Jobless Claims Pushed to Seven-Year High

Thursday 25 September 2008

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by: The Associated Press

Hundreds gather to sign up for a Denver, Colorado, job fair. (Photo: John Moore / Getty Images)

Washington - New claims for unemployment benefits jumped last week to their highest level in seven years due to the impact of a slowing economy and Hurricanes Ike and Gustav, the Labor Department reported today.

The department said new requests for jobless benefits for the week ending Sept. 20 increased by 32,000 to a seasonally-adjusted 493,000, much higher than analysts' expectations of 445,000.

Wall Street was more focused on Washington, though, where lawmakers and the administration appeared to be moving closer to a $700 billion bailout package for the financial system. Stocks rose, with the Dow up more than 200 points in early trading.

The two hurricanes added about 50,000 new claims in Louisiana and Texas, the department said. The four-week moving average, which smooths out fluctuations, rose to 462,500. That's the highest it has been since Nov. 3, 2001.

The level of new claims was the highest since shortly after the 9/11 attacks, when it reached 517,000.

David Resler, chief economist at Nomura Securities, said Thursday's figure is the second-highest since July 1992. Claims have topped 500,000 only a handful of times in the past twenty years, he said, and were consistently above that level during the 1991 recession.

Even excluding the effects of the hurricanes, jobless claims remain at elevated levels. Weekly claims have now topped 400,000 for ten straight weeks, a level economists consider a sign of recession. A year ago, claims stood at 309,000.

The report "reflects a marked deterioration in the job market," Resler wrote in a note to clients. "That deterioration may well accelerate as the distress in the financial markets deepens and the effect of credit impairment spreads to other sectors."

The number of people continuing to draw jobless benefits last week was 3.54 million, up 63,000 from the previous week and nearly a five-year high. The four-week average of continuing claims was 3.49 million.

Other economic indicators Thursday were also negative. The Commerce Department said that orders for big-ticket manufactured goods fell by 4.5 percent in August, far more than the 1.6 percent decline economists expected.

And new home sales fell by 11.5 percent in August, the Commerce Department said in a separate report, to a seasonally adjusted annual rate of 460,000, the lowest level in more than 17 years.

Hurricane Gustav first had an impact on jobless claims for the week ending Sept. 13. The department said Thursday that Louisiana reported an increase in claims of 18,409 during that week, mostly due to Gustav.

The financial crisis, falling home prices and slowing consumer spending continue to apply the brakes to the U.S. economy. The unemployment rate jumped unexpectedly to 6.1 percent in August, the highest level in five years.

Last week, drug maker Schering-Plough Corp. said it plans to cut 1,000 sales jobs to reduce costs, part of a 10 percent reduction in staff announced in April. Also, the nation's largest chicken producer, Pilgrim's Pride Corp., announced it would reduce 100 jobs besides the 600 job losses it previously announced.