Equity index futures crash as jobless figures soar

Initial jobless claims jumped by 12,000 to a total of 500,000 in the week ending on August 14, far higher than even the most pessimistic estimates of analysts. That left the four-week moving average at 482,500, up 8,000 from last week’s figure.

Though stock index futures were initially flat, equities quickly gave up over 1 percent, as investors backed away from risky assets amidst renewed fears of a double-dip recession or anemic growth. Dow Jones Industrial Average index futures lost 82 points to 10,270, while S&P 500 index futures dropped 8.7 points to 1,078.

Nasdaq 100 index futures slipped 7.75 points to 1,829.

Latin stock indexes didn’t fair much better – Mexican Bolsa futures declined 132 points to 32,320, while Brazilian Bovespa index futures were down 67 points to 68,470 at 9:50 a.m. EST.

European futures had been performing well earlier in the day, but as U.S. trading began, FTSE 100 futures declined 44 points to 5,261.50.

Employment has been the limiting factor in the current recovery – although the U.S. economy is once again growing and companies are posting higher-than-expected earnings, that has so far failed to translate into meaningful employment growth.

Without getting more people off of the unemployment rolls, it will be difficult to sustain forward economic momentum. Shrinking incomes and layoffs tend to make people cautious with money, as they focus on reducing debt and cutting spending.

The result is reduced consumption and the threat of a debt-deflation spiral. That would depress U.S. stock index futures, as well as commodity futures tied to industrial production, like copper and crude oil futures.

“We’ve got deeply disappointing numbers today,” Chad Morganlander, a New Jersey-based money manager at Stifel Nicolaus & Co., told Bloomberg News. “There’s lack of job creation and balancing of inventories. Unless you see sustainable job creation, consumption will be below expectations and market participants will focus on economic growth.”

Emerging markets proved to be a better bet, as the MSCI Emerging Markets Index climbed 0.31 points to 993.10. Markets like Russia, Brazil and Indonesia have historically been more volatile than those in developed nations like the U.S. and the U.K. Recently, though, they’ve also delivered much better returns.