Unemployment Claims Climb to 7-Month High : Economy: The news on jobless benefits raises concerns that the nation’s job market is deteriorating.
The number of newly laid-off workers filing claims for unemployment insurance soared to near the half-million mark for the week ending Nov. 9, feeding fears that the feeble recovery of last summer has faltered.
The Labor Department reported Thursday that the number of new claims for jobless benefits increased by 39,000 to 493,000, the highest level in seven months. The large increase, the third in as many weeks, raised concerns that the nation’s job market is deteriorating.
The latest jump, attributed largely to layoffs in construction and the auto industry, continues a reversal of a trend toward gradually lower levels of unemployment since March, when claims peaked at an eight-year high of 540,000.
As recently as Oct. 31, when initial unemployment insurance claims for mid-October were reported, the number was down sharply from 452,000 to 405,000, and some economists had pointed to a steady downward trend since spring as evidence that the economy was still recovering.
Indeed, the latest survey by the National Assn. of Business Economists showed that NABE members still believed that the sluggish rate of growth would not give way to another recession. But they are less optimistic about the economy than when they were last surveyed in August.
Meanwhile, a survey conducted by American Express Co., released Thursday, showed that confidence among owners of small businesses, which employ six in 10 American workers, fell in the third quarter.
“The small-business sector has lost faith in the near-term recovery,” said James Firestone, executive vice president of American Express.
The unemployment claims report, which can be extremely volatile from week to week, disturbed some economic forecasters. There was particular concern because the initial claims level was back at half a million.
“Certainly the absence of jobs and hiring is the factor that has most unnerved American households about this economy,” said Roger Brinner of DRI/McGraw Hill, a forecasting firm based in Lexington, Mass.
“Consumers are not buying, and businessmen see no need to expand production. And if business has no faith in the economy, then they are even less likely to do any hiring. It’s a vicious cycle.”
He said DRI has reduced its forecast for future growth to a 1% annual rate the next two quarters--less than half the rate needed to absorb new entrants into the job market and keep unemployment from rising.
“Technically, that means we won’t be in recession, but most people will feel that we are,” Brinner said. “At that rate, it looks like unemployment will be at or near 7% through most of the election campaign.”
Allen Sinai of Boston Co. in New York declared Thursday’s employment insurance report “in line with other data we’ve seen that suggests there is no recovery and that a downturn in the fourth quarter is possible.”
His firm projects a net decline of 25,000 jobs when the Labor Department reports on the national employment picture for November and an increase in unemployment from October’s 6.8% level to 6.9% or 7%. The peak unemployment rate in this recessionary cycle was June’s 7%.
In its report, the Labor Department said most of the unemployment claims were in the sectors that have lost the most jobs in the recession: construction and manufacturing. Minnesota was the hardest hit state during the week, with a huge 143% increase in claims--to 7,421. Almost all were because of a blizzard that wiped out construction jobs, at least temporarily.
In Michigan, where widespread layoffs in the auto industry pushed the unemployment rate to 8.8% in October, more cutbacks pushed initial claims for unemployment insurance up 39% to 7,307.
Other hard-hit states--Pennsylvania, New York, Wisconsin and Ohio--registered many job losses in construction and manufacturing. In California, claims were 1,440, a level that the state told the Labor Department was “relatively stable.”
The NABE report said the consensus of the group of 45 corporate economists is that consumer caution and a concerted effort to pay off private debt will keep the economy growing at an extremely slow rate, even if a “double-dip” recession is avoided.
NABE President Lynn Michaelis said he is more pessimistic than others in the group, which projects a 2% growth rate in the fourth quarter and unemployment of 6.5% by the end of next year.
“The health of the economy is pathetic,” he said bluntly.
