U.S. Jobless Claims Rose Last Week to Six-Year High

By Courtney Schlisserman


Aug. 7 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits unexpectedly rose last week to the highest level in six years, signaling the labor market continues to weaken.

Initial jobless claims increased by 7,000 to 455,000 in the week ended Aug. 2, the most since March 2002, from 448,000 the prior week. The number of continuing claims increased to a four- year high.

Companies are reducing staff as demand slows and raw- material costs surge. Rising unemployment adds to concerns that consumer spending will falter in coming months after the effects of the government's tax rebate checks wane.

``The labor market is slackening,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``The underlying trend for jobs has got recession written all over it.''

Treasuries rose after the report, pushing yields lower. The benchmark 10-year note yielded 3.99 percent as of 8:42 a.m. in New York, down 7 basis points from yesterday.

Economists had forecast claims would fall to 425,000, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 390,000 to 463,000.

Extended Benefits

Some workers filing for extended benefits under a government-spending bill that was signed by President George W. Bush in June were deemed eligible to enter the program as first- time claimants, according to a Labor Department spokesman. That may have contributed to the jump in applications over the last few weeks, he said.

The government hasn't been able to quantify the impact on claims and applications may remain elevated for a few more weeks, according to the spokesman.

The four-week moving average, a less volatile measure, climbed to 419,500 from 392,750, today's report showed.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.5 percent. Fifteen states and territories reported an increase in new claims, while 38 reported a decrease. These data are reported with a one-week lag.

Decline in Payrolls

The government reported last week that payrolls declined by 51,000 workers in July, the seventh straight monthly drop. The unemployment rate rose to 5.7 percent.

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 369,600 so far this year compared with an average 321,000 for all of 2007.

The recent increase in claims brings the figures closer to losses seen in previous economic downturns. During the last recession, in 2001, about 415,000 workers a week on average filed new applications for benefits.

``Labor markets have softened further and financial markets remain under considerable stress,'' Federal Reserve policy makers said earlier this week in announcing that the benchmark interest rate would remain at 2 percent. It was the second straight meeting at which the Federal Open Market Committee kept the rate unchanged.

Economic weakness is spreading. The Institute for Supply Management said Aug. 5 that its index of non-manufacturing businesses, which make up almost 90 percent of the economy, contracted for a second straight month.

Ameristar Casinos Inc. said Aug. 4 it has fired 244 people as a result of ``weak economic conditions'' and plans to reduce the workforce by an additional 150 full-time positions through both attrition and changes in scheduling and staffing practices.

``We expect current difficult business conditions to continue at least through the second half of 2008, reflecting the impact of the general economic slowdown and higher fuel prices on the gaming industry,'' Chief Executive Officer Gordon Kanofsky said.

The San Francisco Chronicle said Aug. 2 it will offer buyouts to at least 125 employees by the end of the year. If not enough people accept, firings are likely, the newspaper said. Chief Executive Officer Frank Vega said the offer was made because of shrinking ad sales.

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