TORONTO - 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 US unemployment rate fell unexpectedly, dropping to 9.5 per cent, however the drop came as some people gave up looking for work. The US government also reported that factory orders fell in May for the first time in nine months. The 1.4 per cent 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.

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 per cent 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.