12 August 2010


The US Labor Department says new jobless claims hit a six month high last week as 484,000 Americans signed up for unemployment assistance.

The report comes after the Federal Reserve said the pace of recovery is likely to be more modest than anticipated.

Standard and Poor's investment strategist Alec Young. "It was just reaffirmation that the recovery is weaker than expected and that the risks of a double dip have gone up," he said.

A surge in housing defaults only added to investor worries.

Realty Trac, which monitors the housing market, says foreclosures rose four percent in July. That means one in almost 400 U.S. homes has received a foreclosure notice.

Those numbers were more than statistics in Atlanta - where thousands lined up for hours to get on a waiting list for public housing assistance.

Despite low interest rates, the U.S. housing market remains weak.

But economist David Resler at Nomura Securities believes the worst may have passed. "We think that we're close to the bottom, but we may bounce along the bottom for a while yet because there's still a lot of uncertainty in the minds of potential home buyers and home sellers about where things are headed," he said.

Wall Street remained on edge Thursday as traders digested more disappointing earnings reports.

Resler told VOA that market volatility is due mostly to uncertainty - investors not knowing which way the wind will blow. "I think right now what the economy needs is several months of simply stability, in terms of policy. I think the focus should be right away on extending the Bush tax cuts either across the board or to those making less than $250(,000 per year).

The tax cuts are set to expire at the end of the year. Democrats and Republicans are sharply divided. Democrats say ending the tax cuts to wealthy Americans would ease the burden on the middle class and reduce the deficit by 30 percent.

Republicans argue that lower taxes for those earning more than $250,000 a year, would result in more hiring.

The issue could play a role in crucial mid-term elections in November.