Shares slump after US unemployment hits 26-year-high: Economy roundup

The Australian share market has opened lower today after a horror night on Wall Street, where shares dropped sharply after news the unemployment rate has hit 9.5%.

The Dow Jones Industrial Average fell 223.32 points or 2.63% to 8280.74 after the Labor Department released figures showing 467,000 jobs were dropped in the past month.

The country’s unemployment rate is now its highest since August 1983, with the data also indicating the length of the average work week is contracting, along with signs wages are flattening.

US President Barack Obama said the report was “less devastating” than losses reported in the first quarter, but that the news was still hard to hear.

“It took years for us to get into this mess and it will take more than a few months to turn it around,” Obama said at the White House.

Back home, the benchmark S&P/ASX200 index was down 56.6 points or 1.46% to 3820.7 at 12 noon AEST. The Australian dollar also lost ground to US79 cents.

Westpac lost 1.6% to $19.27, while NAB fell 0.9% to $21.66. ANZ dropped 0.2% to $16.10 as Commonwealth Bank dropped 1.1% to $37.00.

Another good sign for the economy has emerged, with the services sector showing growth for the first time in 15 months.

The Australian Industry Group-Commonwealth Bank Performance of Services Index rose 10.3 points to 50.2 – bringing it above the 50-point level that marks the difference between growth and contraction.

“Improving conditions in the services sector are consistent with other recent news which suggests that the economy may well sidestep a severe recession in 2009 despite the negative headwinds from the global economic meltdown,” John Peters, a senior economist at CBA told Reuters.

The index of employment also jumped 2.5 points to 48.5, the highest reading in 12 months.

New figures from the Federal Chamber of Automotive Industries show new car sales recorded their third best result in June, only 3.5% below their peak in June 2008.

Vehicle sales to businesses grew by 12%, with business sales up 26.9% for the month and overall sales up 15.5%. Sales of Australian vehicles fell 5.3%, but both market leaders Holden and Ford experienced sales increases.

Minister for innovation, industry, science and research, Senator Kim Carr, said in a statement the figures are welcome news for the industry.

“That performance makes this month the highest month ever for sales of motor vehicles to businesses, which is fantastic news for the automotive industry.

“This strong outcome means Australian vehicle sales performance has exceeded sales in most other major economies. In June 2009, US sales fell by 27.7% and Japan by 14.5%,” Carr said.

Mining giant Rio Tinto has finished one of the world’s biggest rights issues, saying Australian shareholders have taken 94.76% of their entitlements to the new shares. The company sought a trading halt today pending the announcement.

In other news, Becton Property Group has requested its current trading halt be extended until 7 July, as the company continues to negotiate its debt with lenders.