Ben Feller, Associated Press Writer

By DANIEL LOVERING, AP Manufacturing Writer

Farm equipment maker Deere & Co. said Wednesday it will recall most of the workers it laid off from an Iowa plant earlier this year to start production of the company’s 2010 models.

Deere, based in Moline, Ill., said the 452 manufacturing employees will be recalled to its John Deere Ottumwa Works starting Nov. 30. They are expected to return to work before Deere’s annual holiday shutdown, which starts Dec. 23.

But 78 other workers will remain laid off until market conditions improve enough to warrant their return, the company said.

In June, Deere said it would temporarily lay off 494 of the factory’s workers due to weak demand amid the global economic slowdown. That followed a layoff of 40 employees in April.

The Ottumwa Works, which makes equipment such as balers and pull-type forage harvesters used by hay and livestock producers, employed about 260 salaried employees and 720 wage employees, including those who remain laid off.

Deere, the world’s largest maker of farm machinery, has faced diminished demand amid the economic downturn and lower commodity prices, which affect the buying habits of farmers. In August, the company trimmed its sales projections for 2009, saying it expects the biggest single-year sales drop in at least 50 years, but reiterated an annual profit forecast of $1.1 billion.

In response, Deere has cut costs and laid off hundreds of workers, though many have since been recalled. The Ottumwa recall will be the largest of several over the past four months. Other large machinery makers, such as Caterpillar Inc., have been forced to cut larger numbers of workers because of shrinking demand.

Shares of Deere slid $1.50, or 3.2 percent, to close at $45.42 Wednesday.

TALI ARBEL, AP Business Writer Tali Arbel, Ap Business Writer

NEW YORK – A private measure of U.S. manufacturing activity grew in October at the fastest pace in more than three years, helped by government spending and higher demand from overseas. The better-than-expected reading is a positive signal for the fledgling economic recovery.

The Institute for Supply Management, a trade group of purchasing executives, said Monday that its manufacturing index read 55.7 last month, compared with 52.6 in September. It’s the third straight reading above 50, which indicates growth.

Analysts polled by Thomson Reuters had expected the index to come in at 53. In April 2006, the ISM’s level registered 56.

Employment grew for the first time in 15 months, rising to 53.1 last month. But the measure tracking new orders, a signal of future production, slipped to 58.5 from 60.8 in September.

But there are worries about the sustainability of the manufacturing sector’s recovery as government stimulus programs wind down.

Christina Romer, who heads the president’s Council of Economic Advisers, last week said the government’s stimulus spending already had its biggest impact and probably wouldn’t contribute to significant growth next year.

Still, manufacturers in other countries also are helping propel their respective economies. Manufacturing in China, which posted the strongest growth of the world’s major economies in the third quarter, expanded for an eighth straight month in October, according to a survey by a government-sanctioned industry group.

European surveys also showed growth despite the recent climb by the euro and pound against the dollar, which makes Europe’s exports more expensive. A purchasing managers’ index measuring the 16-nation eurozone expanded last month for the first time in a year-and-a-half, while a British survey spiked to 53.7 in October from 49.9 the previous month, the fastest pace of growth since November 2007.

In October, the ISM said 13 of the 18 manufacturing industries surveyed expanded, led by petroleum and coal production, apparel and furniture. Three industries shrank.

“Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode,” said Norbert Ore, chair of the ISM’s manufacturing survey committee.

Construction spending in September also was better than expected, due mainly to the largest jump in housing construction in more than six years.

The Commerce Department said Monday that total construction spending rose 0.8 percent in September, much better than the 0.3 percent drop that analysts expected. The August performance was revised down to a 0.1 percent drop from a 0.8 percent gain.

By Paul Owers

South Florida Sun Sentinel

Sunday, November 01, 2009

Home buyers in South Florida are petrified of tainted Chinese drywall.

Mike and Sandy Siegel are asking potential neighbors in the Tivoli Isles community west of Delray Beach about any evidence of the drywall. The couple had a handyman climb into the attic of the home they want to buy to make sure Knauf Plasterboard Tianjin, a Chinese maker of drywall and other building materials, is not written on any of the boards.

