Stocks higher despite jobs report

Stocks higher after jobs report come in dismal.

The Labor Department said the nation's employers cut 240,000 jobs in October, hurtling the U.S. unemployment rate to a 14-year high of 6.5 percent. The market had expected employers to cut 200,000 jobs and for the unemployment rate to rise 6.

Meanwhile, Ford reported dismal third-quarter results and announced plans to cut more than 2,000 additional white-collar jobs. General Motors is also expected to report results Friday.

Although the day's news was worse than expected, investors seemed to be attracted by stock prices beaten down the past two sessions.

Investors have been optimistic before, snapping up bargain stocks only to cash in the profits when jitters return. Barack Obama's election to the White House was preceded by a big rally, and then followed by a two-day loss of about 10 percent in the major indexes.

The Dow Jones industrial average gained 89.92, or 1.03 percent, to 8,785.71.

The broader Standard & Poor's 500 index added 8.40, or 0.93 percent, to 913.28, and the Nasdaq composite index rose 16.80, or 1.04 percent, to 1,625.50.

The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.

Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.

October's decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared. Over half of the decrease occurred in the past three months alone.

Job losses were widespread, reflecting the mounting carnage from a trio of crises -- housing, credit and financial.

Factories cut 90,000 jobs, the most since July 2003. Construction companies got rid of 49,000 jobs with heavy losses in home building. Retailers cut payrolls by 38,000. Professional and business services reduced employment by 45,000. Financial activities cut 24,000 jobs, with heavy losses in mortgage banking and at securities firms. Leisure and hospitality axed 16,000 positions.

All those losses more than swamped some gains elsewhere, including in the government, as well as in education and health care.

Racing to assemble his new Democratic Cabinet, President-elect Barack Obama will huddle with economic advisers later on Friday. His team has been in close contact with the Bush administration to pave the way for a smooth hand-off of power.

All the economy's woes -- a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval -- will confront Obama when he assumes office early next year. And, the employment situation is likely to get worse.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.

To provide fresh relief, House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, are pushing to enact another round of economic stimulus of around $100 billion.

Average hourly earnings rose to $18.21 in October, a 0.2 percent increase from the previous month, according to the Labor Department report. Over the past year, wages have grown 3.5 percent, but paychecks aren't stretching that far because high food, energy and other prices has propelled overall inflation at a faster pace.

To prevent the country from sinking into a deep and painful recession, the Federal Reserve last week ratcheted down interest rates to 1 percent and left the door open to further reductions.

The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since 2001 recession, and reflected a massive pullback by consumers.

As U.S. consumers watch jobs disappear, they'll probably retrench even further, spelling more trouble for the sinking economy.

That's why analysts predict the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.