Concern over stalling job growth plunges Dow two percent in worst losing week since 2004
Stocks ended on a sour note Friday, wrapping up a fifth straight week of losses after unexpectedly tepid growth in the number of new jobs heightened concerns the economic rebound is losing steam.U.S. payrolls grew just 54,000 last month, the smallest amount in eight months. The results were well below projections – even after analysts lowered forecasts in the week following glum manufacturing and labor market data.The Dow Jones Industrial Average fell 2% for the week, giving the index its worst weekly losing streak since 2004.
The Labor Department reported that the private sector, the main force behind recent job market growth, added just 83,000 jobs, the least since last June, while government payrolls dropped 29,000.”It is clear we have temporarily entered a soft patch,” Christopher Probyn, chief economist at State Street Global Advisors told Reuters.
“Nobody knows how soft and how long, but the best case view is that the fundamentals of the recovery remain intact and the economy will re-accelerate in the second half of the year.”There was some hope for the economy in data on the U.S. service industry, which expanded more than forecast in May.The Institute for Supply Management’s index of non-manufacturing businesses increased to 54.6 from 52.8 in April.
High gas prices have meant fuel costs are grabbing a bigger share of consumers’ budgets, forcing them to cut back on other spending, economists have said.On Friday, the Dow lost 0.8%, while the Standard & Poor’s 500 index dropped 1% for the day, and posted its longest weekly slump since July 2008. The Nasdaq Composite dropped 1.5%.Reports of healthy earnings from corporate America early in the year drove the S&P 500 to a three-year peak last month, but recent economic data has made investors wonder if their optimism was overblown.Still, stocks are up year-to-date, with the Dow up 5% and the S&P 500 and the Nasdaq up about 3% each.