U.S. Initial Jobless Claims Rise 19,000 to 426,000 (Update1)
By Monee Fields-White
Washington, Sept. 12 (Bloomberg) -- The number of U.S. workers filing new claims for jobless benefits rose last week to the highest level in almost five months, indicating the economy's sluggish recovery is prompting companies to fire workers.
States received 426,000 initial applications in the week that ended Saturday, up from 407,000 in the prior week, the Labor Department said. The rise was the fourth in the last five weeks, and the level was the highest since April 20, when claims totaled 427,000.
``The economy has weakened, and may be beginning to weaken some more,'' said Cary Leahey, senior U.S. economist at Deutsche Bank AG in New York. The rise in claims ``is showing signs that the labor market may be softening again despite the drop in unemployment. This will not change Fed policy because rates are already low and they told us that.''
Federal Reserve Chairman Alan Greenspan will probably tell Congress today that the recovery is sluggish, reflecting public statements of other Fed officials, economists said. In testimony to the House Budget Committee at 10 a.m. Washington time, Greenspan may echo the conclusion of the Fed's regional economic report card, called the beige book, which said yesterday the economy slowed in the past six weeks, limited by weak factory production and little or no gains in employment.
The economy would have to create 100,000 to 200,000 jobs a month, economists estimate, to sustain further declines in the unemployment rate, which fell to a five-month low of 5.7 percent in August. In the past eight months, the economy has lost 48,000 jobs, and companies such as Quantum Corp. and Caterpillar Inc. are still reducing their workforces.
Market Reaction
Treasuries rose after the report. The 4 3/8 percent note due in August 2012 climbed 1/4 to a price of 102 28/32 at 9:05 a.m. in New York. The yield fell 4 basis points to 4.02 percent. A basis point is 0.01 percentage point. Stocks fell before exchanges opened.
The median forecast of 33 economists surveyed by Bloomberg News was for claims to total 400,000 last week, down from the previously reported 403,000.
The less volatile four-week average of claims rose for a fourth straight week to 409,500 from 400,750. Weekly claims have averaged 405,000 so far this year, compared with 406,000 last year.
The number of people collecting jobless benefits rose by 38,000 to 3.569 million in the week that ended Aug. 31, the highest in two months.
Unemployment Rate
The insured unemployment rate, which measures the number of people receiving benefits as a percentage of workers covered by the state program, held at 2.8 percent in the week that ended Aug. 31. The rate tends to track the overall U.S. jobless rate.
``We are still in this jobless recovery,'' said Scott Brown, an economist at Raymond James & Associates in St. Petersburg, Florida. ``We are in a transition phase where the economy is not on a sustainable track yet.''
The Labor Department also said 21 states and territories reported an increase in new claims during the week that ended Aug. 31, while 32 states and territories reported a decrease.
Continuing claims, the insured unemployment rate and state detail are reported on a one-week lag from initial claims.
The August decline in the jobless rate from 5.9 percent in July, reported Friday, was the first in three months. In August, businesses and the government added 39,000 workers, the fourth consecutive monthly increase, after creating 67,000 jobs in July.
Consumer Spending
Job growth is essential because it helps bolster consumer spending, which accounts for two-thirds of the economy.
``If consumers are concerned they will lose income from getting laid off, they will cut spending off quite quickly,'' said Lara Rhame, an economist at Brown Brothers Harriman & Co. in New York. ``Right now, consumer spending is the key pillar keeping our economy standing, so this type of response would be devastating.''
Second-quarter economic growth slowed to a 1.1 percent annual rate from 5 percent in the first three months. According to the latest Blue Chip Economic Indicators forecast, the economy is expected to grow at a 2.7 percent rate in the current quarter and at a 2.9 percent pace in the final three months. For the year, the economy may expand 2.3 percent, the survey showed.
``The economy is going to have to accelerate beyond a 4 percent pace to boost job creation,'' said Michael Englund, chief economist at MMS International in Belmont, California.
Caterpillar, Quest
Two-thirds of the economists in the Blue Chip survey said the jobless rate may peak at 6.2 percent in the next six months.
Caterpillar, the world's second-largest maker of heavy-truck diesel engines, will fire about 470 full-time workers and cut 290 temporary jobs at two Illinois plants, as U.S. emissions rules sapped demand, a Caterpillar spokesman said Friday.
Quantum, a Milpitas, California, maker of computer storage products, said it will reduce its workforce by 1,100. About 80 percent of the workers cut will be hired by Jabil Circuit Inc., which is assuming some Quantum manufacturing, spokeswoman Leigh Nixon said. At the same time, Jabil is closing an assembly plant in Boise, Idaho, and firing 500 workers.
Weekly initial claims had climbed as high as 492,000 at the end of March, as a federal program that allowed unemployed workers to extend benefits 13 weeks went into effect. To qualify for the U.S. government aid, Americans had to re-submit jobless applications. The number of people collecting those benefits rose to 2.43 million in the week that ended Aug. 24 from 2.1 million the prior week. |