“There are no signs yet, but you never know,” Mike Siegel said. “Once you get this, it’s a son of a gun.”

As many as 100,000 homes in the nation, including 36,000 in Florida, could have the imported wallboard, which is thought to corrode wiring, copper pipes, appliances and metals and give off a “rotten egg” stench.

Worse, homeowners say, are the nosebleeds, respiratory problems and other symptoms they blame on the drywall.

However, state and federal officials said last week they had yet to link the drywall to any health risks.

Builders used the material from China because of a shortage of American-made drywall earlier this decade during the housing boom and after the busy hurricane seasons of 2004 and 2005. Even older homes renovated in recent years could have the suspect drywall.

Most builders have refused to fix the homes, and lenders and property insurers have offered little or no relief.

Homeowners who can afford to are moving into rental housing. Others are abandoning the properties.

Hoping to avoid any drywall-caused problems, “buyers are asking a lot more questions and doing a lot more research,” said Jon Klein, a real estate agent for Coldwell Banker in Broward County. “They’re very cautious. Very cautious. I would be, too.”

Some buyers refuse to consider homes that don’t have Chinese drywall if they’re in developments where the problem is prevalent.

“It’s fair to say that anyone who buys a home in a community with Chinese drywall is adversely affected as well,” Boca Raton attorney Allison Grant said. “It hurts everybody’s property values.”

The Broward County property appraiser is slashing assessed values of affected homes in half, and Palm Beach County also plans to cut values.

Based on those assessments, nearby homes without Chinese drywall also stand to lose value.

Drywall complaints in Broward and Palm Beach counties generally have come from Parkland, Pompano Beach, Davie, Miramar, Boca Raton and communities west of Delray Beach and Boynton Beach.

Parkland has been the unofficial epicenter for the drywall complaints in South Florida. About 150 homes there have it, Mayor Michael Udine said.

Heron Bay and Parkland Golf & Country Club are the two developments most affected in Parkland. Many people expected all home sales in those communities to decline, but that hasn’t been the case, Udine said.

Udine said he has heard that investors are trying to get deals on homes with the drywall and factoring in the cost to repair them, even though the federal government has not yet issued an official remediation plan.

But many buyers who intend to live near reported cases of Chinese drywall are trying to make sure they don’t inherit a major hassle.

Debbie Anderson, an agent for Prudential Florida Realty, held an open house recently for a new home in Parkland Golf & Country Club.

“I had a pretty good turnout – about 10 people,” Anderson said. “Almost every one, as soon as they walked in, asked, ‘Does this house have Chinese drywall?’ ”

Some real estate agents note it in marketing materials if a home does not have problem drywall. Other agents prefer to exclude any mention of it.

Under Florida law, sellers and their real estate agents must disclose any known material defect or condition that would affect the value of a home.

The Florida Association of Realtors added a disclosure form for Chinese drywall, but there is no state law requiring sellers to use it.

Buyers are starting to hire inspectors such as Howard Ehrsam to test homes before they commit to the purchase.

“They’ve invested a lot of emotion and energy into finding homes, and if they’re tainted, they get pretty upset,” Ehrsam said. “But they’re also relieved that they’re finding out now versus later.”

Ehrsam, a civil engineer and general contractor from Port St. Lucie, said he saw a need for the niche business across Florida and beyond because many home inspectors don’t know how to detect Chinese drywall.

He and his workers check a home’s mechanical systems, electrical outlets and appliances for corrosion. They also dig into walls and ceilings.

They summarize their findings in a written report, but it does not come with a guarantee. Because so little is known about Chinese drywall, Ehrsam said all he can offer is a “professional opinion.”

Julie Fass cast a wide net across Broward County in her search for a home and was drawn to one development in Coconut Creek.

The curb appeal was striking, and the interior of the home had plenty of bells and whistles. But then she found out the builder was dealing with Chinese drywall elsewhere, so she reluctantly moved on.

Fass’ search continues, though she has narrowed it to Weston because most of the homes there were built before 2005, she said. When she does find a house, she will check the drywall in the attic to make sure it’s not from China.

