Unemployment numbers sees US stocks fall
A jump in unemployment sent stocks plunging today as investors feared Americans will not deviate from their tightened budgets.
The Labour Department's much-anticipated report showed employers cut 524,000 jobs in December, a smaller decline than the loss of 550,000 jobs economists forecast. But the unemployment rate jumped to a 16-year high of 7.2% - more than the 7% economists predicted - from 6.8% in November.
Lost jobs were not a shock to Wall Street, but the news still stung.
"People say that they know how bad the economy is. But they don't know how it feels to have the reality hit home," said Stu Schweitzer, global markets strategist at J.P. Morgan's Private Bank. "It's not the facts - it's how the facts feel. And it feels terrible to have so many Americans losing jobs, and so many more likely to follow in the coming months."
Rising unemployment tends to erode consumer spending, which accounts for more than two-thirds of US economic activity. For all of 2008, the economy lost 2.6 million jobs - the most since 1945. Retailers have been reporting dismal holiday sales figures, and Wall Street is concerned about how long the economy will be suffering a pullback in consumer spending.
President-elect Barack Obama today called December's jobs loss "a stark reminder of how urgently action is needed" to revive the nation's staggering economy. Obama is planning on a stimulus package costing about £500bn (€371.5n), consisting of tax cuts and other ways to try to help individuals and businesses.
But investors were nonetheless worried about the prospects for the economy.
According to preliminary calculations, the Dow Jones industrial average fell 143.28, or 1.64%, to 8,599.18.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 19.38, or 2.13%, to 890.35, and the Nasdaq composite index fell 45.42, or 2.81%, to 1,571.59.
The Russell 2000 index of smaller companies dropped 20.71, or 4.13%, to 481.30.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to a light 1.16 billion shares.
