Economic Outlook: Job losses test recovery
The strength of the U.S. economic recovery is showing signs of strain this week with rising unemployment undermining improvements.
Although U.S. markets have made monthly gains March, April and May, the U.S. Department of Labor said unemployment rose to 9.4 percent last month. With 7 million jobs lost since December 2007, it is a figure that haunts every corner of the marketplace.
Not a month after the U.S. Treasury released results of stress tests it conducted for 19 of the country’s largest banks, the Congressional Oversight Committee is set to release a report Tuesday that advises the government to do it again, The Washington Post reported Tuesday.
The tests, which were designed to show how banks would hold up if the economy worsened, studied — along with other stressors — the implications of unemployment rising to 8.9 percent. But that optimistic figure is now moot, said the committee that oversees the nation’s $700 billion financial bailout fund.
Unemployment was testing the Obama administration’s resolve as Republicans began to hold the $787 billion American Recovery and Reinvestment Act up to the glare of employment figures rising.
While the White House argued unemployment would rise faster without a stimulus bill in place,
the administration looks dramatically out of touch, House Republican whip Eric Cantor said, the New York Times reported.
In the U.S. Supreme Court, unemployment is part of the equation. Justice Ruth Bader Ginsburg issued a temporary stay that prevents the sale of Chrysler LLC to Fiat of Italy in a ruling that has implications for how fast Chrysler can get back on its feet, which is roughly synonymous with how fast its employees return to work.
Although Chrysler is trying to rush through bankruptcy, creditors owed $42 million have questioned the legality of the government’s use of TARP funds, which lawyers for the creditors say were designed for banks, not auto companies.
In addition, the Mortgage Bankers Association said an increasing number of prime mortgages were in trouble, especially in states were unemployment was rising fastest, USA Today reported.
U.S. markets still managed to salvage a slide Monday, coming in near break-even at the end of the day.
Asian markets turned mostly lower Tuesday. In Japan, the Nikkei 225 closed down 0.8 percent, while the S&P/ASX 200 in Australia fell 0.9 percent. The Kospi Composite in South Korea’s dropped 1.5 percent, while the Hang Seng index in Hong Kong fell 1.1 percent. The Singapore Straits Times Index, however, rose 0.6 percent, while India’s Sensex rose 2.6 percent.
In midday trading in Europe, the FTSE 100 in Britain fell 0.21 percent, while the DAX 30 in Germany fell 0.25 percent. The CAC 40 in France dropped 0.02 percent. The broader DJStoxx 600 gained 0.22 percent.