“There are so many things you have to think about when you’re buying a home, and this is just one more,” Fass said. “It’s a pain.”

China’s manufacturing sector expanded for the eighth straight month in October, pointing to further signs that the recovering economy is on firmer ground, a survey by an industry group said Sunday.

The state-sanctioned China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose to 55.2, nearly a full point higher than in September on the 100-point scale. Numbers above 50 show manufacturing activity expanding.

Signs of a more robust expansion follow an already healthy economic recovery, with China clocking 8.9 percent growth in the third quarter — the highest rate for any major economy in a world still trying to shake off the economic crisis.

Economists see the PMI as a valuable measure of upcoming economic activity since it contains information on new orders. In October’s data, seven of the 11 categories measured in the survey of 700 companies rose. Imports — which largely contain materials to be processed for exports — posted a 2.1-point increase, while new orders rose 1.7 points from the previous month.

A government economist hired by the federation to comment on the survey said it showed that domestic demand was picking up and that the economy was on track to continue expanding. “These figures mean that China’s economic growth will continue to accelerate in the next few months,” said Zhang Liqun of the Development Research Center, the Cabinet’s think tank.

The boisterous economic bounce-back has been the result of hefty stimulus spending by the government and a flood of lending by the state banking system. The policies have also led to overcapacity in some industries and other waste that the government is trying to curb. But Commerce Minister Chen Deming told a forum Saturday that easing back on stimulus spending too early could undermine the more fragile recovery under way in the global economy.

The petrochemical industry received a boost Sunday from the Commerce Ministry, which imposed tariffs of up to 35.4 percent on imports of adipic acid from the United States, European Union and South Korea to stop what the agency said was the dumping of the chemical at too low a cost on the Chinese market. Adipic acid is an ingredient in nylon and polyurethane and other resins used in manufacturing.

China Federation of Logistics and Purchasing (in Chinese): http://www.chinawuliu.com.cn

Copyright © 2009 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.

By JAMES PRICHARD, Associated Press Writer James Prichard, Associated Press Writer

GRAND RAPIDS, Mich. – Wal-Mart and two other top retailers said Friday they are suspending business with a large southwestern Michigan blueberry grower after investigators found children as young as 6 working in the grower’s fields.

Wal-Mart, Kroger and Meijer said pending further information, they have stopped buying products from Adkin Blue Ribbon Blueberry Co. near South Haven, about 85 miles northeast of Chicago.

Adkin general manager Tony Marr said the company has a strictly enforced written policy prohibiting young children from working in its fields. All adult employees must sign copies of the policy, and the farm keeps the signed copies on file, he said.

“We certainly don’t condone or promote child labor here in any way,” Marr said.

The company has eight full-time employees and hires about 350 seasonal workers each year to harvest and process the blueberries grown on its 640 acres. About one-third of its berries are processed for sale as fresh produce and the rest are frozen for commercial use.

Adkin is conducting its own investigation to determine what happened, he said. Parents sometimes bring children with them because they don’t have child care, he added.

“Wal-Mart, Kroger and Meijer are very large customers of ours, and certainly we’re cooperating with them in providing information about our internal investigation, trying to figure out what the kids were doing there,” Marr said.

The U.S. Department of Labor announced this week that a check of 35 randomly selected farms in Michigan led to eight being fined about $36,000 in all for violating federal migrant-housing and child-labor laws.

Ten other farms were cited for violations but not fined. Adkin was the lone farm fined for both migrant-housing and child-labor law violations and paid more than $5,500 in penalties, said Scott Allen, a department spokesman based in Chicago.

Wal-Mart Stores Inc. spokeswoman Caren Epstein said the Bentonville, Ark.-based retailer learned of the problem after being contacted by ABC News. Wal-Mart will not buy anything from Adkin “pending the outcome of an investigation by our ethical sourcing team,” Epstein wrote in an e-mail.

Representatives of Cincinnati-based Kroger Co. and Grand Rapids-based Meijer Inc. made similar statements.

