Citigroup (C, Fortune 500) and American International Group (AIG, Fortune 500) in the past year.

Thursday’s report was a follow-up to an earlier Group of 30 study released in October. That study found that a lack of appropriate and necessary banking regulation by governments around the globe led to the current worldwide economic crisis. 

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U.S. lawmakers hardened their opposition on Tuesday to releasing $350 billion in financial rescue funds that President-elect Barack Obama wants, setting up a political showdown that regulators warned could have troubling economic consequences.

In the first big test of how he will work with Congress and tackle dissent from within his own Democratic party, Obama tried to rally support at a lunch with Senate Democrats and sent top economic aide Lawrence Summers to a closed-door meeting with members of the powerful Senate Finance Committee.

“It’s very, very important that we be in a strong position on financial recovery,” Summers, who will become director of the National Economic Council, said after his meeting.

Obama — who takes over from President George W. Bush on January 20 — may face the awkward situation of having to quickly wield his veto power to push through an unpopular policy if Congress votes to block the release of the money. A vote could come as early as Thursday.

Many lawmakers are unhappy with how the government has spent the first half of a $700 billion bailout fund, which was hastily approved shortly after the financial crisis intensified following the failure in September of Lehman Brothers.

But top U.S. regulators argued that the still-ailing financial system urgently needed the second $350 billion, and without it the recession, now over a year old, may deepen.

At a Congressional hearing, they suggested that some of the money could be used to buy bad assets that banks are struggling to value or sell — which was the stated intent when the Bush Administration originally proposed the bailout fund fast payday loan.

At Obama’s request, Bush formally asked on Monday for the second half of the bailout fund, starting a 15-day countdown for Congress to reject it or let the money flow.

Democrats and Republicans alike have complained that there was too little transparency into how the government doled out the first half of the cash. They have demanded more details from Obama before the remaining money is released.

Some Republicans are reluctant on political grounds to promote more government intervention in the economy, while many Democrats object to how the first $350 billion has been handled.

ENOUGH VOTES

Illinois Democrat Sen. Dick Durbin said winning Senate approval for releasing the money would be “challenging” and Utah Republican Sen. Orrin Hatch told Reuters that there were probably enough Senate votes to block it.

If that happens, Obama could overturn the decision with a veto after he takes office on January 20. Congress would then need to muster a two-thirds majority to override it.

“It’s a high hurdle to clear,” Tennessee Republican Sen. Lamar Alexander said in an interview, referring to the two-thirds majority.

That would certainly not be an ideal start to Obama’s presidency, and his economic aides were keen to quell the opposition before a vote. 

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The following is the text of the Bank of England Monetary Policy Committee comments following the January rate decision:

The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.5 percentage points to 1.5%.

The world economy appears to be undergoing an unusually sharp and synchronised downturn. Measures of business and consumer confidence have fallen markedly. World trade growth this year is likely to be the weakest for some considerable time.

In the United Kingdom, business surveys suggest that the pace of contraction in activity increased during the fourth quarter of 2008 and that output is likely to continue to fall sharply during the first part of this year. Surveys of retailers and reports from the Bank’s regional Agents imply that consumer spending has weakened. The outlook for business and residential investment has deteriorated. And the availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non-financial sector. But the substantial depreciation in sterling over recent months may help to moderate the impact on UK net exports of the slowdown in global growth.

CPI inflation fell to 4 fast cash with bad credit.1% in November. Inflation is expected to fall further, reflecting waning contributions from retail energy and food prices and the direct impact of the temporary reduction in Value Added Tax. Measures of inflation expectations have come down. And pay growth remains subdued. But the depreciation in sterling will boost the cost of imports.

At its January meeting, the Committee noted that the recent easing in monetary and fiscal policy, the substantial fall in sterling and the prospective decline in inflation would together provide a considerable stimulus to activity as the year progressed. Nevertheless, the Committee judged that, looking through the volatility in inflation associated with the movements in Value Added Tax, there remained a significant risk of undershooting the 2% CPI inflation target in the medium term at the existing level of Bank Rate. Accordingly, the Committee concluded that a further reduction in Bank Rate of 0.5 percentage points to 1.5% was necessary to meet the target in the medium term.

The minutes of the meeting will be published at 9.30am on Wednesday 21 January.

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European Central Bank Vice President Lucas Papademos said further interest rate cuts may be necessary if inflation keeps slowing.

If price stability is threatened by weakening inflation “an easing of monetary policy could be warranted in order to keep inflation over the medium term at levels close to but below 2 percent,” Papademos said in a speech at a conference of economists in San Francisco today.

Having reduced the ECB’s key interest rate by 175 basis points since early October to 2.5 percent, the bank’s policy makers enter the New Year under pressure to cut more deeply amid Europe’s first recession in 15 years. A report scheduled for release next week will probably show inflation fell below the ECB’s target of just below 2 percent in December for the first time since July 2007.

While pledging that inflation would not be allowed to fall “significantly” below 2 percent for a protracted period, Papademos said any rate cut “to low levels must be judged with special care because of its longer term implications for price stability.” Similar comments from other officials have prompted some investors and economists to bet the ECB will leave its key rate unchanged when its governing council next convenes Jan. 15.

“The ECB will do what is necessary to ensure that medium- term inflation will be in line with our definition of price stability,” Papademos said.

‘Remain Weak’

The euro-area economy is likely to “remain weak” this year and may even contract in the first half, Papademos said. While inflation could “drop considerably” around the middle of the year, the risk of deflation is “nil,” he said.

The ECB last month predicted its 22-nation economy would contract about 0.5 percent this year, the first annual decline since the euro began trading a decade ago cash advance no fax. Economists at Bank of American Corp. are among those anticipating an even weaker performance with a prediction for a 2.5 percent shrinkage.

Retail sales fell for a seventh month in December, manufacturing shrank at a record pace and lending to the private sector stagnated, reports showed in the past week. Data scheduled for release on Jan. 6 will show the inflation rate fell to 1.8 percent in December from 2.1 percent the previous month, according to the median of 20 forecasts given by economists.

Recent data confirm the economy faces downside risks, yet “do not suggest that the outlook for medium-term growth in the euro-area is likely to fall below the lower range” of the ECB’s forecasts, Papademos said. The foot of the ECB’s range of predictions is for the economy to contract 1 percent this year before growing 0.5 percent next year.

Defended the ECB

Papademos defended the ECB for not cutting interest rates quicker, arguing that inflation risks had been “on the upside and were increasing” until the middle of last summer. The bank’s willingness to then pare rates at the fastest pace in its history showed it had “responded in a timely manner to diminished inflation risks,” he said.

The financial crisis has resulted in a “growing recognition” that bank regulation needs to be strengthened and consolidated in the euro area, he said. In an interview published yesterday with Germany’s WirtschaftsWoche magazine, he said that may eventually mean the ECB and its network of regional central banks win new powers to supervise banks whose businesses spread across national borders.

“Enhancement of the current supervisory framework should be fully exploited,” he said today.

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