Stocks tumble as jobless rate climbs to 9.2%

The US economy gained only 18,000 jobs in June, missing expectations for 80,000. Global markets fall. The price of gold spikes.

By TheStreet Staff Jul 8, 2011 7:30AM

Image: Wall Street sign (© Comstock Images/age fotostock)TheStreetBy Melinda Peer, TheStreet

 

Updated at 12:48 p.m.

 

Stocks were losing roughly 1% as a disappointing June jobs report had investors feeling less confident in the economic recovery. 

 

The Dow Jones Industrial Average ($INDU) was down by 113.1 points, or 0.9%, at 12,606. The S&P 500 ($INX) was lower by 14.5 points, or 1%, at 1,338, and the Nasdaq ($COMPX) was falling by 26.3 points, or 0.9%, at 2,846.

 

The U.S. economy only added 18,000 jobs in June after gaining 25,000 jobs in May, according to the Labor Department's report, which was well below the increase of 80,000 that the market had been expecting. The private sector added 57,000 payrolls, missing projected additions of 110,000, according to Briefing.com. The unemployment rate was also disappointing, rising to 9.2%, even though economists had expected it to hold steady at 9.1%.

Average hourly earnings were unchanged in June and the average workweek dipped to 34.3 hours, from 34.4 hours, previously. Manufacturing industries saw a 0.3% decline in weekly hours, suggesting minimal growth in industrial production during the month.

 

The market took the June’s lower-than-expected job growth particularly hard after data from Automatic Data Processing on Thursday showed that the private sector added 157,000 payrolls in June – more than double what economists had been expecting – leading some market watchers to increase their expectations ahead of Friday’s report.

 

The disappointing news curbed investors’ risk appetites, triggering a flight to quality.

 

The benchmark 10-year Treasury rose 12/32, diluting the yield to 3.016%.

 

Gold for August delivery was up by $11.50 at $1,542.10 an ounce.

 

Meanwhile, the August crude oil contract was shedding $2.43 to trade at $96.24 a barrel.

 

”The June jobs report was, in a word, horrible,” said Geoff Somes, senior economist at State Street Global Advisors.

 

“’Disappointed’” is really the key word for the marekt here. I was looking at expectations going into the report and one survey had expectations for job growth of 105,000. I thought that was a little bit rich. The ADP print yesterday helped lift those expectations. However, given what we’ve seen in jobless claims over the past couple of weeks, we were ripe for a disappointment. That said, even though I was expecting a disappointing number, I still wasn’t expecting something as weak as job growth of 18,000,” he said.

 

”We’re clearly seeing signs that the soft patch that started in the spring has persisted into the early summer as well.”

 

The disappointing U.S. jobs figure and renewed concern about Italy’s financial stability weakened European markets. Shares of Italian bank UniCredit dropped amid fears that Italy may be the next eurozone country to struggle with its sovereign debt obligations, according to a Wall Street Journal article.

 

The euro fell 0.9% against the dollar, which was trading 0.5% higher against a basket of currencies, according to the dollar index. The FTSE in London was shedding 1%, and the DAX in Frankfurt was declining by 0.9%.

 

Earlier, Hong Kong's Hang Seng added 0.9%, and Japan's Nikkei gained 0.7%.

 

The Department of Commerce said wholesale inventories gained 1.8% in May after rising 1.1% in April. The level was stronger than the growth of 0.9% that economists had been expecting, according to Briefing.com.

 

Market breadth was overwhelming negative and volume was light. Of the 79% of the 687 million shares changing hands on the New York Stock Exchange trading to the downside while only 19% of shares were rising. There were 8 million shares trading on the Nasdaq..

 

Shares of capital goods, conglomerates and financials were showing the steepest losses with Caterpillar (CAT), General Electric (GE), Bank of America (BAC) and American Express (AXP) were among the Dow’s biggest laggards.

 

Investors were favoring safer bets with consumer staples, utilities and healthcare stocks showing the mildest losses.

 

Merck (MRK) was the only component trading in positive territory. Pfizer (PFE) and consumer staples like Procter & Gamble (PG), Coca-Cola (KO) and Kraft Foods (KFT) were showing some of the mildest losses.