Thomas K. Thornburg, co-managing attorney of Farmworker Legal Services, said labor law violations are rampant among farms that use migrant workers.

“This isn’t one abusive employer,” he said.

Federal law does not allow children younger than 12 to work on farms. Children who are 12 or 13 can have nonhazardous farm jobs outside of school hours if they work on the same farm as their parents or with written parental consent.

Labor Department investigators found four children working in Adkin’s fields during an unannounced visit on July 8. At least two of the children were under 12, including the 6-year-old.

Michigan is the nation’s largest blueberry producer, with 110 million pounds harvested in 2008.

During inspections throughout the state, investigators found migrant workers living in unlicensed migrant labor camps with sewage from a faulty septic system seeping up near living units. They also discovered untreated waste water spilling out of broken pipes, no hot water for hand washing and infestations of bugs and rodents.

Backdrop for Obama’s announcement of fuel-efficiency grants? A couple of foreign-built trucks

F. Brinley BrutonReporter

Photographs of President Barack Obama run on a constant loop in the foyer of a factory here, roughly 100 miles northwest of London.

Shots from the photo-op show the president standing in front of trucks with “Navistar” emblazoned on the front and side, a publicity coup for the major American commercial truck and bus manufacturer.

But why are these photos being shown in Coventry, Britain’s down-at-heel equivalent of Detroit?

The answer lies in the flat-fronted truck looming behind the president: It wasn’t made in Illinois, site of Navistar’s headquarters, or Indiana, where the photos were taken; the vehicle was made at a factory in Coventry by Modec, a small British producer of battery-powered trucks.

“It was hard to believe that the most powerful man in the world was in front of a Modec,” said Darren Dewis, one of about 85 people employed at the company’s airy, glass-ceilinged factory. “It was brilliant, we were over the moon,” the 29-year-old cab assembly worker said of the first time he and his fellow workers saw the pictures.

Dewis has reason to be pleased with Obama: Under a nearly-finalized joint venture with Navistar — an arrangement backed by U.S. stimulus funds — Dewis and his Modec colleagues will get to produce more of the kind of truck seen with the American president.

The deal shows how some of America’s $787 billion stimulus package is trickling beyond its shores, and also how some U.S. companies are having to reach out abroad for the cutting-edge technologies that the president hopes will help spark a broad recovery and foster “green” manufacturing jobs.

‘Right here in America’
On Aug. 5, Obama unveiled plans that would allow Navistar to receive $39 million in federal money to build electric battery-powered commercial trucks with Modec. The funds were part of a larger pool of money being made available to American manufacturers.

“I’m here today … to announce $2.4 billion in highly competitive grants to develop the next generation of fuel-efficient cars and trucks powered by the next generation of battery technologies, all made right here in the U.S. of A. Right here in America. Made in America,” Obama said inside Navistar’s Wakarusa, Ind., facility to a round of applause from local officials and factory workers.

Before the joint venture, Modec produced up to 15 trucks a week at its Coventry factory, and counted UPS, FedEx and Tesco, Britain’s largest retailer, among its customers. But the Navistar joint venture is the five-year-old firm’s biggest success by far.

Under the joint venture, the companies plan to build 400 battery-powered vehicles by 2010, and several thousand vehicles per year after that, Navistar said. The deal will eventually create up to 700 jobs in the U.S., the company said.

The first handful of trucks are scheduled to arrive in the United States on Dec. 25.

“A Christmas present for Navistar,” said Chris Wolfe, operations director for Modec.

An ‘ironic’ announcement?
The president unveiled his automotive grants just a few months after iconic automotive firms Chrysler and General Motors staggered toward bankruptcy and were bailed out with billions of U.S. taxpayer dollars. His promise that the grants would support products “made in America” came in Elkhart County, Ind., a community devastated by the shrinking recreational vehicle industry.

But the fact that much of the new technology would initially come from outside the country was not lost on Modec’s workers.

“If he wants to call it American and produce millions of them, let him get on with it,” quipped Stephen O’Neal, 43, who works as a team leader on Modec’s assembly line. “As long as he keeps selling them and Americans keep buying them, we’ll produce as many as you want.”

