NEW YORK /PRregister.com/-Weakness in the job market is seen as the biggest obstacle to a rebound in the economy. The unexpected rise in first-time claims for unemployment benefits last week was the latest reminder that a recovery will be difficult.
The report lowered expectations that the government's closely watched January jobs report, due on Friday, would show that employers added workers in the first month of the year.
More trouble for debt-strapped European governments also spooked U.S. investors, sending demand for safe haven holdings like the dollar and Treasurys sharply higher. The Dow Jones industrial average fell 190 points, and other stock indexes posted similar drops.
Claims for unemployment benefits rose by 8,000 to 480,000 last week, the Labor Department reported, disappointing investors who had hoped for a drop. It was the fourth increase in the past five weeks. The number of lost jobs was the highest in two months and upended a sense that claims would resume a decline that occurred in the fall and early winter.
Analysts currently expect Friday's monthly jobs report — the most influential economic report on the calendar — to show that employers added 5,000 jobs in January, but also that the unemployment rate ticked up to 10.1 percent from 10 percent. The weekly jobless claims numbers had some wondering if the current estimates are too optimistic.
European markets also tumbled on concerns about onerous debt levels in countries including Greece, Spain and Portugal. The euro hit a seven-month low against the dollar. That hurt demand for commodities, which are priced in dollars and become more expensive to foreign buyers when the dollar climbs.
The concern about jobs and finances in Europe overshadowed improvements in worker productivity and an increase in factory orders. The bad news on employment and European government debt overshadowed pockets of better than expected sales reports from some U.S. retailers. Macy's Inc. raised its profit forecast after sales rose and it discounted fewer items.
Manny Weintraub, president of Integre Advisors in New York, said the economy won't be able to recover and the stock market won't be able to extend its 11-month run if consumers don't eventually start ratcheting up spending. Improvements in unemployment would boost confidence of job seekers and could make those with jobs feel more at ease.
"That's the whole story. People feel if employment starts to improve you have a big multiplier effect," Weintraub said.
In midmorning trading, the Dow fell 192.19, or 1.9 percent, to 10,078.36. The broader Standard & Poor's 500 index fell 20.98, or 1.9 percent, to 1,076.30, while the Nasdaq composite index slid 39.21, or 1.8 percent, to 2,151.70.