 

Bank of America (BAC) agreed to sell its Balboa Life insurance business to Securian Financial for an undisclosed sum, according to the Financial Times. The move comes as banks are shedding extraneous units to focus on their core retail and commercial banking businesses amid new regulatory rules that will raise capital requirements for the largest banks. Bank of America's stock was losing 2.1% to $10.69.

 

ING Group (ING) agreed to sell its car leasing division to BMW for 700 million euros, or $1 billion. The Dutch financial services company said the sale will result in a capital release of roughly 530 million euros and add 17 basis points to ING Bank's Tier 1 ratio.Shares of ING were shedding 2.3% to $11.95.

Former News of the World editor Andy Coulson was arrested over the reporting scandal that allegedly included phone hacking and illegal payments to officers for confidential information. The case has resulted in the closure of News Corp.'s (NWSA) publication, and British Prime Minister David Cameron has called for a full public inquiry into the matter.

 

 

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319Comments
Jul 8, 2011 8:55AM
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Let's see gas prices at the pump Long Island  N.Y. 7-8-11
Reg. $3.89 
Mid. $ 4.15
Prem.$4.30
Houses for sale all over,commercial real-estate collapse not talked about!? eye sore buildings and houses in disrepair.
True unemployment IMO 25% owners of small business cannot qualify for benefits.
Many not paying mortgages and enjoying the summer and using economic bad news to bail on responsibilities like child support sinking to a all time low,wake up look around you and tell me how great it is. some true,many are seeing that they can get away with doing nothing. It is now what the government is preaching has become our lifestyle Spend don't pay back no worries.
Manufacturing needs to be brought back home.
Stop printing money.
Aid to US citizens first,foreign countries second.
Snake eating it own tail !!!! ? Do you see it? you should be feeling it. FALL 2011 very interesting hold on again nothing has changed in many years just the size of your belt,feel it?.
Government has no true business skills just print,grab,squeeze. not a good combination.
We are now in so much debt to china we are gaining power over them,sound crazy? they want there money back at some point ,but look at it this way how about we say we cannot pay.
Sorry for the rant ,frustration on the big picture that many do not see. 

Jul 8, 2011 8:55AM
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Yesterday the market was up due to "better than expected" job reports...now today it is down.....MARKET MANIPULATION.   And look at oil and gas..it was way down for the last few weeks and the administration withdrew from the strategic reserves along with the rest of the world to "ease the pain"...now oil and gas are right back where they were...MARKET MANIPULATION.   The only people getting rich are the banks and wall street cats.  This coruption has to stop!!!
Jul 8, 2011 12:21PM
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The number one problem with the economy is the housing market (or lack thereof), and our political leaders are unable to fix it.  They've already tried bribing people to buy houses, and interest rates are at historical lows.  Until the inventory of foreclosures and short sales is flushed out of the system, the economy will continue to suck.

 

Politicians love to play the blame game, but the truth of the matter is that both parties are equally at fault, along with numerous others.  The true cause of the housing crash was a perfect storm of politicians attempting to "expand" home ownership to people who couldn't qualify for a home loan, speculators who drove prices to ridiculous levels in some markets, greedy and crooked realtors, loan officers, appraisers, and  bankers, and regulators who looked the other way.  And now we're all paying the price for the trillions of dollars removed from the economy.

 

That said, I'm ready to start my weekend.

Beer mugMartini glassBeer mugMartini glass

Jul 8, 2011 9:02AM
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There is one problem all in a nutshell - people are still concerned about the economy because of Obama care and Frank - Dodd. Barney Frank orchestrated the collapse of Freddie and Fannie and then he got to write the bill that added regulations - why isn't somebody regulating that idiot - he's a moron just like most of out illustrious leaders - they're politicians not business people and they do not have the expertise or the gumption to do what it will take to lead us out of this - they're too worry about not offending anybody and hurting their chances for re-election
Jul 8, 2011 9:07AM
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This was a brutal jobs report, all the way around.  U6 at 14.1%.  If last summer was "Recovery Summer", this one is starting to look like the "Summer of Discontent".  Perhaps next summer will be the "Summer of Revolution" and we can spend it plotting to clean house in Nov 2012.
Jul 8, 2011 10:51AM
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We, the sheep, are told that our cost cutting needs to focus on the big stuff and that all the goofy things we hear about are just drops in the bucket. Things like monuments to cowgirls, studies on the habits of foreign prostitues, etc. are just not worthy of attention.  A million here and a million there or even a billion here and a billion there is insignificant. So americans are told that we have to cut "entitlements", where the big money is. Let me suggest one thing: take the budget and cut all the crap out of it first, then come to the american people and show us what is left. I'm sure there will be large cuts still needed, but they will be much more palitable.

