Stores that may not make it to recovery

NEW YORK (CNNMoney.com) -- The pace of store bankruptcies will pick up -- even if consumer spending rebounds -- in the next 12 months, industry experts say.

That's because most retailers face a severe lack of credit availability, which is now almost on par with the recession as the biggest threat to merchants' survivability, according to financial advisory firm BDO Seidman.

Retailers need a lot of cash to manage their operations, such as paying rent for leased stores, buying merchandise from suppliers and paying their employees.

According to BDO Seidman's new ranking of the top risk factors facing the 100 largest U.S. retailers, the recession ranks as the No. 1 threat, up a spot from last year.

However, access to financing, which ranked No. 11 in last year's list, jumped to No. 2.

0:00/02:05Economy is not yet recovering

"Historically, banks have liked lending money to retailers because of their strong, consistent cash flows," said Doug Hart, partner in BDO Seidman's retail and consumer product practice. "But as consumers have stopped spending, their cash flow is under siege."

"So banks are tightening their lending to retailers," he said.

In order for retailers to improve their credit standing, Hart said sellers either have to reduce costs, leading to layoffs, or increase sales, which is dependent on consumer spending.

Different funding: As cash-flow based lending dries up, lenders are offering money to merchants in a different way, said Love Goel, chairman and CEO of GVG Capital, a private equity firm focused on the retailing sector.

"It's called ABL financing, or asset-based loans," said Goel. "Banks are looking at the real estate that retailers own or the value of their inventory."

But even in that case, merchants are being squeezed by lenders as real estate values decline and lenders push up interest rates on loans. "If when business was good you could get 75 cents to 80 cents for every $1 of inventory, now you're getting 50 cents to 60 cents," Goel said.

"If you've bought $100 million in merchandise, you can maybe get $60 million in financing instead of $70 to $80 million," he said. "Merchants are struggling to bridge the gap."

Merchants are caught between a rock and a hard place. "Not only do they badly need money that they don't have, it's much more expensive to borrow money in this environment," Goel said.

Who's at risk?: Credit rating agency Moody's Investors service said earlier this month that credit conditions will worsen for sellers in the coming months.

The agency said in a report that it currently rates about 20% of retailers at "Caa1" or lower, "indicating our view that the number of defaults in the retail industry will rise in the next 12 months as the recession deepens."

Barneys, Blockbuster (BBI, Fortune 500), Eddie Bauer (EBHI), Claire's Stores, Guitar Center, Michael's Stores and Rite Aid (RAD, Fortune 500) are among the retailers that Moody's has rated "Caa1" or lower.

Goel said this serious cash crunch will force more sellers into bankruptcy and subsequent liquidation.

Although he didn't name specific companies, Goel said regional department stores, regional sporting goods stores, jewelry merchants, furniture stores and small consumer electronics sellers -- merchants laden with big amounts of inventory -- have the greatest risk of buckling due to the economy and lack of liquidity.

"We believe the [retail] market will lose 10 to 15% of the sales supply over the next year and a-half," he said.

Goel cited the home goods market, which included now-defunct chain Linens 'N Things, as being particularly hard-hit by the sales and credit crunch.

"About 18 retailers have filed for bankruptcy in that space, resulting in $6 billion in lost supply. That's just in the last 12 months," he said.

Goel estimates that as many as two-thirds of retailers -- that includes both poorly run and well-run sellers -- are vulnerable to the credit squeeze.

"Even well-run companies can't raise money to refurbish their stores or invest in customer service," he said.

If there is a silver lining, Goel said the latest retail shakeout will sift out the laggards, making the industry more competitive in all aspects of retailing.

"When the dust settles and the economy comes back, it will solidify the winners, and consumers will be buying better merchandise from well-run merchants," he said. 

Unemployment rate down in 21 states

NEW YORK (CNNMoney.com) -- The employment situation in the states showed signs of stabilizing last month.

The unemployment rate declined in 21 states in April, compared with the month before, while 11 states had no rate change, according to federal data released Friday.

The work situation, however, deteriorated in 18 states and Washington, D.C., last month, according to the Bureau of Labor Statistics.

A month earlier, unemployment rates rose in 46 states.

In April, Michigan once again led the nation with a jobless rate of 12.9%, up from 12.6% in March. Oregon, South Carolina, Rhode Island, California, North Carolina, Nevada and Ohio all had rates exceeding 10%.

Nationally, the unemployment rate rose to 8.9% in April, up from 8.5% a month earlier.

Missouri saw the biggest drop in unemployment, falling 0.6% to an 8.1% rate in April. Alaska followed with a 0.4% decline to 8%.

