Initial jobless claims unexpectedly rise


In this photo made Tuesday, Jan. 12, 2010, hundreds of people wait to enter a job fair in Hallandale Beach, Fla., to apply for the 600 retail and cafe jobs in the new shopping project, The Village at Gulfstream Park. Hundreds were turned away. The number of newly-laid off workers seeking jobless benefits rose more than expected last week, as the job market recovery proceeds slowly and unevenly.

J Pat Carter/The Associated Press
Published: Thursday, January 21, 2010 at 11:23 a.m.
Last Modified: Thursday, January 21, 2010 at 11:23 a.m.

WASHINGTON — A surprising jump in first-time claims for unemployment benefits is a painful reminder that jobs remain scarce six months into the economic recovery.

The increase deflated hopes among some analysts that the economy would produce a net gain in jobs in January.

The Labor Department said Thursday that initial claims for unemployment insurance rose last week by 36,000 to a seasonally adjusted 482,000. Wall Street economists expected a small drop, according to Thomson Reuters.

The four-week average, which smooths fluctuations, rose for the first time since August, to 448,250.

A Labor Department analyst said that much of the increase last week was due to administrative backlogs leftover from the winter holidays in the state agencies that process the claims.

Still, that would indicate that claims totals in previous weeks were articifically low, many economists said. Those drops had raised hopes that layoffs were ending and that employers would add a modest number of jobs in January.

The January employment report will be issued Feb. 5. But the surveys that are used to compile that report were conducted last week, so economists pay are paying close attention to the jobless claims figures from that week.

"The trend in the data is still discouraging," Diane Swonk, chief economist for Mesirow Financial, wrote in a note to clients. "Hopes for a positive employment number in January ... are rapidly dimming."

The stock market fell in morning trading. The Dow Jones industrial average dropped 170 points by late morning, while broader indexes also declined.

A separate report that seeks to forecast future economic activity was positive: The Conference Board's index of leading economic indicators jumped 1.1 percent in December, suggesting that economic growth could pick up this spring.

Eight of the 10 components in the index showed improvement, with the strongest gains in the so-called interest rate spread and building permits, which are a signal of future home construction.

The interest rate spread is the difference between the cost of borrowing money for 10 years and borrowing overnight.

In jobs market, initial claims for unemployment benefits had dropped steadily since last fall, as companies cut fewer jobs. First-time claims have dropped by 50,000, or almost 10 percent, since late October.

Still, employers are reluctant to hire. The Labor Department said earlier this month that employers cut 85,000 jobs in December, after adding 4,000 in November. November's increase was the first in nearly two years. The unemployment rate was 10 percent, unchanged from November.

Many economists say the four week average of claims will need to fall to below 425,000 to signal that the economy is close to generating net job gains.

The economy is growing, but not quickly enough to bring down widespread joblessness. Most economists estimate that the gross domestic product, the broadest measure of the economy's output, grew at about a 4 percent clip in last year's fourth quarter. That followed 2.2 percent growth in the July-September period.

Meanwhile, the number of people continuing to claim regular benefits dropped slightly to just under 4.6 million. The continuing claims data lags initial claims by a week.

But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.9 million are receiving extended benefits in the week ending Jan. 2, the latest data available, an increase of more than 600,000 from the previous week. The data for emergency benefits lags initial claims by two weeks.

The increasing number of people claiming extended unemployment insurance indicates that even as layoffs are declining, hiring hasn't picked up. That leaves people out of work for longer and longer periods of time.

Among the states, California saw the largest increase in claims, with 16,160. Texas, Florida, Pennsylvania and Georgia saw the next largest increases. The state data lags the initial claims data by a week.

Oregon saw the biggest drop in claims, of 5,784, followed by Iowa, Kentucky, Michigan and Massachusetts.

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