Seasonally adjusted jobless claims rose 19,000 to a 3-month high of 479,000 for the week ending July 31, according to the Department of Labor’s weekly report. The data showed a persistent weakness in the U.S. labor market, indicating that despite solid earnings from many companies, recovery remains tenuous.
Stock index futures reacted with predictable pessimism, with the Dow Jones Industrial Average index futures falling 45 points to 10,590. S&P 500 futures slipped 6.9 points to 1,117.7, while Nasdaq 100 futures lost 5.75 points to 1,899.5 at 9:15 a.m. EST.
The increase in jobless claims surpassed economists’ estimates, and will probably only reinforce the cycle of retrenchment. Businesses see rising unemployment, adjust their forecasts and cut back on staff and wages in anticipation of lean seasons ahead.
Since last year, some businesses have been restocking inventories and anticipating growth. With the job situation weakening, that situation could now be reversed, and some businesses may find themselves making deeper cuts than they would have hoped.
“The slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending,” said Federal Reserve chairman Ben Bernanke in a South Carolina speech.
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