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Economy Extends Job Loss Streak
Thursday 07-03-2008 11:56am ET
WASHINGTON (Reuters) - Employers cut workers from their payrolls for a sixth straight month in June for the longest losing streak for the labor market since 2002, and a jump in first-time claims for jobless benefits points to more weakness ahead.
The Labor Department said on Friday that 62,000 nonfarm jobs were lost last month, bringing jobs shed for the year so far to 438,000 as housing market woes chilled growth. The unemployment rate, which shot up sharply in May, held steady at 5.5 percent.
A separate report showed new applications for jobless benefits hurdling to 404,000 last week, a level associated with recession in the past that suggests further weakness ahead for employment.
"It shows that the labor market still is very soft. We're not seeing dramatic job cuts, but clearly companies are trying to hold the line on costs," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.
U.S. stock futures rallied as investors breathed a sigh of relief that the data was not even more dire. Shares were helped by a rise in the value of the dollar against the euro as the head of the European Central Bank suggested a rate hike on Thursday could be the last for awhile.
Analysts polled by Reuters had expected the unemployment rate to edge down to 5.4 percent and had expected the economy to shed 60,000 jobs.
The weak tone of the report was buttressed by downward revisions to both May and April's employment count that took their combined job losses to 129,000, compared with an early estimate of 77,000 jobs lost.
In June, the creation of 29,000 government jobs helped support payrolls. Private-sector employment dropped by 91,000.
TAME WAGES
Average hourly earnings, closely watched by the Federal Reserve as it monitors price pressures to make sure they do not creep into higher wages, edged up six cents, or 0.3 percent in June to $18.01.
However, over the past 12 months earnings have risen just 3.4 percent, the lowest reading since January 2006.
The Fed last week halted an aggressive interest-rate cutting campaign, holding overnight U.S. rates at 2 percent and warning that inflation risks had risen amid soaring energy and food prices. The central bank had been cutting rates to shield growth from a collapsing housing market.
"It does show that the Fed has to hold policy steady for now," Thayer said of the data. "We've now seen job cuts all year long and that suggests that raising interest rates now would probably hurt the economy significantly."
The six-month streak of job losses was the longest consecutive period of shrinking payrolls since employment fell without respite from March 2001 until May 2002, a period that corresponds to the last U.S. recession and the beginning of a jobless
recovery.
There were 43,00 jobs lost in construction in June as the housing slowdown continued to bite, while manufacturing shed 33,000 jobs. Both of these sectors have lost jobs in every month over the past year.
Jobs in the professional services sector declined by 51,000 as the financial services and real estate industries continued to suffer the country's housing market woes.
Flooding in the Midwest had no impact on June's employment report, the Labor Department said, holding out the possibility of additional pressure on the jobs market in the coming months as flood-related job losses get counted.
The separate report on jobless claims showed initial filings jumped by 16,000 last week to 404,000.
The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, increased for the fourth straight week to 390,500, the highest reading since October 2005 in the aftermath of Hurricane Katrina.
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Copyright 2008 Reuters. click for restrictions Paulson: U.S. Facing Tough Second Quarter
Wednesday 07-02-2008 4:56am ET
BRUSSELS (Reuters) - The U.S. economy is facing a tough second quarter and Europe will not be immune to the impact, Treasury Secretary Henry Paulson was quoted as saying on Wednesday. "There's no doubt that the second quarter will be a tough quarter," Paulson told the International Herald Tribune in an interview. "There's no doubt in any of our minds that the high oil prices are going to have an impact."  Paulson is on a trip to Europe and Russia to explain how Washington is working to resolve the U.S. economic problems, just as signs emerge of a sharper slowdown in Europe than had been previously detected. Denmark said on Tuesday its economy was in recession, the first EU state to report that its output shrank for two quarters in a row. U.S. data also on Tuesday added to concerns that the United States is facing weak growth combined with high inflation. Paulson told the IHT that the U.S. woes would have an impact on Europe. "I've never been one to accept the decoupling theory," he told the newspaper. "In a global world, we're all interrelated." A weaker Europe could also hurt the U.S. economy due to a lower demand for U.S. exports, Paulson said, adding emerging economies would now give the biggest lift to global output. Paulson has used his trip to reinforce the message from Washington that the U.S. administration believes in a strong U.S. dollar. But he declined to comment on the divergence in interest rate policies of the U.S. Federal Reserve, which has cut rates, and the European Central Bank, which is expected to raise them on Thursday. Photo Copyright Getty Images Copyright 2008 Reuters. click for restrictions Dow Suffers Worst First Half Since the 70s
Tuesday 07-01-2008 10:22am ET
NEW YORK (Reuters) - The Dow and S&P 500 were little changed on Monday on the final trading day of the second quarter as record oil boosted energy shares, offsetting weak financial stocks amid nagging concerns of further credit losses.
