WASHINGTON, Jan. 4, 2008
Stocks Dive As Jobless Rate Hits 5 Percent
Wall Street Slides On Slower-Than-Expected Jobs Growth; Unemployment Reaches 2-Year High
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Job Cuts Fuel Recession Fears
Wall Street takes a dive after worrisome unemployment numbers fuel fears of a recession. Anthony Mason reports.
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Employers last month added the fewest new jobs to their payrolls in more than four years,according to the employment report released Friday, Jan. 4, 2008 by the Labor Department. (iStockphoto)
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The Labor Department's report that employers raised payrolls by only 18,000 and that the nation's unemployment rate rose to its highest level since November 2005 unnerved investors, who worried that a weakening job market will hurt consumer spending and tip the economy toward recession.
A better-than-expected reading on the nation's service economy briefly pulled stocks off their lows but wasn't enough to shake investors' concerns.
Investors had been awaiting the jobs report for weeks as they tried to determine whether the economy would continue to benefit from robust consumer spending even as sectors like home construction, mortgage writing and manufacturing slow. Wall Street is concerned that areas of weakness could puncture growth if consumers can't depend on a solid job market.
Manufacturers, construction companies and financial services companies all cut jobs during the month amid an anemic housing market. Retailers also made reductions.
CBS News correspondent Anthony Mason reports that the construction industry was hit with 49,000 layoffs last month, noting that because of the housing slump, 176,000 construction jobs have now been cut since July.
Mason spoke to Bill Cheney, chief economist for John Hancock who warned, "any time that the economy slows down the way it has, you're at a much higher risk that something else will come out of left field and knock you over the edge."
The December report showed employers added the fewest jobs to their payrolls since August 2003. Economists had predicted a jobs growth figure of about 70,000 and an unemployment rate of 4.8 percent. Instead, unemployment climbed to 5 percent in December from 4.7 percent in November.
White House deputy press secretary Tony Fratto commented that the five percent rate is still low by historic standards - lower than averages from the 1970's, 1980's, and 1990's, reports CBS News White House correspondent Mark Knoller.
President Bush said that while there is some uncertainty about slowing economic growth, the nation's "financial markets are strong and solid."
Still, the unemployment increase from November clearly made some investors nervous.
"It's a scary number, no question about it. No matter how good you wanted to feel about the economy averting a recession, there is far less conviction than even two or three days ago," said Joe Balestrino, senior portfolio manager at Federated Investors.
According to preliminary calculations, the technology-focused Nasdaq fell for the sixth straight session and showed its steepest percentage decline since a market pullback on Feb. 27 last year. The Nasdaq declined 98.03, or 3.77 percent, to 2,504.65, in part after the downgrade of Intel, but also because its smaller-capitalization components are seen as more vulnerable in an economic slowdown.
The Dow fell 256.54, or 1.96 percent, to 12,800.18, while the Standard & Poor's 500 index declined 35.53, or 2.46 percent, to 1,411.63.
It was the steepest point drop for the Dow and the S&P 500 since Dec. 11.
The Russell 2000 index of smaller companies fell 23.44, or 3.14 percent, to 721.57 and hit a fresh 52-week low.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.65 billion shares, compared with 1.32 billion traded Thursday.
Bond prices rose as investors sought the safety of government-backed debt after the employment reading. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.87 percent from 3.89 percent late Thursday.
A Federal Reserve announcement Friday that it is ramping up the amount of cash available to banks through a new auction process did little to calm the markets. After two auctions of $20 billion each, the Fed has now scheduled auctions Jan. 14 and Jan. 28 at $30 billion each.
The dollar was mixed against other major currencies. Gold prices, which have risen to nearly 30-year highs in recent days, declined.
Light, sweet crude fell $1.27 to settle at $97.91 a barrel on the New York Mercantile Exchange. Oil touched $100 per barrel this week for the first time, stirring concerns about inflation.
The employment figures overshadowed a report from the Institute for Supply Management, a business group, which said its December index of non-manufacturing activity showed the nation's service sector grew in December. However, the pace was slightly slower than in November and the index fell to 53.9 in December from 54.1 the prior month. Analysts had expected a deeper decline.
It's been a difficult start to 2008 on Wall Street. After selling off in the final session of last year on Monday, investors spent the first three sessions of the new year absorbing a weaker-than-expected reading on the manufacturing sector, oil that reached $100 a barrel and Friday's dismal employment numbers.
"It's hard to point to any piece of data in recent weeks that makes you feel comfortable," said Balestrino, noting that many bullish investors had hoped a strong jobs picture would lift Wall Street's mood.
"This the one piece that was holding up pretty well and now it's showing some weakness as well," he said. "In our business it's not the absolute number, it's the direction of the number and especially the direction versus the expectations."
In corporate news, a JPMorgan analyst lowered his rating on Intel to "neutral" from "overweight," citing a drop in chip orders from computer manufacturers during the fourth quarter and high inventories. Intel, one of the 30 stocks that comprise the Dow industrials, fell $2, or 8.1 percent, to $22.67.
Overseas, Japan's Nikkei stock average fell sharply, finishing down 4.03 percent to its lowest level since July 2006 after being closed since the previous Friday for holidays. The pullback followed uncertainty on Wall Street about the U.S. economy and rising oil prices.
