Small caps continue slide on jump in unemployment rate

After a smack-down on Thursday small-cap stocks continued their slide into Friday. The Russell 2000 remained submerged midday after the unemployment rate jumped more-than-forecasted, adding to the economic case against the economy.

At 1:32 p.m. ET, the Russell 2000 (NYSE:IWM) was down 6.11, or 0.85%, at 712.51, off its lows of the session.

The jobs data disseminated from the Labor Department this morning sent equities into a tailspin, as the nation’s unemployment unexpectedly jumped to the highest level since December 2003. Unemployment rose to 6.1% from 5.7%, while economists were forecasting the rate to clock in roughly flat. Adding to the gloomy jobs report, non-farm declined by 84,000, wider than the forecasted decline of 75,000 jobs. This marked the eighth consecutive monthly decline in payrolls, which hasn’t happened since the 2001 to 2002 time frame.

“So far this year, 605,000 jobs have been lost,” Steven Wood, chief economist with Insight Economics, said in an email. “The economy has clearly slipped into a jobs recession because the housing meltdown and credit market turmoil has spread to the broader economy. Over the past year, the number of unemployed people has increased by more than 2.24 million and the unemployment rate has increased by 1.4 percentage point. In the post World War II period, every time the unemployment rate has jumped by a full percentage point or more in the course of a year, the economy has been in a recession.”

With the spotlight on the jobs market, oil’s slide midday did little to change the market’s direction. Crude oil futures had slid about $2 a barrel to $105 and change midday, as oil traders sold off the commodity in the face of weakening demand worldwide. The greenback was mixed against the euro and the yen. The euro had climbed to $1.4257 midday.

The market also overlooked that home foreclosures grew at the most rapid pace in nearly 30 years during the second quarter, as tough credit conditions persisted.

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