U.S. Initial Jobless Claims Fell to 432,000 Last Week

By Timothy R. Homan

Aug. 21 (Bloomberg) -- Initial jobless claims in the U.S. fell last week to a level that still indicates the labor market is softening.

The number of Americans filing-first time claims for unemployment benefits decreased by 13,000 to 432,000 in the week ended Aug. 16, fewer than forecast, from a revised 445,000 the prior week. The four-week average, a less volatile measure, rose to the highest level in almost seven years.

Companies are trimming staff as demand softens and raw- material costs remain elevated. High unemployment contributes to concerns that consumer spending will falter through the end of the year as the cost of living increases and the effect of the government's tax rebates fade.

``It's hard to say the labor market is strong right now,'' Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, said in an interview on Bloomberg Television. A job market turnaround ``is going to be a story for next year.''

Treasuries were little changed after the report, with the 10-year note yielding 3.81 percent as of 8:40 a.m. in New York. Stock futures were lower.

Economists had forecast claims would fall to 440,000 from a previously reported 450,000 for the prior week, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 400,000 to 470,000.

Claims averaged 445,750 a week since the end of July, the highest level since December 2001. So far this year, weekly claims have averaged 374,000, compared with 321,000 for all of 2007.

Extended Benefits

Publicity surrounding the government's extension of jobless benefits under the spending bill signed by President George W. Bush in June has prompted more unemployed workers to apply for the program, contributing to the jump in claims that began in the middle of last month.

The government hasn't been able to quantify the program's impact on initial claims. The number of people applying for extended benefits, which aren't included in the figures for initial claims, jumped to 1.284 million in the week ended Aug. 2 from 714,000 the previous week.

Continuing claims, or the total number of people receiving benefits, dropped by 17,000 to 3.362 million in the week ended Aug. 9.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.5 percent. Thirty-three states and territories reported an increase in claims, while 20 had a decrease. Georgia and New York reported the biggest increases in applications. These data are reported with a one-week lag.

Today's report covers the week the Labor Department surveys businesses to calculate the monthly payroll figures. The next jobs report is due Sept. 5.

Spending Outlook

Rising prices and dimming job and wage prospects may hurt consumer spending the rest of this year. Sales at U.S. retailers dropped 0.1 percent in July, the first decrease in five months, according to figures from the Commerce Department.

Inflation concerns are high following three reports from the Labor Department this month. Consumer, producer and import prices were all higher than forecast.

Companies are trimming staff to offset declining demand. Delphi Corp., the bankrupt former parts unit of General Motors Corp., said this week it will cut 600 salaried jobs in the U.S., part of an effort to reduce costs by 25 percent amid a drop in sales to automakers.

``Consumer trends and market conditions have caused fundamental shifts in consumer preferences, impacting both the volume and mix of vehicles produced by our North American customers,'' Jeff Owens, president of the company's electronics and safety division, said in a statement.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net