Stocks pounded as jobs report feeds recession fears

ByABC News
January 6, 2008, 1:04 PM

NEW YORK -- Wall Street fell sharply again Friday after the government's much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate.

The Labor Department's report that employers raised payrolls by only 18,000 and that the nation's unemployment rate rose to its highest level since November 2005 unnerved investors, who worried that a weakening job market will hurt consumer spending and tip the economy toward recession.

The technology-focused Nasdaq fell for the sixth straight session and showed its steepest percentage decline since a market pullback on Feb. 27 last year. The Nasdaq declined 98.03, or 3.8%, to 2504.65, in part after the downgrade of Intel, but also because its smaller-capitalization components are seen as more vulnerable in an economic slowdown.

The Dow fell 256.54, or 2.0%, to 12,800.18, while the Standard & Poor's 500 index declined 35.53, or 2.5%, to 1411.63.

It was the steepest point drop for the Dow and the S&P 500 since Dec. 11.

For 2008, the Nasdaq is down 5.6%, the Dow is off 3.5% and the S&P is down 3.9%.

Investors had been awaiting the jobs report for weeks as they tried to determine whether the economy would continue to benefit from robust consumer spending even as sectors like home construction, mortgage writing and manufacturing slow. Wall Street is concerned that areas of weakness could puncture growth if consumers can't depend on a solid job market.

Manufacturers, construction companies and financial services companies all cut jobs during the month amid an anemic housing market. Retailers also made reductions.

The December report showed employers added the fewest jobs to their payrolls since August 2003. Economists had predicted a jobs growth figure of about 70,000 and an unemployment rate of 4.8%. Instead, unemployment climbed to 5% in December from 4.7% in November. While 5% unemployment is still considered good by historical standards, the increase from November clearly made some investors nervous.