Economic Outlook: Stimulus revisited

Asian and European markers turned mostly lower Wednesday, following the second sharp fall in U.S. markets in three trading sessions.

The Dow Jones industrial average plunged 2.63 percent Thursday before the Independence Day break, made slight gains Monday, up 0.53 percent, then dropped 1.93 percent Tuesday in a session marked mostly by anticipation of a shaky corporate earning season.

Underneath it all, a rising tide of unemployment has the attention of investors and bureaucrats who realize paychecks are the cornerstone to a thriving economy.

In Washington, White House economic adviser Lawrence Summers defended the stimulus package that has yet to create the jobs expected from a $787 billion boost to the economy. In Moscow, President Obama did the same thing, telling a reporter, "there's nothing that we would have done differently," The Washington Post said Wednesday.

Summers said it was "clear from the data that there needs to be more fiscal stimulus in the second half of the year," with the additional thought that "fortunately, the stimulus program designed by the president and passed by Congress provides exactly that."

To Summers' credit, the measure was designed to spend about a quarter of the package this year and 75 percent by the end of 2010 -- a conservative design that anticipated rising unemployment but not, perhaps, the public's perception that the massive spending bill was a futile gesture.

The jump to a 9.5 percent unemployment rate in June on the loss of 433,000 jobs in the month toppled a three-month run up in stocks and prompted politicians to consider a second stimulus bill. "I think we need to be open to whether or not we need additional action," House Majority Leader Steny Hoyer, D-Md., said Tuesday.

But the international community would also react to a second stimulus package. In part, the business community would likely applaud the measure, sensing the opportunity provided by more money in the hands of spending consumers. Emerging economies would likely see it as a mixed blessing: Opportunity for their export companies and a risk that rising government debt would erode confidence in the future.

In Asia, the Nikkei average dropped sharply Wednesday, falling 2.35 percent. In Hong Kong, the Hang Seng index fell 0.79 percent. The Singapore Straits Times fell 0.55 percent, while the S&P/ASX index in Australia rose nominally, up 0.03 percent.

In midday trading in Europe, the FTSE 100 rose gained 0.20 points, less than 0.01 percent. The DAX 30 in Frankfurt rose 0.01 percent, while the CAC 40 in Paris fell 0.49 percent. The broader DJStoxx 600 index shed 0.76 points or 0.38 percent.