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Job Figures Stir Fears of Recession

January 10, 2008 03:00 PM
by findingDulcinea Staff
Markets reacted negatively to news of higher unemployment and a weak job market. Talk of recession is in the air, and the United States steels itself.

30-Second Summary

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The U.S. unemployment rate reached 5 percent in December, its highest level in two years. That figure was up from 4.7 percent in November, according to the monthly Labor Department report released on Jan. 4.

Fewer jobs were added in December than projected. The non-farm sector added 18,000 jobs, far below the expected 70,000.

This is the latest development in an economy already weakened by a housing slump and tight credit. The labor market held up for most of last year. Job growth was moderate but steady.

In response to Friday’s figures, the stock markets slumped. The Dow Jones Industrial Average fell 256.54 points, or 2 percent, while the 3.8 percent decline in the Nasdaq Composite Index was its worst single-day performance since Sept. 17, 2001.

At a press conference, President Bush said the economy is sound, but that economic growth cannot be taken for granted. He said his cabinet is preparing a package to boost the economy.

Analysts expect an economic slowdown, whether a full-blown recession or not. In The Wall Street Journal, David Resler of Nomura Securities said that a 0.3 percent rise in unemployment in a one-month period signals that rough times are ahead. In December, The New York Times’s editorial board took the view that parts of the country were already in recession.

Last year’s economic turbulence affected millions of Americans following the sub-prime meltdown. In December, the construction sector lost 49,000 jobs and manufacturing shed 31,000. Financial services cut 4,000 jobs.  

But if analysts’ worst forecasts come to pass, all Americans will feel the squeeze in their household budgets.

The economy could be the deciding issue in the 2008 presidential elections, according to a CNN poll.

Headline Link: ‘Jobless Rate Spooks Market’

Reactions: The stock market, the White House and the Fed

Stock market
White House
The Federal Reserve

Background: December’s market and the public’s fears

Opinion & Analysis: Predictions and solutions

Historical Context: The 2001 recession

Reference Material: ‘The NBER’s Recession Dating Procedure’

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