Source: The Canadian Press

Stock markets will be hunting for direction this week as investors grapple with the persistent question of whether the economy will continue to build a gradual recovery or fall off the tracks and begin another spiral downwards.

The key uncertainty that still persists is whether markets will head into a “double dip,” or a second plummet of the economy and stocks.

“Economics gets interesting for markets at inflection points, and that’s exactly where the global economy is sitting as spring turns into summer,” said Avery Shenfeld, chief economist at CIBC World Markets in a note.

“But are we seeing a turn for the worse — a period of slower, or slow growth — or a turn for the worst, towards renewed recession?”

Last week, the U.S. unemployment rate fell unexpectedly, dropping to 9.5%, however the drop came as some people gave up looking for work.

The U.S. government also reported that factory orders fell in May for the first time in nine months. The 1.4% drop was the biggest since March 2009, when major stock indexes hit a 12-year low.

The unemployment data “hasn’t really clarified things,” said Norman Raschkowan, chief investment officer at Mackenzie Financial

“It wasn’t different enough from what people’s expectations were that people were saying ‘This confirms that things are OK’ or that ‘This confirms it’s a double dip.”’

This week, investors will little to mull over in their quest for some further clues about the economy.

On Tuesday, ISM non-manufacturing data for June could provide some insight into consumer confidence, and is expected to back off slightly.

“The expected level of 55.0 would indicate continued moderate growth, with services, resources and utilities paving the way but construction dragging its feels,” wrote BMO senior economist Sal Guatieri.

In Canada, housing starts are scheduled for Friday and some observers suggest that numbers could start to show signs of slowing down.

“Existing home sales have already fallen 17% in seasonally-adjusted terms in the first five months of the year, while the HST will put the brakes on B.C. and Ontario new home sales in the second half of the year,” wrote BMO economist Robert Kavcic.

“This moderation in demand should eventually cool housing starts down to around a 180,000 annualized pace, or just slightly above the rate of household formation.”

Canadian employment could also start to show some strain when they are released Friday.

“While the hiring likely continued in June, recent evidence that the Canadian economic recovery is downshifting suggests that the gain could be below the average seen so far during the recovery — we’re looking for 13,000 new jobs in June,” Kavcic added.