Stocks Dive As Jobless Rate Hits 5 Percent

Wall Street Slides On Slower-Than-Expected Jobs Growth; Unemployment Reaches 2-Year High

(CBS/AP)  Wall Street fell sharply again Friday after the government's much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate. The Nasdaq composite index, also pummeled by a downgrade of Intel Corp., skidded more than 3.5 percent, while the Dow Jones industrials fell more than 1.5 percent.

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.

[erichsh]

News alert: today is Monday and the stock market is up. Guess CBS News can''t get go of the bad news from last week.

[mcvet]

When you run a Stupid War on Credit these things do happen... the worst is yet to come by the way. Sieg Heil Bush!!

[DaveGress]

shanev137 - I agree with you 100%.

[DaveGress]

samael2014 - are you a comedian? because your are just plain funny.

[samael2014]

When you consider the rapid influx of low-income illegal immigrants into employment statistics (multi-income households), you better believe these unemployment statistics are even worse than they look for an economy heading toward a burgeoning retirement community (and all that entails ... oh my), massive federal debt (and already huge expenditures in defense and upper class welfare), spiking oil prices and inflation, plummeting dollar (for all of you counting on retirement plans to supplement your income, and for all the rest of us paying into social security and taxes, who are also counting on your retirement plans to offset the costs to us) and much much more. Clearly an ongoing Repubican solution is the only one which will move this all along quickly, so that the rest of the world can get their act together, cut off their association with America and the American dollar, reformulate their international trade and financial markets, and retreat & fortify, all hopefully without any further world destruction triggered by American/Republican spite and avarice and wait for the smoke to settle as America implodes on itself at the hands of these insatiable parasites.

[clestes-2009]

It is only going to get worse. The housing slump is so big, millions of defaults coming, combined with the over extension of credit cards is going to be a really hard 1,2 punch for the American economy.

And this does not sound good for the rest of the world either.

It will come into play with the elections this year, as well. If the American people, who are already unhappy with the direction of the country and have been for the 18 months, have to face more financial downtimes, look for a BIG CHANGE in washington this Nov.

[shanev137]

The Dow Jones Average...what a complete and utter joke.

Percentage wise, the rate of return on Dow stocks hasn''t even kept pace with the rate of inflation since George Dummya Bush took office in 2000.

Republican are such stupid idiots, it''s not even funny anymore.

[underdogus]

I believe the world''s debt-based economic system is in a free-fall the answer to this problem is WWIII.

[ianlou]

I am american, 26, very nice. A friend on the net tells me:"You are too hot!" I met many great men on interracialloving.com -diversely ethnic singles meet new friends, build lasting interracial relationships. I also uploads many my hot photos there. My username is xhot. Feel free to chat with me.
Posted by susan360

Susy, Are you blond?
What does your *** life have to do with the stock market or the unemployment rate?

You sound like the type who would try to sell *** toys at a funeral!

I hope for you sake that your looks are fine enough to compensate for you apparent empty headedness.

[susan360]

I am american, 26, very nice. A friend on the net tells me:"You are too hot!" I met many great men on interracialloving.com -diversely ethnic singles meet new friends, build lasting interracial relationships. I also uploads many my hot photos there. My username is xhot. Feel free to chat with me.

[hypnotoad72]

Investors should make up their minds. They always want job cuts for higher profits. They get those cuts then they fret that profits will drop because not enough people have jobs and can''''t buy the products that will give those investors the profits they want. Greedy bums... they deserve to get the worst.

Posted by kevsan1
------------------

Talk about a contender for the Darwin award...

[mediapreachr]

''And please, no more speculation in energy stock; why is this allowed?
Posted by curse914 at 12:46 PM : Jan 05, 2008''
It is allowed because,contrary to all that is stated daily,nobody gives a ***** about me and you.
Just take a look at the above picture(closing bell)-the bankers and their concubines,economy in the crapper-they applause and look giddy.

[kevsan1]

Investors should make up their minds. They always want job cuts for higher profits. They get those cuts then they fret that profits will drop because not enough people have jobs and can''t buy the products that will give those investors the profits they want. Greedy bums... they deserve to get the worst.

[omega39-2009]

Bush''s dismal job record

http://online.wsj.com/documents/info-presjobs05.html

[underdogus]

2. Stop buying any product made in Communist China or India or any other third-world Posted by johngoodnews john,john, got some bad news for you my friend, we will buy goods made "anywhere" if it means we can SAVE A PENNY!!!! capice?

[bm6005]

I''''m tired of posts which blame Wasington and globalization for our economic woes. It''''s us.
Posted by johngoodnews

John; While I agree with a lot of what you say, seriously, our own gov''t is guilty of passing laws which favor the outsourcing of our mfg base. Along with that globalization is sucking work out of our country to send to slave labor countries with which we can never compete. How often have you bought a tool made in Asia only to find that you were lucky if it worked once? My tools made in the US are 30 years old, my Dad gave me his Gerstner tool box and it was made in the 1920''s and it''s still in excellent condition. This c r a p made in Asia is just that C R A P!!!! When I shop I pay more for made in the US whenever I can.

[underdogus]

====**** UNCLE SAM WANTS YOU===***

[piercetheval]

Hey Keasac, If you consider that all involved in this so called War on terrorism would otherwise be un-employed I guess you could say things are the best they''ve been in 30 years. "There are lies, damnable lies and then there are statistics." Mark Twain.

[kesac4650]

What silliness. 5% is figure that Washington has used all my lifetime to indicate full employment. This is the first Administration in 30+ years that ever bested that figure. In The Jimmy Carter years when unemployment was near 12%, the Democrats told uw that 5% was only a theoretical number that was obviously unnatainable.
Now we have done that and better, and just read the notes from the little posters below whining.

[piercetheval]

Don''t you remembers Ws'' daddys spech. Read my lips, A thousand points of light, etc. The only points of light I ever saw were the ones I could see when I held my wallet up to the lamp looking for some money to pay the rising costs back in B.C, [Before Clinton] Give em'' Hill!