Stocks Fall, Negative Jobs Report Jolt Economic Recovery

Stocks fell Friday after a disappointing jobs report added to investors’ concerns about the economy.

The Dow Jones industrial average fell about 85 points in midday trading after the government said private employers added 83,000 jobs last month, fewer than the 112,000 analysts had forecast. Broader indexes also fell.

Trading was light ahead of the long Independence Day weekend. That could bring swings in the market as traders depart for vacation later in the day.

Reports on jobs in the past two days had diminished expectations for the snapshot of the labour market. Payroll company ADP said private employment was weaker than expected, while the government said initial claims for unemployment benefits rose unexpectedly last week.

Investors have focused on private employment in recent months because the overall jobs numbers have been skewed by the hiring of temporary census workers. Also, private workers account for the bulk of the country’s labour force.

The government cut 225,000 census jobs in June. Overall, 125,000 workers lost their jobs last month, worse than the 110,000 forecast by economists polled by bracing Reuters.

Traders have been concerned in recent weeks that the economic recovery could be fading. High unemployment has kept consumers’ confidence low and hurt retail sales. Consumer spending is the biggest driver of the U.S. economy so a rebound in hiring is critical to a sustained recovery.

John Silvia, chief economist at Wells Fargo Securities, said that while the jobs report indicates the economy might not be robust, it is still improving. He noted hiring by businesses was small, but that it occurred in industries from manufacturing to health care.

“It says to me you have economic growth,” Silvia said. “It’s sustained.”

The unemployment rate did fall unexpectedly, dropping to 9.5 per cent. Economists polled by Thomson Reuters had forecast it to rise to 9.8 per cent. The unemployment rate is calculated from different statistics than the net job cuts, which is why the unemployment rate can fall even if more people lose jobs in a month.

The government also reported after the start of trading that factory orders fell in May for the first time in nine months. The 1.4 per cent drop was the biggest since March 2009, when major stock indexes hit a 12-year low.

Pessimism has been growing since April about the health of the economy. The Dow has fallen for six straight days following a string of mostly downbeat economic reports. Traders are worried that the recovery will stall, though many economists say the economy isn’t likely to begin sliding again.

In midday trading, the Dow fell 85.78, or 0.9 percent, to 9,647.58. The Standard & Poor’s 500 index fell 7.77, or 0.8 per cent, to 1,019.60, while the Nasdaq composite index fell 15.73, or 0.8 percent, to 2,085.63.

Demand for Treasurys mostly slipped after strong gains this week. The yield on the 10-year note, which moves opposite its price, rose to 2.97 per cent from 2.95 per cent late Thursday. Its yield is used as a benchmark for interest rates on some mortgages and other consumer loans.

Crude oil fell 53 cents to $72.42 per barrel on the New York Mercantile Exchange. Gold rose.

About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 422 million shares, compared with 651 million shares traded at the same point Thursday.

The Russell 2000 index of smaller companies fell 7.78, or 1.3 per cent, to 596.98.

Britain’s FTSE 100 rose 0.7 per cent, Germany’s DAX index fell 0.4 per cent, and France’s CAC-40 rose 0.3 per cent. Japan’s Nikkei stock average rose 0.1 per cent.