Initial applications for jobless benefits climbed by 58,000 to 573,000 in the week ended Dec. 6, upwardly revised from 515,000 the previous week, the U.S. Labor Department reported yesterday (Thursday).  The figure was the highest since 1982, and far exceeded the median projection of 525,000 put forth by 39 economists surveyed by Bloomberg News.

The increase was due, in part, to a bounce from the week before, which was shorter because it included the Thanksgiving holiday. Government offices were open only four days that week.

Nevertheless, the four-week average, which smooths out fluctuations, stood at 540,500.  That’s the biggest number of jobless claims filed since December 1982, when the economy was also mired in a deep recession. By comparison, there were 337,000 initial claims last year.

Workers claiming continuing jobless benefits also blew through economists’ projections, jumping by 338,000 to 4.4 million, the Labor Department said. Economists had expected 4.1 million. Continuing claims lag initial claims by one week.

“Stepping back from the short-term noise … it is very clear that the underlying trend in claims is still rocketing, as companies throw in the towel and prepare for a long, deep recession,” Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a research note to clients, MSNBC News reported.

Jobless claims are considered by economists to be a snapshot of the health of the labor markets and broader economy.

The U.S. economy has shed 1.9 million jobs so far this year, with payrolls having now dropped for 11 straight months. U.S. companies slashed 533,000 jobs in November, and the unemployment rate grew to 6.7% , the highest since 1974, the government said last week.

“The labor market is facing its worst crisis since 1982, and it is certainly not over yet,” said Harm Banholtz, a U.S. economist at UniCredit Markets and Investment Banking in New York, told Bloomberg News. “One of the most important tasks of the newly elected government is, therefore, to help distressed homeowners and to stimulate the labor market.”

More companies added to the malaise  yesterday as additional layoffs were announced. New Britain, Conn.-based toolmaker Stanley Works (SWK) plans to lay off 2,000 workers and close three manufacturing plants.  Illinois-based foodmaker Sara Lee Corp. (SLE), said it had outsourced 700 jobs overseas, and Office Depot Inc. (ODP) is adding 2,200 cuts of its own over the next three months. The office-products firm is closing 112 stores – about 9% of those in the North American market – and six of its 33 distribution centers.

Looming over the jobless picture is the uncertainty surrounding the $14 billion automakers bailout bill, currently being mulled in the Senate.  But even with a bailout, one – or even all three – of America’s “Big Three” carmakers may fail.
If a bailout doesn’t materialize – or fails to have the desired impact – the results will be catastrophic, according to the Center for Automotive Research.  The Ann Arbor, Mich.- based nonprofit told The Associated Press that if Detroit’s Big Three stopped making cars today and returned to 50% production in 2010 and 2011, it would still wipe out nearly 2.5 million jobs next year.
Job losses of that magnitude would have a profoundly negative impact on the U.S. economy – with horrid ripple effects worldwide – because of the plunge in consumer confidence the resultant job losses and loss of confidence that would result. Fully 70% of all domestic economic activity is powered by consumer spending.  And with the cutbacks some doomsayers foresee, even exporters in developing markets as far away as China and India would feel the squeeze.

Here at home, the mere threat of job losses is being felt on Main Street. According to an Associated Press-GfK poll released Wednesday, 53% of shoppers say they expect to spend less on holiday gifts than they did last year, while 40% will spend the same.

In other words, more than 90% of American shoppers are resisting the urge to splurge and spend more this year than last on friends and family during the holiday period, a time retailers depend on for  as much as 40% of their revenue for the year. That spells big trouble for retailers nationwide, with the possible exception of Wal-Mart Stores Inc. (WMT) , and other large discounters.

Also buttressing the curtailed spending argument is a new poll that says just 20% of shoppers plan to use credit cards for holiday purchases.  That’s down a whopping 33% from 2004. And two-thirds of the consumer surveyed said they would pay off the full balance owed when the bills come due in January, the poll found.

Source: U.S. Companies “Throw in the Towel” – Pushing Jobless Claims to a 26-Year High

For the tale of the tape, the TSX Exchange added 1.58%, while the TSX Gold Index fell 4.2% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, rallied 0.56% with the declining issuers edging out the advancers by a 511 to 408 margin on volume of 143 million shares traded.

Cash rich SNS Silver and cash-poor Andover Ventures (AOX) have inked a deal to merge. Under the proposal, SNS shareholders will get half an Andover share for each SNS share held. SNS has also provided Andover with a C$2 million bridge loan. SNS closed flat at C$0.16, while Andover dropped C$0.03 to close at C$0.34.

ATW Venture (ATVWF) cut 13.37 grams gold per tonne over 15.6 metres at its Burnakura gold mine in Western Australia. The result was good enough for a C$0.06 gain as shares in the junior closed at C$0.44.

Sherwood Copper (SWK), which added C$0.70 to close at C$4.30, hit 9.6 metres grading 2.58% copper at the high-grade Minto copper-gold mine in the Yukon.

Not to be outdone, Osisko Mining (OSK) tabled a 258 metre intercept running 2.13 grams gold per tonne at the South Barnat target some 1.2 km from its Canadian Malartic project in Quebec. Osisko ended the session up C$0.41 at C$2.95

Shares of Cameco (CCJ) continued to slide closing down C$0.63 at C$23.44. The company reported that production at its Key Lake mine in Saskatchewan will come in lower than expected. Earlier the company reported a green light to restart operations at its Port Hope uranium hexafluoride conversion plant that was shut down in July 2007 for contaminated soil. On the downside, its supplier of hydrofluoric acid has terminated its contract leaving the company without the key ingredient needed to produce uranium hexafluoride.

Liquidity or the lack there of remains a major stalling point for the more speculative issues. Cash rich companies can sit back and wait things out but the cash poor explorers will be fighting for survival by looking to do deals. Meanwhile, the prospects moving the debts off the books of the financials by throwing all the bad ones into a U.S. government vehicle may have the markets jumping for joy but one has to wonder as to the scale and practicality. We will see what Friday trading has in store.

Source: Resource Stock Roundup Friday September 19, 2008