Prior to the open on Wall Street Thursday morning (December 11) the weekly jobless claims report was announced. A disappointing 573,000 jobless claims were reported in the previous week. This is the highest number of claims reported in 26 years. It is also much worse than the 525,000 claims that analysts expected. Jobless claims continue to be one of the major concerns pointing toward a deep recession for 2009.

There were several new announcements of more jobs to be cut as well. Bank of America is expected to slash 35,000 jobs over the next three years. Some of the job losses are expected to hit Merrill Lynch and Company, the leading investment bank which Bank of America agreed to buy in September.

The $14 billion auto bailout proposal has been the talk of the investment world this week. Investors have been anxiously awaiting word as to whether government leaders would come to agreement on a proposal. The decision is likely to impact markets as failure of one of the leading automakers would add significantly to the already high jobless claims tallies.
GM and Chrysler have communicated that they are going to run out of cash for operations within weeks if a bailout agreement is not reached. Ford maintains it should be fine through 2009, though it would like access to a government credit line in case of emergency. Chrysler is reportedly already communicating with bankruptcy lawyers in the event a financial savior does not come around.

Late Thursday evening, the Senate voted to reject the $14 billion auto bailout proposal based mainly on the decline of steep pay cuts by the United Auto Workers Union. Leading republicans had held firm that a bailout agreement should require a pay cut agreement with the UAW. Many lawmakers had expressed concern about investing tax payer money in a doomed cause if restructuring and lower wages were not included.

The rejection by the Senate does not necessarily mean there is still not a possibility for a bailout of some type. Earlier this year, President Bush’s tax rebate stimulus plan met some initial resistance but perseverance eventually won out and an agreement was reached. President-elect O’bama said yesterday that an agreement “must” be reached regardless of how it happens. Lawmakers in favor of the proposal have turned their attention back to the $700 billion bailout already in plan. They are urging the Bush Administration to use a portion of that money to assist the auto makers.
There are many road blocks that must be cleared in order for a bailout. The majority of Americans do not support an auto bailout. There are not enough votes for a bailout to pass without the concessions identified by republicans. President Bush would have to put himself in a precarious position to “go it alone” in supporting the industry. Despite the obstacles, the sense of urgency from automakers and congressional leaders indicate the auto bailout talks are not dead.

Market Recap
The Dow gained 98 points on Wednesday as investors were hopeful that an auto bailout agreement would be reached sometime this week. Stocks faltered Thursday as anxious investors waited to see what would happen with the auto bailout proposal. The Dow dropped 196 points. An unemployment report showed the most jobless claims in 26 years. The dollar is falling against most major currencies. Oil jumped to $48 per barrel.

Neil Kokemuller
Thursday, December 11, 2008
11:49 PM EST
Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.
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