Some states, however, suffered rising rates. West Virginia fared the largest jump in joblessness, with its rate climbing 0.7% to 7.5% in April. Rhode Island and Ohio followed with 0.5% increases to 11.1% and 10.2% respectively.

State budget woes

States and their budgets have been hammered by rising unemployment rates. Income and sales tax revenues decline as people lose their jobs and rein in their spending.

Many state leaders are scrambling now to close last-minute budget gaps that opened when April tax revenues came in below estimates. The fiscal year in 46 states ends on June 30, and unlike the federal government, states cannot run deficits.

State and local officials are also working to deploy federal stimulus dollars that are starting to flow to them. The White House estimates that the funds have created or saved 150,000 jobs and will create or save another 600,000 by August. 

GM's tough road to avoid bankruptcy

NEW YORK (CNNMoney.com) -- It's coming down to the wire for General Motors.

With GM rapidly burning through its cash reserves due to hefty losses amid an historic slump in auto sales, President Obama said the Treasury Department would give the automaker the cash it needs to continue operations on the condition that GM restructure its debt or file for bankruptcy by June 1.

The automaker set a May 26 deadline for its bondholders to reach a restructuring agreement. As Tuesday steadily approaches, GM chief executive officer Fritz Henderson has repeatedly said that the difficulty in inking a deal makes a bankruptcy filing for the automaker "probable."

A spokeswoman for GM said Friday the company continues to plan for a bankruptcy, which is the likely next step if no agreement is reached.

0:00/02:53Remove GM from the Dow

A deal with bondholders is one of the last major hurdles for GM (GM, Fortune 500) to clear in order to avoid bankruptcy. GM has reached agreements with the United Auto Workers and Canadian Auto Workers unions that will allow the company to reduce some of its labor and retiree healthcare costs.

Rival Chrysler, which has also received billions of dollars from the federal government, filed for bankruptcy last month despite reaching a deal with the UAW, after several bondholders held out of the restructuring agreement.

So if GM cannot work out a deal with bondholders, it could file for bankruptcy as early as some time next week.

Bondholders key to avoiding Chapter 11

Still, bankruptcy is not a done deal.

"In very hostile negotiations, most of the progress is made at the 11th hour," said Edward Neiger, founder of Neiger LLP, a creditors' rights and bankruptcy law firm. "It's very hard to predict what the outcome will be until the 11th hour, when the parties often realize the alternative is worse for both of them."

To avoid bankruptcy, GM would need to convince the bondholders to accept a much reduced stake in the company.

GM's proposal would give bondholders a 10% stake in the automaker, even though they currently own about 40% of the company's debt. The Treasury would get about a 50% stake in GM.

Bondholders have issued a counteroffer that would give them a 58% stake in the company. The Treasury, however, would not receive any stake in GM, and the automaker would remain liable to pay back the that the government has lent it.

Late Friday GM said it borrowed an additional $4 billion from the US Government making a total of $19.4 billion borrowed from the Treasury Department.

Under both plans, the UAW would receive about a 40% stake in the company.

Henderson has suggested that it will be up to the government, not GM, to determine whether bondholders should get a better deal, but the government has not given any sign it will adjust its offer.

The Treasury has indicated it wants to protect the interest of the taxpayers who have given billions to the automaker. A spokeswoman for the Treasury said Friday the government continues to work with all stakeholders to reach an agreement.

But Rep. Jeb Hensarling, R-Texas, wrote in a letter to Treasury Secretary Tim Geithner Friday that more negotiations "must take place soon and at an expedited pace."

"Bondholders must have a seat at the table during negotiations in how the company would be restructured. The company, the government, the union and the bondholders should negotiate details of a reasonable debt-to-equity swap before stepping into court," Hensarling wrote.

Bankruptcy would be bad for investors, suppliers and dealers

Should GM file for bankruptcy, the court will determine just what debts will be paid to various creditors. Bondholders could end up with a better deal than GM's offer, and many appear willing to take that gamble.

GM's stockholders, however, would likely be cleaned out. Although many GM shareholders have essentially been wiped out already. The stock currently trades for about $1.40 a share, more than 90% lower than year-ago levels.

Auto parts suppliers could also take a hit. GM pays its parts makers an average of $2 billion a month. The company would be able to pay some of the money it owes suppliers, but only those whom the court determines to be "critical vendors."

The fate of many GM dealers could also be decided by a bankruptcy court. GM notified 1,100 of the 6,000 dealerships in its network that it would be terminating their contracts next year. Some of those dealers would likely close this year.