But even with the pause on Monday, the Dow and S&P posted their worst one-month drop since September 2002. The Dow also suffered its worst first half since 1970.
The Nasdaq ended the session lower, hurt by a drop in the shares of Yahoo as it battles with shareholders after takeover talks with Microsoft fell apart.
 Shares of Exxon Mobil and Chevron lent support to the Dow and the S&P 500. Oil jumped to a record of $143.67 a barrel on rising Israeli-Iranian tensions but then pulled back to trade only slightly higher.
Financial shares fell on more negative analyst comments.
Veteran analyst Richard Bove said Merrill Lynch will be forced to raise equity in the third quarter and may sell 20 percent of its holdings in Bloomberg for $1 billion. Ladenburg Thalmann's Bove also cut his 2008 and 2009 earnings estimates for Morgan Stanley.
Trading was erratic, which traders blamed on positioning by portfolio managers making final adjustments at the end of the quarter.
"I'm sure with the continuing meltdown, there are a number of managers out there who don't want to be seen with certain financials on their books or even being as heavily weighted as they were," said Matt Kaufler, portfolio manager and equity analyst at Clover Capital Management in Rochester, New York.
"Many have tried to catch the proverbial falling knife, but it's eluded everybody, ourselves included."
The Dow Jones industrial average gained 3.50 points, or 0.03 percent, to end at 11,350.01. The Standard & Poor's 500 Index was up 1.62 points, or 0.13 percent, at 1,280.00. The Nasdaq composite index was down 22.65 points, or 0.98 percent, at 2,292.98.
For the month, the Dow fell 10.2 percent, the S&P 500 fell 8.6 percent and the Nasdaq ended down 9.1 percent.
For the quarter, the Dow dropped 7.4 percent, the S&P 500 lost 3.2 percent and the Nasdaq ended up 0.6 percent. The Dow ended 19.8 percent down from its October high, just short of a bear market.
The S&P financial index dropped 1.5 percent, while shares of insurer American International Group and Citigroup, the largest U.S. bank, ranked among the heaviest drags on the S&P 500.
Shares of AIG fell 4 percent to $26.61 and Citigroup declined 3 percent to $16.70. Lehman Brothers shares fell 11 percent to $19.81. Morgan Stanley's shares fell 1.7 percent to $36.07 and Merrill's shares shed 3 percent to $31.71.
Wachovia Corp, the fourth-largest U.S. bank, fell 4.2 percent to $15.53 after the New York Post said Prudential Financial Inc could force the bank to buy its stake in their Wachovia Securities joint venture. A Wachovia spokeswoman said she could not comment on what Prudential may or may not do.
Yahoo shares fell 3.1 percent to $20.66 as it sought to rally shareholder support for its board of directors and management, calling billionaire Carl Icahn's plan "ill-defined" for the future of the Internet company.
Exxon Mobil Corp rose 1.8 percent to $88.13 and Chevron Corp climbed 1.4 percent to $99.13, both on the New York Stock Exchange.
On the economic front, a report showed business activity in the U.S. Midwest contracted in June for a fifth straight month but activity was not as weak as analysts feared.
Another report showed the downturn in New York City business activity continued in June after May's brief pause.
Trading was moderate on the New York Stock Exchange, with about 1.61 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.10 billion shares traded, also below last year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by a ratio of about 3 to 2 on the NYSE and by 2 to 1 on Nasdaq.
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