U.S. economy sheds more jobs

September 5, 2008 5:52:38 AM PDT
Wall Street looked to extend its sharp decline Friday after the government disappointed investors with news that the economy shed jobs for the eighth straight month in August and at a faster-than-expected pace.

The Labor Department said payrolls shrank by 84,000 last month, more than the 75,000 economists predicted, and higher than the 51,000 jobs lost in July. The unemployment rate rose to 6.1 percent from 5.7 percent.

The report confirmed Wall Street's fears that the economy is continuing to weaken. The nation has lost nearly 550,000 jobs so far this year, eroding investors' hopes for a late-year recovery.

Meanwhile, a downgrade of Merrill Lynch & Co. compounded the market's misery. Goldman Sachs analyst William Tanona cut the nation's largest brokerage to a "sell" rating on expectations it will incur fresh write-downs on top of the $5.7 billion it announced in late July.

Stocks turned in a dismal performance on Thursday, with all three major indexes moving back into bear market territory, defined as a 20 percent drop from a recent peak. The Dow Jones industrials plunged more than 340 points in a sell-off underpinned by disappointing economic news and lackluster sales reports from retailers.

Early Friday, Dow futures fell 118, or 1.06 percent, to 11,082. Standard & Poor's 500 index futures shed 15.20, or 1.20 percent, to 1,221.40 and Nasdaq 100 index futures dropped 22.50, or 1.27 percent, to 1,753.25.

With concerns about the economy and more problems in the financial sector, investors again moved into the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.58 percent from 3.62 percent late Thursday.

And the gloom about the U.S. economy was not contained to just major American indexes. Investors overseas sent shares sharply lower on concerns about America's impact on global growth.

Japan's Nikkei stock closed down 2.75 percent. In afternoon trading in Europe, Britain's FTSE 100 fell 0.77 percent, Germany's DAX index dropped 1.47 percent, and France's CAC-40 shed 1.75 percent.

Wall Street again took no comfort from falling oil prices, with crude dropping below $107 a barrel Friday as the dollar continued to gain on the euro and investors waited to see if OPEC moves to restrict output next week amid a two-month plunge in prices. The Organization of the Petroleum Exporting Countries is scheduled to meet early next week in Vienna and has indicated it may take action to defend the $100-a-barrel level.

A barrel of light sweet crude fell $1 to $106.89 a barrel in electronic trading on the New York Mercantile Exchange.


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