Discuss: Is this a good deal for U.S. taxpayers?

Some in the United States also noticed that the president was hyping a U.K.-made vehicle during his Wakarusa announcement.

Bright is also vying for some of the billions of dollars that the administration has decided to spend to promote electric and battery technology.

Waters was part of the team that developed General Motors’ EV1 in the 1990s, an electric car that quickly gained a small, devoted following but was eventually scrapped by the company.

“(Obama) is giving money to U.S. companies importing vehicles and not exporting them,” Waters said. “There is a contradiction there in terms of image and messaging.”

Perhaps sensitive to the perception their collaboration is creating, Modec and Navistar are circumspect about where exactly the U.S. government money is going and whether some of the $39 million will go directly into Modec’s coffers.

Navistar’s spokesman Roy Wiley also declined to say when exactly the vehicles would start being produced in the United States.

“I won’t respond to timeline questions,” he said. “We’ll start production when we start production.”

‘Investing in the future’
Matt Rogers, the Department of Energy’s senior adviser in implementing the Recovery Act program, said the Modec-Navistar deal makes good sense for Americans.

Roughly a third of the Recovery Act was meant to halt the economy’s downward spiral, said Rogers, who was a senior partner at consulting firm McKinsey & Co. before joining the Department of Energy. Another third was aimed at helping states suddenly caught short of essential cash.

The remaining third was earmarked to foster investment in technology that will have a long-term impact, both in terms of jobs and new technologies, he said.

“(The Navistar-MODEC joint venture) is going into a former recreational vehicle factory and restarting production in that factory with advanced technology,” he said. “We need to attract new technologies and accelerate the adoption of new technologies in the automotive sector,” he added.

U.S. companies certainly are getting serious government incentives to spur innovation.

Under the American Recovery and Reinvestment Act of 2009, $112 billion will be invested in so-called “green” technologies, and $2 billion will be earmarked for renewable energy research. Obama has also proposed adding $15 billion a year to renewable energy research.

One of the reasons that so many billions need to be spent to get U.S. manufacturers up-to-speed is that for the last two decades or so the country’s leading automotive companies have lagged their foreign counterparts in developing innovative and fuel-efficient vehicles.

Buoyed by decades of a lax regulations and low fuel prices, giants like General Motors, Chrysler and Ford focused on building bigger vehicles full of creature comforts, with little regard for how much fuel they used.

“Where’s the innovation been in the last 20 years? In NAV systems, putting VCRs in cars – that’s not innovation, that’s getting my decorator in to redo my living room,” said Maryanne Keller, who wrote “Rude Awakening: The Rise, Fall and Struggle for Recovery of General Motors,” and “Collision: GM, Toyota, Volkswagen and The Race to Own the 21st Century.”

“Obama has basically said, ‘You will reach 30-plus miles per gallon,’ so everyone has gotten on the bandwagon, saying, ‘We’re not going to be able to BS our way out of this like we have for the last 25 years,” Keller said.

So after having fumbled with and even stifled cleaner and more fuel-efficient technology, according to industry insiders, America’s automotive industry is looking for partners to help it come up with that same technology – and fast.

Hence President Obama’s photo-op display in an English Midlands factory.

In the case of the Modec-Navistar deal, the American company looked for a partner that had a particular product ready to go instead of having to develop one from scratch, Keller said, adding that the deal makes “perfect sense.”

‘You can’t just take’
Back in the Coventry factory, the type of collaboration Keller describes is top of mind.

“We’ve all got individual skill sets and we will all struggle individually,” said Wolfe, the operations director. “But if we can get together … we can take this technology onto the next step.”

Dewis, the factory worker, who like many of his colleagues lost his job at Peugeot and struggled to find work before coming to Modec, sees the Navistar deal in a bigger context that has little to do with salary, profits and national borders.

For him, the electric-vehicle technology he works with could well change the world for the better.

“You’ve got to think about future generations and the way the planet is at the minute,” said Dewis, who has a 2-year-old daughter and a 6-year-old stepson. “You have got to give something back; you just can’t just take.”

