Wall Street hit as US unemployment soars
Pastor Dale Morgan
Wall Street hit as US unemployment soars*
* Ashley Seager, economics correspondent
* guardian.co.uk,
* Friday June 6 2008
Shares on Wall Street dived this afternoon after the US unemployment
rate unexpectedly jumped to 5.5%, intensifying fears that the world's
biggest economy is sliding into recession.
The Dow Jones industrial average lost more than 200 points and by 3.15pm
the index was showing a loss of 235 points, at 12,370, a fall of 1.8%.
US non-farm payrolls - a crucial indicator of the health of the US
economy - contracted by 49,000 jobs last month, although the fall was
smaller than expected.
The US Labour Department revised its April figure to show a drop of
28,000 rather than the 20,000 estimate it had made last month.
However, the unemployment rate of 5.5% - about the same level as
Britain's - was sharply higher than expectations and up from the 5%
level of the previous month. The new figure was the highest since
October 2004 and represented the biggest monthly rise in unemployment
since February 1986.
As stocks tumbled in response, so did the dollar, which shed nearly a
cent against the euro, to trade at $1.567.
Bond prices moved sharply higher as they scaled back expectations of any
near-term increase in interest rates from the Federal Reserve amid signs
of a weakening labour market. Gold futures jumped 2%, to $891 an ounce,
as investors, taking fright, sought a safe haven. Oil extended its
earlier gains, jumping to $134, an increase of $6 on the day.
The US jobs data showed that there were substantial job losses last
month in construction industries, where 34,000 cuts were made, in
manufacturing, where 26,000 jobs were lost, and among providers of
professional services, where 39,000 jobs went.
"The overall trend is clearly weakening, with the unemployment rate
having increased by a full percentage point over the past twelve months.
This will continue to depress consumer spending - the fiscal package is
being fully swallowed by higher gasoline prices - and will, in our view,
help to keep activity depressed for longer than financial markets are
currently discounting," said James Knightley, an economist at ING
Financial Markets.