Oh, and one last thing. I would appreciate it if the political rhetoric properly labeled things that will be cut. Social Security for example is called an "entitlement". Hmmm..... I don't remember being asked to have money taken out of my paycheck for the last 40 years for my socical security contributions. I recall being told it was coming out of my paycheck. Now when and if I ever get to receive benefit checks, I will be told it is an "entitlement" given to me by the government.  How about we do this you mangy bastards: give me all  my contributions back with appropriate interest and we'll call it even. Then you won't need to "give" me a damn thing.

 

Jul 8, 2011 9:06AM
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Why do economist think jobless rate will decrease. The greedy corporations will continue to keep fewer employees, and have them work longer hours with less pay. The stock market is a game for the wealthy. Sad so many folks depend on it to live. We work harder, spend less time with our families,
and continue to receive less benefits. Is this the new American dream?
 
Jul 8, 2011 9:06AM
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It's amazing how these economist, columnist, and news people make the most miniscule nudge forward sound like the second coming of Christ. Trash the reports, the forecasts, the numbers. Get out into the streets and see what's really going on.
Jul 8, 2011 10:46AM
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Let us stop and look at what Obama has done for the work force??? Nothing.... What has Obama done for the working people who still have a job??? Nothing.... What has Obama done for most people in the US?  Entitlements that take form those who do work that makes the worker the scapegoat of America.... How does an American worker work 40+ hours a week make ends meet when he has to pay for those who will not or wont work for a living???? How can this economy survive with American workers paying out so much and receiving so little??? Obama is for those who wont or will not work... He is for ENTITLEMENTS for the the people who do not SUPPORT the US in any way!!!!!
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The gain of 18,000 jobs in June was even weaker than the 25,000 added in May, according to the Labor Department's report -- well below the increase of 80,000 that the market had expected. The private sector added 57,000 workers, missing projected additions of 110,000, according to Briefing.com. The unemployment rate was also disappointing, rising to 9.2%, even though economists had expected it to hold steady at 9.1%. 
The reality is the US is still on a death spiral of lost jobs and an ever weaker and weaker economy. We have past the point of no return on the economy. 

Geithner and Bernanke will have to build up our industrial base at a rate not seen since W.W.II to get us out of this death spiral. When you consider that half of Americans earn less than $26,500 a year vs $32,000 a year only 4 years ago and the fact that we have had at least 4 to 5 percent real inflation during that time period this means half of Americans have lost about 1/3 of their buying power. Not to mention the 10 percent who have lost all buying power. 

There is no way the stock market should be where it is considering our economy is much weaker than it was during the recent crash. Add in the fact that more and more baby boomers have retired and taking money out of the stock market and state and local governments are having to raid their pension funds for money to operate on vs adding to them and that they are going to have to drain their pension funds of all money in the next five years to pay pensions to already retired workers and we have a total collapse of the market on our hands folks.

This recent increase in the stock market was driven only by investors dumping US T-bills and pouring the money into the stock market. The question becomes who is taking up the slack in the US T-bills???? I see no one who can be buying them right now so Geithner and Bernanke must be doing some illegal cooking of the books to make things work right.






Jul 8, 2011 11:10AM
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What we NEED is less of Obamunism, and MORE of Marco-Rubioism...

Sen. Marco Rubio (R-FL) said on the Senate floor.

We don't need new taxes. We need new taxpayers, people that are gainfully employed, making money and paying into the tax system. Then we need a government that has the discipline to take that additional revenue and use it to pay down the debt and never grow it again. That's what we should be focused on, and that's what we're not focused on.

You look at all these taxes being proposed, and here's what I say. I say we should analyze every single one of them through the lens of job creation, issue number one in America. I want to know which one of these taxes they're proposing will create jobs. I want to know how many jobs are going to be created by the plane tax. How many jobs are going to be created by the oil company tax I heard so much about. How many jobs are created by going after the millionaires and billionaires the president talks about? I want to know: How many jobs do they create?

