Bleak unemployment news batters markets

The U.S. unemployment rate rose to 6.1% in August, marking the highest level since 2003 and the eighth consecutive month of slashed payrolls, according to the Department of Labor. Non-farm payrolls fell by 84,000 last month, led by job losses in manufacturing and employment services. Total ranks of the unemployed rose to 9.4 million in August, while the unemployment rate climbed 0.4 percentage points from July’s level of 5.7%. Manufacturing jobs declined by 61,000, while 53,000 positions were eliminated in employment services. However, jobs in health care grew by 27,000. Additionally, job loss estimates in June and July were also revised upward today: Some 100,000 jobs were lost in June, and 60,000 jobs were cut in July, up from a previously reported 51,000 for each month. Also, estimated initial claims for unemployment benefits during the one-week period ended Aug. 30 were revised upward to 444,000, an increase of 15,000. More job losses are probably ahead despite the 3.3% gross domestic product growth the economy experienced in the second quarter, noted Nigel Gault, chief U.S. economist at Global Insight Inc. of Waltham, Mass. He predicted that the rate will rise into the 6.5% to 7% region and that the loss of so many jobs does not bode well for future economic growth. “Even if the economy accelerated in the second quarter, it was very temporary,” Mr. Gault said. “Growth will go negative this year. The bottom line is that we have to wait this out, and things are going to get worse before they get better.” The news sent the Dow Jones Industrial Average, which had already plummeted over 300 points yesterday, even lower. In morning trading, the Dow was down 90.7 to 11097.53, the Nasdaq Composite Index had fallen 22.32 to 2236, and the Standard & Poor’s 500 stock index had dropped 12.83 to 1224. The stocks made a comeback in mid-afternoon, moving into positive territory.