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U.S. stock markets took their biggest drop in three months Thursday, following disappointing news about joblessness and manufacturing.
The Dow Jones Industrial Average fell 203 points, or 2.01 percent, while the Standard & Poor's 500 Index dropped 2.6 percent. This came after the U.S. Department of Labor said that first-time claims for jobless benefits increased more than expected last week.
That was seen as a sign employers are reluctant to hire and the job market remains weak.
Separately, the Institute for Supply Management, a private trade group, said manufacturing activity expanded for the second straight month in September, but at a slightly slower pace than in August.
Even though consumer spending jumped in August by the most in nearly eight years -- due partly to the government's Cash for Clunkers program -- economists question whether the improvement can be sustained. They note that households face rising unemployment, tight credit conditions and other obstacles.
Initial claims for unemployment insurance rose to a seasonally adjusted 551,000 from 534,000 in the previous week. Wall Street economists expected an increase to 535,000, according to a Thomson Reuters survey.
The increase comes after three weeks of declines. Weekly claims have trended down since spring, but the decline has been painfully slow. The four-week average, which smooths out fluctuations, dropped to 548,000, about 110,000 below its peak in early
"This is a bit disappointing but not unduly alarming," Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote to clients. The increase "leaves the downward trend in claims intact."
In Utah, Mark Knold, chief economist for the state Department of Workforce Services, had a similar reaction.
"They're not particularly surprising. Any time you're in the initial stages of [a recovery], we get these back and forth swings. One week is hard to build a trend on," he said.
"The general trend of our claims is downward, but last week they were higher than the week before that," Knold added. "They're still at levels you don't want them to be at, levels that suggest you are losing more jobs than gaining new jobs."
Many economists say initial claims below 400,000 would be a signal that employers are adding to the net total of jobs.
Meanwhile, the number of people nationally with active unemployment claims fell 70,000 to 6.09 million, the lowest since the week of April 4. Continuing claims have declined slowly from a record 6.9 million in late June. But when federal emergency programs are included, the total number of jobless-benefit recipients was nearly 9 million in the week that ended Sept. 12. That's little changed from the previous week.
The large number of people remaining on the rolls indicates unemployed workers are having a hard time finding new jobs.
Consumer spending, which accounts for 70 percent of total economic activity, jumped in August by the largest amount in nearly eight years even though personal incomes continued to lag.
The Commerce Department said consumer spending rose 1.3 percent in August, the largest monthly advance since October 2001, when the economy was shaking off the impact of the terrorist attacks; a 1.1 percent gain had been expected. But incomes edged up 0.2 percent, the same as in July.
Tribune reporter Mike Gorrell contributed to this article.
