While you were sleeping: BusinessWire weekend wrap

Monday 12th January 2009

The US economy shed 524,000 jobs in December, bringing the total lost last year to 2.6 million, the worst slump in employment since the end of World War II.

The unemployment rate climbed to a 16-year high of 7.2% from 6.8% the previous month, according to Labor Department figures on Friday, underscoring the prospects of a prolonged recession. US Treasury bonds rose, stocks fell and crude oil declined after the non-farm payrolls figures.

The world's largest economy may not climb out of recession until the third quarter of this year, according to the Blue Chip Economic Indicators poll of 52 economists, the longest contraction since WWII.

The jobs slump may strengthen support for President-elect Barack Obama's US$800 billion fiscal stimulus package. Christina Romer, the chairwoman of his council of economic advisers, over the weekend released analysis of the plans showing they would create or save between three million and four million jobs. That's the target Obama has previously cited for his American Recovery and Reinvestment Plan.

"Clearly the situation is dire," Obama said at a news conference on Friday. "It is deteriorating and it demands urgent and immediate action."

Obama said the fiscal demands of reviving the US economy means he will have to scale back his election pledges. "I want to be realistic here, not everything that we talked about during the campaign are we going to be able to do on the pace we had hoped," Obama said on the ABC's 'This Week' programme yesterday.

The Standard & Poor's 500 Index fell 2.1% to 890.35 and the Dow Jones Industrial Average fell 1.6%, to 8599.18. The Nasdaq Composite declined 2.8% to 1571.59. Citigroup fell 5.7% to US$6.75 after former Treasury Secretary Robert Rubin resigned as senior counselor. Rubin said he won't seek re-election to the board amid criticism of the firm's stock price slump and US$20 billion of losses.

The financial firm is in talks to sell its Smith Barney brokerage unit to Morgan Stanley, the Wall Street Journal reported, citing people familiar with the talks.

JPMorgan Chase fell 4.6% to US$25.97, Bank of America dropped 4.1% to US$12.99 and American Express declined 4% to US$19.23. Alcoa dropped 4.8% to US$10.81 and Microsoft fell about 3% to US$19.52.

Treasuries rose on the prospects of a prolonged recession. The yield on 10-year Treasury notes fell 5 basis points to 2.39%.

The US dollar rose against on Friday, rounding out its best week in two months, as some economists had job losses last month of as many as 550,000 jobs.

The euro fell more than 2% to $1.3431, bringing its weekly slide to 3%. The US dollar fell 0.8% to 90.36 yen. The ICE Futures dollar index, which measures the dollar against a basket of six major currencies, rose 1.3% 82.652.

Stocks also fell in Europe on the US non-farm payrolls and oil producers declined with the price of oil. The Dow Jones Stoxx 600 Index fell 0.5% to 207.82. Commerzbank fell 11% and Xstrata fell 6.6%.

Germany's DAX 30 fell about 2% to 4783.890 and France's CAC 40 dropped 0.8% to 3299.50.

In London, the FTSE 100 slipped 1.3% to 4448.54 after a report by the National Institute for Economic and Social Research said the UK economy contracted 1.5% in the final quarter of 2008. Anglo American and Rio Tinto fell more than 5%.

Volkswagen, Europe's largest carmaker, posted a 0.6% increase in worldwide sales to a record 6.23 million vehicles last year on sales of its Audi and Skoda brands.

Crude oil as the loss of jobs in the US heightened concern demand for fuel will slide even as OPEC reduces production. Crude for February delivery fell 2.1% to US$40.83 a barrel on the New York Mercantile Exchange.

Copper futures for March delivery rose 5.4% to US$1.5595 a pound in New York on optimism Obama's spending plans will revive demand.

Gold rose as the prospects of a deeper recession spurred demand for the precious metal. Gold futures for February delivery rose 50 cents to US$855 an ounce on the New York Mercantile Exchange.

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