A Roller Coaster Day Ahead

Whoops, jobs slip
David Berman
RTGAM



If investors are under the impression that the U.S. economy will show steady improvement - week in, week out - they're in for a shock: On Thursday, the Labor Department reported a jump in the number of initial jobless claims, thumping global stock market indexes.

U.S. stock index futures were down with about 40 minutes before markets open, suggesting that stocks will fall at the start of trading. Futures for the Dow Jones industrial average were down 37 points. Futures for the broader S&P 500 were down 7 points.

In Europe, the U.K.'s FTSE 100 was down 1.2 per cent and Germany's DAX index was down 2.1 per cent in afternoon trading. In Asia, Japan's Nikkei 225 rose 2.2 per cent in overnight trading.

To be fair, the European indexes were down from the start of trading, but the U.S. jobless report appears to have made matters worse. Initial claims rose to 627,000 last week, up 15,000 from the previous week and well ahead of expectations for claims of 600,000.

Clearly, the number of laid off Americans seeking benefits is not shrinking at the pace economists have been expecting. Just as disappointing, the previous week's claims - which had been heralded as good news at the time - were revised upward, to 612,000 from 608,000.

"On balance, the fact that initial jobless claims continue to hover above the 600,000 mark does suggest that there is still job destruction embedded in the U.S. labor market, though there is some evidence to suggest that the level is beginning to show signs of stability," said Ian Pollick, economics strategist at TD Securities, in a note, pointing to the consistent range of claims over the past several weeks.

Copyright 2001 The Globe and Mail