By MAYA JACKSON RANDALL

WASHINGTON — President Barack Obama, in his weekly radio address, took time out to highlight the importance of small businesses, saying too many small companies are still finding it difficult to obtain the loans they need to keep their businesses running.

“While credit may be more available for large businesses, too many small-business owners are still struggling to get the credit they need,” the president said in his prepared remarks. “These are the very taxpayers who stood by America’s banks in a crisis–and now it’s time for our banks to stand by creditworthy small businesses, and make the loans they need to open their doors, grow their operations, and create new jobs.”

Mr. Obama said it is time that large banks, who have already received substantial aid from the government, take the necessary steps to enable the recovery to take hold.

“Our economy as a whole can’t move ahead if small businesses and the middle class continue to fall behind,” he said, noting that small businesses have been hit hard by the recession. Many entrepreneurs can’t get the financing they need to start up their own companies and small firms have lost hundreds of thousands of jobs, he noted.

Earlier this week, Mr. Obama called on Congress to increase the maximum size of various loans for small businesses. He also announced plans to make more credit available for small firms through the government bailout program, the Troubled Asset Relief Program (TARP).

“The goal here is to get credit where it’s needed most–to businesses that support families, sustain communities, and create the jobs that power our economy,” he said.

Still, some critics argue that the Obama administration’s ambitious plans to rework the nation’s health-care system would actually hurt small businesses.

Noting that the unemployment rate is edging up toward 10%, House Minority Leader John Boehner of Ohio Friday argued in a statement that now is not the time for Democratic leaders to be focusing on “a massive government takeover of health care that will harm small businesses, impose more than $820 billion in new tax hikes and make job losses even worse.”

Similarly, Sen. Mike Johanns (R, Neb.) argued that Democrats’ health-care plans would have a negative impact on the country.

“The bottom line is this: We’re nearing 10% unemployment. We have a record budget deficit, and many families are working hard just to put food on the table and to pay the bills,” he said in the weekly GOP address. “Yet, there’s no doubt about it. These proposals will negatively impact pocketbooks and paychecks across America.”

Write to Maya Jackson Randall at Maya.Jackson-Randall@dowjones.com

By MIRIAM JORDAN

A coveted visa program that feeds skilled workers to top-tier U.S. technology companies and universities is on track to leave thousands of spots unfilled for the first time since 2003, a sign of how the weak economy has eroded employment even among highly trained professionals.

The program, known as H-1B, has been a mainstay of Silicon Valley and Wall Street, where many companies have come to depend on securing visas for computer programmers from India or engineers from China. Last year, even as the recession began to bite, employers snapped up the 65,000 visas available in just one day. This year, however, as of Sept. 25 — nearly six months after the U.S. government began accepting applications — only 46,700 petitions had been filed.

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Zuma PressEngineers Anna Li, left, and Jason Schlosser look over data in a lab in San Diego. Ms. Li is from Singapore and has been in the U.S. for five years on an H1-B visa.

In addition to the weak economy, companies have curbed applications in the face of anti-immigrant sentiment in Washington and rising costs associated with hiring foreign-born workers.

Usually, all visas are allocated within a month or two from April, when applications for the following fiscal year are first accepted. But this year, six months later, “you can still walk in with an application and you’re still highly likely to get approved,” said R. Srikrishna, senior vice president for business operations in North America for HCL Technologies Ltd., an Indian outsourcing company.

The sagging economy, which has pushed U.S. unemployment to 9.8%, has crimped expansion in the technology sector, traditionally the biggest user of the H-1B program. Julie Pearl, a corporate immigration lawyer in San Francisco, said that at least a third of her clients have cut their hiring of H-1B visa holders in half from a year ago.

“Most companies just aren’t hiring as many people in general,” Ms. Pearl said.

For Indian outsourcing companies, historically the largest recipients of H-1B visas, the economy as well as political pressures have prompted a cutback in applications. The recession has trimmed technology budgets at their U.S. clients; at the same time, Washington has scrutinized hiring from abroad more closely amid high unemployment at home.