Britain's FTSE 100 fell 2.02 percent, Germany's DAX index fell 1.26 percent, and France's CAC-40 fell 1.79 percent.
© MVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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See all 186 CommentsThis is a warning that many have been preaching for months, if not years. The prime culprit is the bursting of the housing bubble. All products and services that complimented the realestate/mortgage/construction industries will find profits drying up and eventually, the job cuts will find their way into those complimenting industries/sectors such as:
Consumer Electronics
Major Appliance
Furniture
Home improvement
Retail stores that sold any of the above items
Combine that with a skyrocketing national debt and the sinking value of the U.S. dollar, along with rising energy prices...
...and you have a "perfect storm" of harsh economic times ahead. And those who will suffer the most will be the middle class and poor (AS ALWAYS).
The unemployment rate for people over 40+,,has always been 8 to 10 %..Afetr all,,this group gets left out of the employment stats, because they have aready,in most cases,,used up their benefits.
And thus never counted. Most opt out,, of the work force,, and retire
Don''t worry, the trickle in Bush''s trickle down economics plan is coming soon. If, when it reaches you, it looks and smells like urine, that''s because it is.
Posted by underdogus at 11:33 AM : Jan 04, 2008
Sounds like another rich American(?) , that got theirs ,,off the backs of the middle class, and poor. Then took the horde,,and know are exploiting another group of people ,,in a different country..
And , no wonder people of the world hate us , so much.
Posted by Klingon69
Unemployment numbers are derived from a monthly household survey, the statistics are reported in a series of measures ranging from the U1 to U6. The U1 is the narrowest, U3 is the one reported by the press. The U6 is the broadest and is running somewhere around 10% I believe.
I believe that klingon, and I are correct, but maybe you can enlighten me on the , U 1,, and the U 3,,,etc, never heard of that nomenclatiour before.
I believe that klingon, and I are correct, but maybe you can enlighten me on the , U 1,, and the U 3,,,etc, never heard of that nomenclatiour before.
Posted by slim1h2o
http://olmis.emp.state.or.us/olmisj/ArticleReader?itemid=00000486&print=1
BTW,,I do agree, that the rate is 10%,as you pointed out. I forgot to incude that, in the 1st post.
Seems like he usually goes, "Well, no, they just told me about this LAST WEEK, first I''ve heard of it!"
This is more reminescent of the early 8o''s than what they are stating. The real unemployment numbers are not in this report.
http://www.youtube.com/watch?v=DZ1OaaMrnYM
Posted by omega39 at 11:48 AM : Jan 04, 2008
What household survey? Never seen/heard one yet.
Don''''t worry, the trickle in Bush''''s trickle down economics plan is coming soon. If, when it reaches you, it looks and smells like urine, that''''s because it is.
Want examples? My daughter has ben unemployed since September but she isn''t counted because she worked part-time and can''t get unemployment! My wife had a triple bypass after Thanksgiving and has been off work to recover; she has now been released to go back to work part-time with restrictions, but her employer doesn''t "feel right" about her coming back!
Both my daughter and my wife are considered unemployed!
Washington doesn''t care about we the people; it only cares about making itself look good! Remember that the next time you get let go and "hard times" hit you like a BRICK!
SIG HEIL, BUSH!!!!!!!
Posted by Klingon69
Why are there two monthly measures of employment?
The household survey and establishment survey both produce sample-based
estimates of employment and both have strengths and limitations. The estab-
lishment survey employment series has a smaller margin of error on the mea-
surement of month-to-month change than the household survey because of its
much larger sample size. An over-the-month employment change of 104,000 is
statistically significant in the establishment survey, while the threshold for
a statistically significant change in the household survey is about 400,000.
However, the household survey has a more expansive scope than the establish-
ment survey because it includes the self-employed, unpaid family workers,
agricultural workers, and private household workers, who are excluded by the
establishment survey. The household survey also provides estimates of
employment for demographic groups.
http://www.bls.gov/news.release/empsit.faq.htm
+ report why dont you go to ARIZONA? go pick some lettuce,or something you BUM!!! haaa haaaa LOVE IT!! MEXICO!!! and start building the FENCE you IDIOTS!!!
haaa ha im WHITE!!!you BUM living like a KING in MEXICO!!!!
In other words he''s going to steal even more money from the poor and middle class with more tax cuts for the wealthy. What the hell, it didn''t work the last time he tried it, so by the definition of insanity he''ll try it again and hope for a different result this time. Idiot.
On second thought I take that back. It did work in the sense that it did what he wanted it to do, make the rich richer and scr*ew everyone else.
Hey,,,Twit,,,Why didn''t you answer my post earlier?
And if you can''t rebutt THAT,,maybe you should keep your comments to yourself
well...I consider my self middle class,but in Mexico im rich, I guess..bought a house and live the good life!! more freedom.. been here 7 years and I have no plans on moving back to the US..
Posted by SgtRDS at 01:44 PM : Jan 04, 2008
Sounds like you just described "underdogus"!!
Posted by ainttaken at dont forget the VIEW..love it, gorgeous sunsets dolphines, sea gulls love it !! and 20.oo a month for elec!!!! ha haaaaa
I think Led Zeppelin said it best...
"Squeeze me baby, till the juice runs down my leg.
Squeeze me baby, till the juice runs down my leg.
The way you squeeze my lemon, I''m gonna fall right out of bed."
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