August 9, 2010

U.S. jobless claims point to further employment losses

WASHINGTON

Initial requests for jobless benefits in the United States rose this month to their highest level since April, a sign that hiring remains weak and some companies are still cutting workers.

The Labour Department said Aug. 5 that new claims for unemployment insurance rose by 19,000 to a seasonally adjusted 479,000. Analysts had expected a small drop. Claims have risen twice in the past three weeks.

Some of the increase in claims stemmed from difficulties the government has in adjusting for seasonal factors.

But the jump in claims is a cautionary sign that higher corporate profits and a slowly recovering economy aren’t spurring companies to generate many jobs.

“The very unyielding flow of layoffs now clearly evident discourages any thought that employers are more comfortable with the size of their staffs,” Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.

Recent economic data has heightened concerns that the recovery is slowing. Americans are spending cautiously as they save more and pay down debt. Home sales and construction have slumped after a popular homebuyers’ tax credit expired on April 30. The impact of the federal government’s stimulus efforts is fading.

Analysts said seasonal factors that began in early July are still skewing the numbers and must be considered before reading too much in to the report.

The Labour Department anticipated a large decline in claims last week as many auto companies usually shut their plants temporarily in early July. Claims were expected to rise during the shutdown and then fall. But this year General Motors and other manufacturers skipped the shutdowns, so claims didn’t fall last week as much as expected.

“Claims have averaged 463,000 since the beginning of the year, and at this point we still consider the underlying trend to be around this level,” said Ryan Wang, an economist at HSBC Securities.

The seasonally adjusted four-week average of claims, which smooths out volatility, rose by 5,250 to 458,500.

Economists closely watch initial claims because they are considered a gauge of the pace of layoffs and an indication of employers’ willingness to hire.

Applications for unemployment insurance have fluctuated between 450,000 and 480,000 all year, after declining steadily last year from a peak of 651,000 in March 2009. In a healthy economy with rapid hiring, claims usually fall below 400,000.

The tally of laid-off workers continuing to claim unemployment benefits fell by 34,000 to 4.54 million. That doesn’t include an additional 3.9 million people receiving extended unemployment benefits paid for by the federal government.

Associated Press

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