Jul 8, 2011 9:33AM
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Big-D, according to most sources the all 3 Wars, (2 of W, 1 of Obama), and not topped 1.4 trillion yet.  It is interesting to note that the Wars have increased in cost from a high of 128 Billion / year under W to 142 Billion this year.  Libya is still under 2 billion so far.

 

All three wars over the last decade have not equalled Mr. Obama's domestic spending deficits for this year. 

 

We must CUT up Mr. Obama's credit card...

Jul 8, 2011 10:21AM
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Some will argue that we need to keep gov employment up... Remember that gov employees and contractors pay their taxes by simply returning a small portion of the government revenues they were paid with.  Want a bigger gov sector?  Then need a much bigger and more profitable private sector to pay for it!

Sad as it sounds, laying off gov employees is 3 or 4 times more "deficit efficient" than laying off private sector employees.
Jul 8, 2011 8:17AM
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Wholesale gas prices are back up - $3.10/gallon, which means they should be going back up at the pump very soon.  We've been "spoiled" in my area with pump prices at $3.16 - that's gotta end soon.  Kinda sad to be celebrating gas prices when they are still above $3/gallon, but whatever.

My guesstimate for the jobs number - 115,000 created and a rate of 9.1%, and that's based on, well, uh, um, I don't know   Ok, it's just a guess, at least I admit it, unlike all the analysts and economists.

Jul 8, 2011 11:01AM
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don't forget the company matches that SS tax money.  there's a LOT of money going into the pool.  hardly an entitrlement to get some back

 

 I would appreciate it if the political rhetoric properly labeled things that will be cut. Social Security for example is called an "entitlement". Hmmm..... I don't remember being asked to have money taken out of my paycheck for the last 40 years for my socical security contributions. I recall being told it was coming out of my paycheck. Now when and if I ever get to receive benefit checks, I will be told it is an "entitlement" given to me by the government.  How about we do this you mangy bastards: give me all  my contributions back with appropriate interest and we'll call it even. Then you won't need to "give" me a damn thing.
Jul 8, 2011 10:32AM
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We as Americans should demand more for what we produce.... Food/crops are needed in many countries so we need to level the playing field. 1 pound of rice for 1 gallon of oil would balance the economy!!!!! I as an American know what food and oil mean to the Global economy.... We as Americans feed MILLIONS and the Arab society has no understanding about what oil does to the entire Global economy..... Supply and demand which means rice,corn,oats are more important than oil??????
Jul 8, 2011 10:58AM
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What happened to the GREAT news yesterday? Stocks were surging on hopes the economy was turning around. Less than 24hrs later stocks are falling off the cliff because the economy stinks and there are no jobs out there.
Jul 8, 2011 9:28AM
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Comrade Deklen,

 

You seem to be under the delusion that a business owes you anything.  If you don't like the wages offered, I suggest you start your own business.  Business exists to make a profit.  Failure means you close up and layoff everyone, including yourself.

 

This idea of yours that corporations exist to share their profits with workers is nonsense.  These profits belong to the shareholders of said business.   If you want to share in the profits of most companies buy SHARES.   And if you hate management, buy shares and vote against them.

 

But, no company owes workers anything.  This is not a slavery environment, the Republicans did away with that Democrat idea under Lincoln.  I cannot force you to work for me.  You are free to leave anytime.  I aways laugh at unions.  If they were so good, they would quit en-mass and start their own company.  And they probably would be bankrupt the first week...

 

You cannot Borrow, Tax, Spend or Debase your way to prosperity, no matter what "57 states" and the Donkeys preach...

 

Jul 8, 2011 10:11AM
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Yesterday's report indicating major improvement in jobs. Today's report showing dismal numbers. How can this be anything other than 1) utter incompetence or 2) arrogant manipulation?
Jul 8, 2011 10:26AM
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The problem is we are governed by low life politicians on both sides. The Democrats are dominatied by fringe thinking nuts that spend money to push social issues that are in conflict with the core values of the majority of americans. The Republicans dominated by high living aristocrats that want to cut medicaid, medicare and social security while they have no comprehension of the devastating personal results of such on millions of our least fortunate citizens because most of them have never experienced anything but a privileged lifestyle. While these are generalizations, they aren't far off the truth.

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