Some dealers are hopeful that state franchise laws could protect them from having to be shut down, but many legal experts have said that the dealers will face an uphill battle if GM actually does wind up filing for bankruptcy.

-- CNNMoney.com senior writer Chris Isidore and CNN Congressional producer Deirdre Walsh contributed to this story.  

The incredible shrinking dollar

NEW YORK (CNNMoney.com) -- The U.S. dollar has taken a beating in the past few months even as stocks have soared and investors have come to expect an economic recovery sooner rather than later.

The euro hit a 5-month high against the greenback on Wednesday while the British pound rallied to its highest level against the dollar since November. The dollar has also been weakening against the yen as of late.

It's an interesting phenomenon that, at first blush, might not make sense. The stronger the rally in stocks and the more that people talk about a potential end to the recession, the more ground the dollar... loses against other currencies?

But this does make sense. Despite the many problems facing the U.S. economy, traders had flocked to the dollar because of its relative safety. As bad as the U.S. economy was, it appeared that Europe's was in even worse shape.

Plus, there's the notion that since the U.S. led the rest of the world into this global economic crisis, it was likely that it would also be the first country to emerge from the recession.

Now that there are more signs that this is coming to fruition, investors have embraced stocks again. The dollar is no longer viewed as a place for jittery investors to park cash.

0:00/03:02Happy with higher oil prices

"The dollar is under pressure. As the economic situation in the U.S. seems to be stabilizing, the dollar is losing some of its safe haven demand. It's on weak footing," said Brian Dolan, chief currency strategist for FOREX.com, online currency trading site.

Talkback: Are you worried the dollar will get even weaker? Leave your comments at the bottom of this story.

So if the dollar deteriorates further, how will that impact the economy going forward?

The downside of a weaker greenback

The bad news is that a weaker dollar could lead to a continued surge in commodity prices, most notably oil. The weakening greenback has played a small role in leading crude prices back above $60 since oil is traded in dollars.

If oil prices stabilize around this level, it may not necessarily spell an end to economic recovery hopes. But if the dollar dips even more and oil prices skyrocket as a result, that has the potential to hit consumers hard. Nobody wants a return to last summer's record high gas prices of more than $4 a gallon.

"If the dollar were to continue to weaken and energy prices move much higher, it acts like a tax on the consumer," said John Derrick Director of research U.S. Global Investors Inc., money management firm based in San Antonio.

A much weaker dollar would also make the cost of other imported goods more expensive and diminish the buying power of anything purchased abroad. That's also not in the best interest of consumers.

Some benefits from the dollar's decline

But a shrinking dollar is not all bad news. Many big multinational companies based in the U.S. could benefit from further declines in the greenback since it would boost the value of their international sales and profits once translated back to dollars.

While that may seem like nothing more than a mere accounting trick, the importance of improving results for blue chip companies can't be overlooked.

With that in mind, an analyst at Deutsche Bank upgraded shares of McDonald's (MCD, Fortune 500) on Wednesday and cited easing currency pressures, i.e. a weaker dollar, as one of the reasons he's more optimistic about Mickey D's outlook.

Other big multinationals such as Procter & Gamble (PG, Fortune 500), Johnson & Johnson (JNJ, Fortune 500)and Coca-Cola (KO, Fortune 500) have been moving higher as the dollar has weakened and have also been upgraded by analysts.

Let's face it: We need American icons like these companies to bounce back. The only way for the market rally to have legs is for large, well-known firms to get back on solid footing.

Even though it's tempting to say that what happens on Wall Street doesn't affect you on Main Street, nothing could be further from the truth.

An improving stock market should eventually lead to higher levels of consumer confidence and, more importantly consumer spending. What's more, it's no coincidence that major companies issued massive layoffs falling steep plunges in profits and their stock prices. The job losses should abate and companies will start hiring again once their bottom lines improve.

Now of course, a weaker dollar is not a complete panacea for the U.S. economy's woes. Dolan points out that multinationals will probably report some favorable impact from currency fluctuations in the second quarter, but that will be partly offset by the fact that demand abroad is likely to remain weak due to the worldwide economic slump.

Derrick adds that some investors are likely to dismiss any profit gains from a falling dollar as transitory.

Still, there are clearly pros and cons to a weaker dollar. Everybody is hopeful that the U.S. economy is finally close to hitting bottom, and one sign that the recovery could be for real is if investors continue to sell the dollar and embrace riskier assets.

But one unfortunate side effect of a recovery is that the dollar could get dragged down further and spark more worries about inflation down the road.

Talkback update: Greetings Buzz readers. There is a new way to post comments for this column. If you have a Facebook account, you can submit your feedback using the Facebook Connect feature that will appear at the bottom of the page. If you don't have one, it is free to sign up.

