U.S. Jobless Claims Fell Less Than Forecast Last Week

By Courtney Schlisserman and Shobhana Chandra

Aug. 14 (Bloomberg) -- More Americans than anticipated filed initial claims for jobless benefits last week, signaling further weakness in the labor market.

The number of first-time applications decreased by 10,000 to 450,000 in the week ended Aug. 9, from a revised 460,000 the prior week that was higher than previously estimated. The total number of people receiving benefits climbed to an almost five- year high.

Rising unemployment and smaller wage gains are among the reasons economists project consumer spending will keep slowing following a drop in retail sales last month. Fewer purchases raise the risk that the economy will stall later this year.

``The job market is still weakening,'' said Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina. ``We're going to see continuing claims numbers continue to rise and that's certainly disconcerting.''

Economists forecast claims would fall to 435,000 from a previously reported 455,000 for the prior week, according to the median of 41 projections in a Bloomberg News survey. Estimates ranged from 400,000 to 465,000.

A separate report today showed consumer prices climbed 0.8 percent in July, more than forecast, reflecting increases in the cost of food, energy, clothing and airline fares. Excluding food and fuel, so-called core prices rose 0.3 percent for a second month, also more than anticipated.

Market Reaction

After the reports, Treasuries were little changed, with the 10-year note's yield at 3.92 percent at 9:02 a.m. in New York, according to BGCantor Market Data. Futures on the Standard & Poor's 500 Stock Index dropped 0.5 percent to 1,277.90.

Claims in the last few weeks have been pushed up by several factors, according to a Labor spokesman. Publicity over the extension of benefits as well as an increase in firings have contributed to the jump, he said.

The government hasn't been able to quantify the impact on claims from the new legislation, according to the spokesman.

The four-week moving average of first-time claims, a less volatile measure, increased to 440,500, the highest since April 2002, today's report showed.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 2.6 percent from 2.5 percent. Thirty-five states and territories reported an increase in claims, while 18 had a decrease. These data are reported with a one-week lag.

Job Prospects

So far this year, weekly claims have averaged 372,300, compared with 321,000 for all of 2007.

The government program extending benefits is also boosting the level of continuing claims, which jumped in the week ended Aug. 2 to 3.417 million, the most since November 2003.

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 Commerce Department said yesterday. Excluding automobiles, purchases increased a less- than-forecast 0.4 percent.

Ford Motor Co., the second-largest U.S. automaker, is laying off 300 workers at a Michigan engine factory to address dwindling demand for vehicles equipped with V-8 engines. The furloughs will extend indefinitely, spokeswoman Angie Kozleski said in an e-mail Aug. 11.

Some companies are seeking different solutions to make up for their rising costs and slower sales. Chrysler LLC plans to run a dozen U.S. plants four days a week instead of five, spokesman Ed Saenz said in an interview on Aug. 11. The shift is being discussed in the company's talks with the United Auto Workers union and the company doesn't expect the changes ``to be temporary,'' he said.

The automaker also plans to close its St. Louis-area minivan factory by the end of October and scale back to one shift of production at a nearby Dodge Ram plant by Sept. 2. These moves will cut about 2,400 jobs.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.netShobhana Chandra in Washington at schandra1@bloomberg.net