Jobless Claims Up, Worker Compensation Down : Economy: Number seeking first-time benefits hits 17-month high. Wages, benefits shrink for those who do have jobs.

The Labor Department reported Thursday that the number of Americans seeking first-time jobless benefits shot up last week to the highest level in 17 months, and that inflation-adjusted compensation for those who have jobs fell 2.7% in the year ended March 31.

Initial claims for state unemployment pay increased by 20,000 to a seasonally adjusted 395,000 in the week ended Saturday, the department said. That was the highest level since 401,000 for the week ended Jan. 29, 1994.

California led the nation with 10,977 new claims. The state attributed the increase to the return of the five-day workweek following the Memorial Day holiday, as well as to layoffs in the service and agricultural industries.

The weekly nationwide total far exceeded Wall Street economists’ forecasts of 373,000 initial claims.

“When initial claims are above 400,000, then that’s consistent with recession. We’re getting mighty close,” said Philip Braverman, senior vice president and chief economist at DKB Securities, a unit of Dai-Ichi Kangyo Bank.

Braverman and other economists said the jobless figure added to expectations that the Federal Reserve Board will move to cut short-term interest rates at its policy-setting meeting July 5-6.

The Treasury market appeared to agree. Investors bought up the 30-year bond, boosting its price by a full point, or $10 for every $1,000 of face value. Its yield fell to 6.47% from 6.54% on Wednesday.

“It’s pretty stunning,” Christopher Low, economist at HSBC Markets Inc., said of the jobless report. “It points to significant deterioration in June, especially in the goods-producing sector.

“To put it into perspective, when the 1990 recession began, claims were at 355,000,” he said. “They rose up above 400,000 during the course of the recession. This 395,000 level is very high and is consistent with recession.”

The closely tracked four-week moving average of first-time jobless claims, viewed as a more reliable gauge of labor market conditions than the weekly figure because it smoothes out weekly fluctuations, climbed to 381,000 in the week ended Saturday--the highest level since Oct. 10, 1992--from a revised 377,250 a week earlier, the Labor Department said.

The number of Americans receiving state jobless benefits in the week ended June 10, the latest period for which that data is available, rose by 47,000 to 2,626,000.

Forty-eight states and territories reported increases in claims for the week ended June 10, while just five registered declines. State figures are reported a week later than national totals.

Seventeen states, including California, reported increases in initial claims exceeding 1,000 on an unadjusted basis for the week ended June 10, the latest period for which that data is available.

They included New York, with 3,693 new claims; Pennsylvania, with 3,507; Texas, with 2,538; South Carolina, with 2,426; Washington, with 2,373; Georgia, with 2,100, and Indiana, with 2,083.

In its compensation report, the Labor Department said real hourly compensation in private industry fell to $17.10 an hour, down from $17.57 a year earlier. That included a 24-cent decline in wages and salaries, to $12.25 an hour. It was the largest drop since the government began tracking wages and benefits in 1987.

Labor Secretary Robert B. Reich described the report as “very, very dramatic” and “very disturbing.”

“Despite a strong year of economic growth, improved productivity, a surging stock market and near-record corporate profits, the wages of working Americans have suffered,” he said.

Reich said the decline threatens the economy “because consumers who don’t have enough money to spend may not be able to keep the recovery going.”

The report shows compensation varied widely by industry and occupation, union status, part-time and full-time status, business size and geographic region.