Investors are digesting a bit of bad news concerning the economy, as initial applications for unemployment insurance increased to 500,000 during the past week.

The 12,000-claim rise suggests that the economy is slowing and that employers are cutting jobs. The last time initial claims for unemployment insurance were this high was back in November. The latest data does not include millions of unemployed receiving extended insurance, which is paid for by the federal government. Roughly 5.6 million unemployed workers were on this extended insurance as of the end of July.

Is the unemployment picture getting any better? The truth is that's its hard to tell. The Labor Department said that initial claims for state unemployment insurance rose 3,000 to 608,000. The expected number was 600,000. This is especially disturbing since this is the time of year when most hiring in done, mainly in the construction trades.

However, there is some good news. Continued claims for unemployment (those persons already on the rolls) fell by 148,000 to 6.69 million. This was the lowest level since May 9, as well as the largest one-week drop since November 2001. This indicates that persons already on the rolls are finding work, and that's good news.