The good news is that reader comments will now appear immediately and on the same page as the column as opposed to a separate page. I trust that loyal Buzz readers will continue to actively share their thoughts with this new feature. And rest assured, I will still be using the best reader reaction as fodder for video installments of The Buzz.

So with that in mind, here is today's question for readers. Are you worried the dollar will get even weaker? 

Summer's here. So are higher gas prices

NEW YORK (CNNMoney.com) -- With the Memorial Day weekend and summer driving season approaching, motorists are facing a familiar trend -- surging gasoline prices.

But while pump prices have increased more than 15% over the last 23 days, and are likely to go even higher over the coming weeks, experts don't foresee anything like the record levels of 2008.

"An overall increase is not abnormal for this time of year," said Bob van der Valk, a fuel-pricing analyst with 4Refuel Inc. in Lynnwood, Wash. "It will follow a similar trend, just starting at a lower price than 2008 did."

He also cited recent refinery fires in California, Pennsylvania and Illinois, curtailing supply, as a reason for the current spike.

The national average price for a gallon of regular unleaded gasoline increased Thursday to $2.362, up 2.8 cents in a daily survey compiled for motorist group AAA. That's the 23rd consecutive increase, during which the price of gas has increased 31.4 cents, or 15.3%. All 50 states and the District of Columbia have regular unleaded gas prices of $2 and higher.

0:00/2:24Summer pump jump

But the surge in prices is somewhat relative. The average price is down 38% from the $3.807 per gallon AAA reported one year ago. And it's down $1.75, or 42.5%, from the record high of $4.114 set last July 17.

Gas prices could increase to $2.41 this weekend, said Tom Kloza, publisher of Oil Price Information Service.

"That would be an astounding 50% increase from November," he noted. "We have never seen a similar percentage increase from winter to spring."

As a resultof the comparatively lower prices, van der Valk said he expected Americans will drive more this summer when they take time off.

That wasn't the case last year, when prices at the pump were volatile. Soaring prices curtailed travel, and by July 17 gas prices had risen already 35% year-over-year.

Consumers finally began to see a reprieve in August. But late summer brought Hurricanes Gustav and Ike, and gas prices shot back up in September, reaching more than $5 per gallon in some parts of the country. On Sept. 16, gas prices started declining amid weakening demand as the global economic slowdown took hold.

Barring major hurricanes or other unforeseen events, van der Valk expects the average price to peak around $2.75 by Labor Day. California and other West Coast states could see prices spike as high as $3, he added.

Kloza doesn't see quite as big a spike.

"If you believe in $3 gas, you believe in the Dow going back to 10,000," he said. "Fundamentals are the only way prices will move higher -- and I don't see that."

Instead, Kloza predicted average national prices will peak this year around $2.50 --and "we may be really close" to that level, he said.

And then, the cycle heads downward again.

"It could go below $2 by Christmas," van der Valk said. "People will say, 'Great, the gas companies are giving it away again.'" 

Hired! Do your homework, land a job

NEW YORK (CNNMoney.com) -- Even in the current job market, getting a pink slip doesn't always lead to long-term unemployment - especially if you're willing to do the extra legwork it takes to get hired these days.

When David Hudson was laid off from his computer programming job, he sharpened his skills, did his due diligence and took full advantage of the resources available to him.

Hudson, 40, was lucky enough to get a heads up before his employer gave him the ax. He was notified in early February that his firm would have to make cuts and his last day would be March 6. He made sure to use the time wisely.

"I put myself in the place of the employer," he explained. "What would the employer be looking for, what would catch their eye?"

For starters, Hudson researched the key words and phrases that hiring managers were looking for now, like "computer programmer," instead of the more outdated "IT professional," and described himself accordingly on his résumé before posting it to Dice.com, Careerbuilder.com and Monster.com.

It worked. Hudson says he received 20 or 30 calls or hits from his résumé alone.

As for networking, Hudson reached out to his friends and former managers, joined LinkedIn and his college alumni association at UCLA to gain access to more job listings. He focused his search on programming jobs in the Los Angeles area. With a wife and two sons, Hudson hoped to make the transition smooth.

Meanwhile, he brushed up on his software skills through books and online tutorials. And prepared a loose-leaf binder with alphabetized information on the companies he applied to and recruiters he was in contact with.

0:00/00:48Targeting your next job

One of the employers that contacted him early in his search was Edmunds.com, a Web site that covers the auto industry based in Santa Monica, Calif.

