U.S. Initial Jobless Claims Rose to 406,000 Last Week

By Shobhana Chandra

July 24 (Bloomberg) -- The number of Americans filing first-time claims for unemployment benefits rose last week to the highest in almost four months, a sign the slowing economy is weakening the labor market.

Initial jobless claims increased by 34,000 to 406,000 in the week ended July 19, from a revised 372,000 the prior week, the Labor Department said today in Washington. The filings exceeded economists' forecast and were the most since 406,000 in the week ended March 29.

U.S. employers are reducing workers as surging fuel costs, a three-year housing slump and a crisis in credit markets restrains demand. Rising joblessness reinforces concern that consumers will pull back on spending, which accounts for more than two-thirds of the economy.

``The underlying picture is one of a labor market that is weak,'' said David Sloan, senior economist at 4Cast Inc. in New York, whose forecast of 410,000 was the closest to the actual number in a Bloomberg News survey of 44 economists. ``The economy is growing slowly so you tend to see job losses rising. The weakness could increase further in coming months.''

Treasuries were higher, pushing yields down. The benchmark 10-year note yielded 4.09 percent as of 8:50 a.m. in New York, down 3 basis points from yesterday.

Near 2005 High

The last time weekly claims exceeded last week's total was in September 2005, just after two hurricanes on the U.S. Gulf Coast threw thousands out of work.

Initial claims were estimated to increase to 380,000 from 366,000 initially reported for the prior week, according to the median projection of 44 economists in a Bloomberg News survey. Estimates ranged from 365,000 to 440,000.

Weekly jobless claims figures can be difficult to interpret in July, the month automakers temporarily trim staff to upgrade factories in preparation for new car models. Affected auto workers who are not eligible for vacation pay can apply for jobless benefits.

The four-week moving average, a less volatile measure, increased to 382,500 from 378,000, today's report showed.

Continuing Claims

The number of people continuing to collect jobless benefits fell to 3.107 million in the week ended July 12, from 3.116 million the prior week. The unemployment rate among people eligible for benefits, which tends to track the nation's jobless rate, stayed at 2.3 percent. These data are reported with a one- week lag.

Thirty-seven states and territories reported an increase in new claims, while 16 reported a decrease.

Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- slows.

Weekly claims have averaged 364,100 so far this year, compared with an average 321,000 in 2007, when the economy generated 91,000 new jobs on average each month.

Previous Downturns

The government's claims figures have so far not matched the losses seen in previous economic downturns. During the last recession, in 2001, about 415,000 workers on average filed jobless claims each week.

Job losses may rise as growth deteriorates. The economic expansion may slow to the weakest pace in six years in the fourth quarter, after the impact of federal tax rebates fades, according to a monthly Bloomberg News survey. The unemployment rate will rise to 5.8 percent by the end of 2008, it showed.

The Labor Department's monthly payrolls report, due next week, may show the economy lost jobs for the seventh straight month in July, according to the Bloomberg survey median.

Companies continue to pare jobs. Pilgrim's Pride Corp. on July 15 said it will shut the tray-pack chicken business at its El Dorado, Arkansas, processing plant and consolidate the work into six other facilities, eliminating about 600 jobs.

Also last week, Monaco Coach Corp., a recreational-vehicle maker, announced plans to close operations in three Indiana towns, trimming about 1,400 jobs and half its production capacity for large motor homes because of declining sales.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net