Workers Are Remaining Unemployed
By Joanne Morrison
Thursday November 8, 5:20 pm Eastern Time
WASHINGTON (Reuters) - U.S. workers left jobless in an economy battered after the September hijack attacks are staying that way, as companies put hiring on hold pending better economic times, the government's latest figures showed.
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And with the fear of job losses high, consumers have shifted their spending -- albeit meager -- to discount store chains instead of the more expensive department stores, a trend analysts expect to continue for several months.
``This is a very typical reaction by consumers,'' said Sung Won Sohn, chief economist at Wells Fargo Bank in Minneapolis, one of many economists who expect the labor picture to weaken further over the next few months.
In its latest report, the Labor Department said the number of Americans remaining on state unemployment benefits for the last full week in October was at its highest level in more than 18 years.
And while fewer Americans applied for first-time unemployment benefits last week, the level of these initial claims has been substantially higher than levels seen the same time last year.
Stock prices ended mixed on Thursday after a big rally on an interest-rate cut by the European Central Bank fizzled.
The Dow Jones industrial average (.DJI) ended with a modest gain of 33.15 points, or 0.35 percent, at 9,587.52. At the height of the day's rally, the Dow had been up nearly 170 points, or 1.75 percent.
The Nasdaq composite (.IXIC) fell 9.76 points, or 0.53 percent, to 1,827.77, after having been up as much as 51 points, nearly 2.8 percent. The broad Standard & Poor's 500 index (.SPX) edged up 2.74 points, or 0.25 percent, to 1,118.54.
JOBLESS CLAIMS FALL, BUT LEVEL UP OVER LAST YEAR
The number of initial jobless claims for the week ended Nov. 3 fell by 46,000 to a seasonally adjusted 450,000, the Labor Department said. But that was still 31 percent higher than the level reported during the same week last year.
``Not only is hiring at a standstill, but still I think we are seeing more and more layoffs and I don't think the bad news on the employment front is behind us yet,'' Sohn said.
Even so, the number of workers remaining on jobless benefits, considered a key gauge of employment conditions in a weakened economy, reached its highest level since April 23, 1983, when the economy was struggling out of a recession.
``Folks who have lost their jobs are having a great difficulty finding new jobs. That's something we haven't seen since the last recession,'' said Mark Vitner, senior economist with Wachovia Securities in Charlotte, N.C.
These so-called continued jobless claims rose by 34,000 to 3.72 million for the week ended Oct. 27, the most recent week for which the data were available, the department said.
Vitner expects the weekly jobless claims to peak in December or January, when many of the hundreds of thousands of layoff announcements made since the Sept. 11 attacks become a reality.
``Many of the layoffs that we've been reading in the papers lately haven't even taken effect,'' he said.
According to the international outplacement tracking firm Challenger, Gray and Christmas, nearly a half a million layoffs have been announced since the September attacks in a broad range of sectors.
CONSUMER SPENDING SHIFTS
The dismal employment situation has changed consumer spending behavior.
Faced with the risk of losing their jobs, Americans have cut back on spending at pricier department stores and instead are looking more for discounts.
``Clearly value pricing is going to rule now. In an environment where you don't feel security about your job, consumers are going to want values,'' said Anthony Chan, chief economist at Banc One Investment Advisers in Columbus, Ohio.
Discount stores like WalMart Inc. (NYSE:WMT - news), the world's largest retailer. and Target Corp. (NYSE:TGT - news), the third-largest U.S. discount chain, reported a rise in October sales from September figures. But spending remained well below last year's levels.
Consumers stayed away from the more expensive department stores such as Dillard's Inc. (NYSE:DDS - news), May Department Stores Co. (NYSE:MAY - news) and luxury department store operator Saks Inc. (NYSE:SKS - news), all of which posted hefty sales declines in October.
``People are trying to economize, going for more bang,'' Sohn said.
IMPORT PRICES DOWN
U.S. import prices in October took the biggest plunge since the government began publishing the figures, driven down by the largest monthly fall in petroleum prices in more than a decade, the Labor Department said in a separate report on Thursday.
U.S. import prices fell 2.4 percent in October after edging up 0.1 percent in September, the department said. That was the biggest decrease since the government began publishing these monthly numbers in January 1989 and a good sign that inflation pressures will remain in check.
October's decline in import prices was led by a 15.7 percent falloff in petroleum import prices, the biggest drop since an 18.6 percent plunge in February 1991.
Excluding petroleum, U.S. import prices fell a more modest 0.4 percent, led by a continuing slide in prices for industrial supplies and materials. However, prices for autos and parts rose 0.2 percent, the second straight monthly increase. |