Immediately, Hudson familiarized himself with the company by watching the office video tour online. He also looked up current employees on LinkedIn and researched the relevant skills and current projects they listed.

When it came time for his interview, Hudson arrived in a suit even though he knew the office was business casual. He also prepared answers and anecdotes for every conceivable question he could think of in advance.

Jesus Robles, Edmunds.com's director of release management and Hudson's hiring manager, said the Senior Release Management Engineer position had been open for 5 months and they had received many, many résumés - "way more than normal," he said.

"When I saw David, it looked like he had done his homework; he was really good at responding to our questions, his skills were current."

Hudson got the job and started March 10. Technically, he had only been unemployed for three days.

Back in business

Our career experts agree that Hudson can credit his success to his analytic approach to the job search.

"This is a buyer's market out there right now," said Dan King, principal of Career Planning and Management Inc. in Boston. "Its not always the most qualified who gets the job but the one who knows best how to market their qualifications."

Like Hudson, job seekers need to sell themselves to potential employers. That means getting up to speed on relevant skills in demand, finding contacts with the company and putting your best foot forward at the interview.

Using job boards to get information on what employers are looking for, and incorporating that in your résumé with key words and phrases, is a smart way to get started, according to Barbara Safani, president of Career Solvers in New York.

Taking courses, webinars and tutorials to bone up those sought-after skills is also key - particularly for those that have been out of the job market for an extended period of time, she said.

"That's true in all industries but particularly in technology," she added.

Further, promoting yourself as a serious candidate during in-person interviews is not just about being prepared, but also presentable.

"Showing up in a suit communicates that it was important enough to him to make the right impression," King said.

Read updates on the people previously profiled in Hired! Join the Hired! group on Facebook .

Have you found a job recently? We want to hear from you. Send us an email and attach a photo. Tell us where you got hired and how you landed the job and you could be profiled in an upcoming story on CNNMoney.com. For the CNNMoney.com Comment Policy, click here .  

California budget nightmare

NEW YORK (CNNMoney.com) -- Note to Californians: Get ready for larger class sizes, fewer police patrolling the streets and more public offices shuttered on weekdays.

State officials are now scrambling to close a $21.3 billion fiscal shortfall, a gap that grew by $6 billion overnight after residents voted down five budget propositions Tuesday.

The state must make "severe cuts now," Gov. Arnold Schwarzenegger said Wednesday. He and state legislative leaders will have to hammer out a budget deal before the fiscal year ends on June 30.

"There will be around $5.3 billion in additional cuts in education, there will be severe cuts in health care, which is another area where you know we spend a lot of money, and then of course you have to go and look in other areas like prisons," said the governor, who was in Washington, D.C., meeting with the Obama administration.

While most states are facing cash crunches as the economy weakens, California's problems are larger than most. Only three months ago, state officials agreed on a budget deal that closed a $40 billion gap by cutting $15.8 billion in spending, temporarily raising the state sales tax by a penny, borrowing $5.4 billion and using nearly $8 billion in federal stimulus funds.

Back at the budget table

Now they are back at the table, facing another massive shortfall. And unless the budget problems are addressed, the nation's most populous state won't have enough money to pay many of its bills on time in the coming fiscal year, the California Legislative Analyst's Office said earlier this month. The state comptroller already had to delay $3 billion in payments in February because of a lack of cash.

California's options are more limited than most. Leaders are constrained by having the nation's lowest state bond rating, which makes borrowing more expensive, and by a multitude of voter-approved propositions that dictate their spending.

"They are not flush with choices," said Jerry Nickelsburg, senior economist with the UCLA Anderson Forecast. Officials will look to education, health care and prisons because "they are about the only places you can find the money."

The defeated proposals would have allowed the state to divert money earmarked for early childhood education and mental health programs into the general fund and to borrow funds from the state lottery.

Even if these measures had passed, Schwarzenegger said he still needed to cut $3 billion from education spending, reduce funding for the state's Health and Human Services department, reduce the state workforce by 5,000 people and obtain $6 billion through short term borrowing to close a $15.4 billion gap.

Last week, the governor said that if the propositions are defeated, he'd be forced to cut another $2.3 billion from the education budget, eliminate funding for substance abuse treatment, crime prevention, HIV education and prevention and outreach efforts by the state public college systems. He would also have to borrow $2 billion from local governments, forcing them to cut back their spending on law enforcement and other services.

California residents will likely see teachers laid off and a shorter school year, said Daniel J.B. Mitchell, professor of management and public policy at the University of California at Los Angeles. Already, the Los Angeles court system announced it will be closed one day a month to conserve funds.

"There's no end to the things you can cut," Mitchell said.