Financial Market Update-More Grim News on Employment Front

Jobless claims are at their highest level in 16 years, according to the U.S. Department of Labor. For the week ended Nov. 15, initial claims for state unemployment insurance benefits were 542,000. The four-week moving average of new jobless claims also rose, from 490,750 last week to 506,500, which was the highest in 25 years. Reports like this week after week are bound to reflect a larger ill wind blowing through the economy, and sure enough the Conference Board reported today that the Composite Index of Leading Economic Indicators declined 0.8 percent in October, following a 0.1 percent increase in September, and a 0.9 percent decline in August. “The economy is contracting, and the pace of contraction may intensify over the next few months,” noted Ken Goldstein, economist at the Conference Board, in a statement. GMAC L.L.C. has applied to be a bank holding company–it’s all the rage among large financial institutions hoping for a slice of sweet bailout pie. But as the largest lender to GM car dealers, the move is seen as a survival gambit as well. The company also kicked off an exchange offer for $38 billion of its notes (and notes issued by its Residential Capital L.L.C. home lending unit), the goal of which is getting rid of debt. GMAC may survive, but the automakers themselves didn’t have such a good day on Capitol Hill yesterday. Congress is scheduled to wrap up its lame-duck session tomorrow, with no sign that it will do anything about Detroit’s problems before it does. It’s possible that Congress will be called back in December, but few are betting on the a positive outcome for the Big Three even in that case. Meanwhile, the International Monetary Fund has gotten around to bailing out Iceland with a $2.1 billion loan, in conjunction with another $2.5 billion from the Nordic countries of Finland, Sweden, Norway and Denmark. Bloomberg reported that though the financial infusion may be a good thing for the beleaguered island nation, it isn’t a panacea. Lars Christensen, chief analyst at Danske Bank A/S, noted that it isn’t enough to prevent the country’s economy from contracting at least 10 percent next year.