Stocks plunge over jobless, retail data
Dow Jones industrials fall by more than 340 points
The market was already nervous as it waited for the government to release its August employment report today. So news from the nation's major retailers that shoppers curtailed their spending last month due to higher gas and food prices came as a heavy blow.
Wal-Mart Stores Inc., the world's largest retailer, beat expectations because of its big discounts, but many teen retailers and luxury chains did poorly, a sign that consumers are spending mostly on essentials and putting discretionary buying on hold.
Meanwhile, the Labor Department said new applications for unemployment insurance rose by 15,000 last week from the previous week. That broadly missed expectations for a fourth-straight week of declines, heightening worries that the average American — already feeling the effects of the weak housing market — will have even less means to spend.
The four-week moving average of claims fell slightly to 438,000, down 3,250 from the previous week. Initial claims stood at 320,000 in the same week last year.
The distortions from that program have likely faded, several economists said, meaning that the sluggish economy is increasingly to blame.
"We'll be above 6 percent unemployment by Thanksgiving," said Ken Goldstein, an economist at the Conference Board, a business research group based in New York. "We might even be there by Halloween."
In another sign of labor market weakness, the number of people continuing to receive unemployment benefits rose 6,000 to 3.44 million for the week ending Aug. 23, a five-year high.
That number doesn't include people who have exhausted their regular benefits and have requested extended assistance under an emergency program approved by Congress in June.
Furthermore, if the job market keeps deteriorating, it is tough for Wall Street to see a rebound in sight for the economy's biggest culprit: the tumbling housing market.
"You have to have a paycheck to pay that mortgage," said Craig Peckham, market strategist at Jefferies & Co.
The numbers released Thursday were a sign that despite some upbeat reports over the past month, the economy remains deeply troubled. Investors are not expecting any promising news in the August jobs report, particularly after the ADP National Employment Report said that private sector employment decreased in August by 33,000. Economists are predicting the government will report the eighth straight monthly payrolls drop, and a rise in the unemployment rate.
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