Instead of bringing over Indian engineers, HCL has been hiring American employees who otherwise might have been let go by clients switching the work to HCL, Mr. Srikrishna said. Last year, HCL hired more than 1,000 employees from clients and received just 87 H-1B visas, he said.

Political pressures have come to bear among other applicants as well. Companies that receive federal bailout funds must prove they have tried to recruit American workers at prevailing wages and that foreigners aren’t replacing U.S. citizens. That regulation caused Bank of America Corp., among others, to rescind job offers to dozens of foreigners.

In addition, would-be immigrants from India and China are finding new career opportunities at home as those economies grow relatively quickly while the U.S. economy sags and its political climate appears less welcoming.

Vivek Wadhwa, a visiting scholar at the University of California at Berkeley who has studied H-1B visas, said that trend has been compounded by what he sees as rising anti-immigrant sentiment in the U.S. “The best and the brightest who would normally come here are saying, ‘Why do we need to go to a country where we are not welcome, where our quality of life would be less, and we would be at the bottom of the social ladder?’” Mr. Wadhwa said.

The cost and bureaucracy of applying for H-1B visas is another deterrent. Lawyers’ fees, filing fees and other expenses can easily reach $5,000 per applicant.

And immigration lawyers say some would-be employers are put off by a crackdown on fraud. U.S. Citizenship and Immigration Services, which administers the H-1B program, has been dispatching inspectors on surprise company visits to verify that H-1B employees are performing the jobs on the terms specified. The fraud-detection unit in coming months is expected to inspect up to 20,000 companies with H-1Bs and other temporary worker visas.

“It’s an invasive procedure that is both stressful for the employer and the foreign national employee,” said Milwaukee lawyer Jerome Grzeca, whose employment-visa business is down 40% since last year.

The numbers represent a sharp turnaround for a program that many companies had complained was too stingy with its visas. Year after year, U.S. businesses braced for “visa roulette,” as applications to bring in highly skilled foreign workers far outstripped demand, forcing the government to hold a lottery to award them.

High-tech companies, such as Microsoft Corp., have been lobbying Congress for years to raise the cap. At the same time, some U.S. legislators have been calling for restrictions on the program, which they say displaces American workers.

Sen. Charles Grassley, an Iowa Republican, wrote a letter this month to the new director of citizenship and immigration services, urging tighter controls on H-1B visas. In April, Mr. Grassley and Illinois Democrat Sen. Richard Durbin introduced legislation to require companies to pass more stringent labor-market tests that would ensure they make a bigger effort to hire U.S. workers.

Companies that use H-1B visas argue the market, rather than Congress, should dictate the number of visas issued. The fact that the 65,000-visa cap hasn’t been reached this year shows that the market will temper demand when necessary, said Jenifer Verdery, director of work-force policy at Intel Corp., who represents a coalition of companies that use the visas.

“Contrary to the claims of H-1B critics, if importing cheap labor were the goal of H-1B visa employers, these visas would have been gone on the first day applications were accepted last spring,” Ms. Verdery said. “In slow economic times, such as today, the demand decreases and the market takes over, which is as it should be.”

In 2008, 44% of approved H-1B visa petitions were for foreigners working as systems analysts or programmers. The second-largest category consisted of professionals working in universities. Indians account for about half of all H-1B visa holders.

While the number of visa holders is small compared with the U.S. work force, their contribution is huge, employers say. For example, last year 35% of Microsoft’s patent applications in the U.S. came from new inventions by visa and green-card holders, according to company general counsel Brad Smith.

Google Inc. also says that the H-1B program allowed it to tap top talent that was crucial to its development. India native Krishna Bharat, for example, joined the firm in 1999 through the H-1B program, and went on to earn several patents while at Google. He was credited by the company as being the key developer of its Google News service. Today, he holds the title of distinguished research scientist.

—Niraj Sheth, Geoffrey A. Fowler, S. Mitra Kalita and Pui-Wing Tam contributed to this article.

Write to Miriam Jordan at miriam.jordan@wsj.com

Printed in The Wall Street Journal, page A35