Unemployment Rate Expected to Pass 5%

Fallout from the terror attacks is rippling through the economy, catapulting new claims for unemployment benefits to a nine-year high.

Layoffs mounted for workers in travel and tourism last week, and economists believe the jobless picture will get worse in coming months.

Even before the attacks, the nation’s unemployment rate had risen to 4.9% in August from 4.5%, the biggest one-month jump in more than six years as businesses eliminated 113,000 jobs.

Today, the government will release its first monthly employment report since the Sept. 11 attacks. Many economists are expecting it to show that the jobless rate climbed to 5% in September and businesses slashed payrolls by at least 100,000.

Mark Zandi, chief economist at Economy.com, estimated that over the next six months a net 500,000 more jobs are likely to be lost, after taking into account jobs created during the period. The unemployment rate could rise to 6% by year’s end.

For the work week ended Sept. 29, new jobless claims soared by a seasonally adjusted 71,000 to 528,000, the Labor Department reported Thursday.

That came on top of a 64,000 increase the week before, which many analysts believe represented the first wave of layoffs coming from the Sept. 11 disaster.

“We’ll see continued high levels of layoffs for a while,” said Gary Thayer, chief economist for A.G. Edwards & Sons. “We are headed into a period of economic weakness that is going to be more severe than it’s been up to now.”

The last two sharp increases in jobless claims reflect the toll the attacks are having on a labor market that already was suffering because of the country’s more than yearlong economic slump.

New claims are at the highest point since July 25, 1992.

The four-week moving average, which smooths out week-to-week fluctuations, rose last week to 453,500, the highest level since Dec. 28, 1991.

In another report, companies announced plans to cut 248,332 jobs in September, a record monthly high, according to outplacement firm Challenger, Gray & Christmas. Of that total, 200,807 layoffs were announced after the attacks.

With new uncertainties raised by the attacks and many economists saying a recession this year is unavoidable, businesses will be reluctant to hire new workers, analysts said.

Manufacturing has been hardest hit by the slowdown and had cut roughly 1 million jobs before the attacks. In the aftermath, the industrial sector probably will continue to post weak sales and to shed workers, analysts said.

In another report, orders to American factories were virtually flat in August, decreasing to $332.6 billion, after dipping by 0.1% in July, the Commerce Department said.

As part of a plan to jump-start the economy, President Bush wants to accelerate income tax cuts, currently set to take effect in 2004, and give tax rebates to millions of lower-income workers who didn’t qualify for this summer’s rebate checks. The president also is pushing a 13-week extension of unemployment benefits, which now run out after 26 weeks.

New York saw the biggest jump in claims--by 10,717--reflecting layoffs in the trade, service, financial and recreation businesses.