U.S. Unemployment Rate Hits 26 Year High in October

The U.S. unemployment surged to hit its highest level in more than 26 years as employers cut more jobs in October. The unemployment rate rose by 0.4 percentage point to 10.2%, a sign the labor market continues to struggle as the economy emerges from its deep recession. The unemployment rate of 10.2% was the highest since April 1983.

The economy lost another 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million.

Despite the apparent end of the Great Recession, economic expansion has yet to translate into jobs, leaving tens of millions of people still struggling.

The pace of job loss continued to taper off in October, the precursor to eventual growth. Amid the paralyzing fear between November 2008 and April 2009 the economy shed an average of 645,000 jobs a month. The pace dropped to an average monthly loss of 357,000 jobs between May and July. And over the last three reports, average monthly job losses have slipped to 188,000.

Some experts see that as the economy expands, companies will use fresh profits to add to payrolls as they reach for increased sales. As workers spend their paychecks, they will create opportunities for other businesses, generating more jobs. But some doubt whether recent trends of a 3.5 percent annualized rate economy growth can continue, absent another dose of government spending.

News that the nation's unemployment rate rose above 10 percent last month didn't derail the stock market's strong gains in the week, which lifted major indexes more than 3 percent. The bad economic news reassured some investors that the Federal Reserve will have to hold interest rates low for some time.

Low interest rates tend to weaken demand for the dollar, which in turn gives a boost to stocks. When the dollar is weaker, U.S. goods are cheaper for buyers overseas. Companies that do business overseas also get a profit gain when their earnings are translated back into dollars.

U.S. GDP finally expanded in third quarter

The United States GDP grew in the third quarter ended in September, the first time its economy has expanded in more than a year. The economy expanded at a 3.5% seasonally adjusted annual rate, ending the longest contraction since World War II.

The economy had been falling for four straight quarters, bottoming with a 6.4 percent decline in the first three months of this year, the steepest quarterly fall since 1982. The expansion matched the economy’s average annual growth rate from the last 80 years

The growth was driven by consumer spending, which rose 3.4% in the third quarter. Some of the largest components of growth, for instance, came from spending on car sales and house building, both areas that have been propped up by federal programs.

The recovery is expected to be slow and painful, as companies shed jobs and credit remains tight. Job-seekers probably will not see the benefits of a recovery for months to come.

The stock market surged in reaction to the news, a bigger-than-expected expansion in the U.S. economy. Stocks posted their biggest gain in more than two months Thursday. The Dow finished up 199.89 points, or 2.05%, to 9962.58, its largest one-day point gain since July 15, when it surged 257 points.

The Standard & Poor's 500 rose 2.25% to 1066.11, with gains in all its sectors, led by a 4.3% jump in financials and a 3.2% rise in its materials category.

Home prices continued to rise

The prices of U.S. homes in 20 metropolitan cities continued to rise for the fourth-straight month in August, according to the Case-Shiller home price index. The home price stabilization added to signs of housing market improvement and economic stability in the United States.

In August the price index climbed by a seasonally adjusted 1% compared with July. Prices rose in 17 of 20 cities.

In the past year, the composite index is down 11.3% in the 20 cities. Prices are down 29.3% from the peak. Prices are where they were in the fall of 2003.

The Case-Shiller index lags behind the National Association of Realtors’ report on existing home sales, which have been issued for September. That number also showed improvement. Low prices and mortgage rates combined with the first-time buyers’ tax credit have spurred home sales. Congress is considering extending the tax credit that saves first-time buyers 10 percent of the sales price, up to $8,000.

Some investors have become concerned that such signs of improvement could prompt central banks to withdraw stimulus measures sooner than expected. Another factor likely to obstruct the market in the coming months is an increase in interest rates, as the Federal Reserve ceases its buying mortgage-backed securities.

Confidence returned, Dow reclaimed 10,000 mark

U.S. stocks soared higher sparked by earnings news on Wednesday, Oct. 14, pushing the Dow Jones Industrial Average to close above 10,000 for the first time in more than year. The sharp rally signaled investors' confidence that the economy is recovering from the financial crisis and recession.

SmartInMoney reported that the Dow finished up 144.90 points, or 1.5%, to close at 10,015.86, its highest level since global markets plunge on Oct. 6, 2008, when the Dow fell below 10,000 amid the outbreak of financial crisis on Wall Street. The Dow first closed above 10,000 in May 1999 but retreated in the years after the dot-com bubble deflated. It then regained the 10,000 mark in late 2003 before peaking at 14,000 in October 2007.


Other indexes hit fresh one-year highs as well. The broader S&P 500 stock index gained 1.8% to end at 1,092.02, while the Nasdaq Composite rose 1.5% to 2,172.23.

The Dow is still more than 4,000 points off its all-time highs; while S&P 500, a broader measure of the market, are down 30 percent from their peaks.

The sharp rally was fueled by surprisingly better than expected results from two blue chips, Intel and J.P. Morgan Chase and a smaller decline than anticipated in U.S. retail sales.

Senate committee approved health care bill

The Senate Finance Committee voted on Tuesday to approve legislation that would reshape the American health care system and provide subsidies to help millions of people buy insurance. The vote was 14 to 9, with all of the other Republicans opposed. Senator Olympia J. Snowe, Republican of Maine, joined all 13 Democrats on the panel in support of the landmark bill.

Health care legislation is expected to be on the Senate floor the week after next, said a spokesman for Majority Leader Harry Reid of Nevada. But it won't be the Baucus bill; it will be combination of the Finance version and a more liberal proposal from the health committee.