U.S. Initial Jobless Claims Climb More Than Forecast

By Bob Willis and Shobhana Chandra

Sept. 4 (Bloomberg) -- First-time claims for unemployment insurance climbed more than forecast, and benefit rolls reached a five-year high, underscoring a deteriorating job market that threatens to erode consumer spending.

Initial jobless claims rose to 444,000 in the week ended Aug. 30, while the number of Americans continuing to collect benefits increased to 3.435 million in the prior week, the Labor Department said today in Washington. A private report indicated separately that U.S. companies cut 33,000 jobs in August.

The figures reinforce projections for tomorrow's August employment report from the Labor Department to show an eighth straight month of payroll declines. Households may cut spending as employment prospects dim, property values decline and credit becomes harder to get.

``We're continuing to get sort of a grinding slackening in the labor markets,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``Businesses are becoming more cautious about hiring and layoffs continue. At some point this begins to weigh increasingly heavily on the consumer.''

ADP Employer Services said the 33,000 decline in private payrolls followed a revised gain of 1,000 for the prior month that was lower than previously estimated.

Treasuries, Stocks

Treasuries rose, sending benchmark 10-year note yields to 3.68 percent at 9:37 a.m. in New York, from 3.70 percent late yesterday. The Standard & Poor's 500 Stock Index dropped 0.6 percent to 1,266.81.

Economists had forecast initial claims would fall to 420,000 from a previously reported 425,000 in the prior week, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 405,000 to 435,000.

``We're still in an uncomfortable situation with respect to job growth,'' Richard DeKaser, chief economist at National City Corp. in Cleveland, said in a Bloomberg Television interview. ``The underlying trend here is not a good one for August.''

Economists forecast the Labor Department will report tomorrow that nonfarm payrolls fell by 75,000 in August, following a drop of 51,000 the prior month, bringing the total decline this year to 538,000. The jobless rate stayed at 5.7 percent, the survey indicates.

Four-Week Average

The four-week moving average of initial claims, a less volatile measure than the weekly figure, fell to 438,000 from 441,250, today's report showed.

So far this year, weekly claims have averaged 378,000, compared with 321,000 for all of 2007, when the economy generated 91,000 new jobs each month on average. Monthly job losses have averaged 66,000 in 2008, according to Labor data. Monthly payrolls tend to fall as claims rise.

The surge in claims that began in the middle of July can be at least partly attributed to the government's extension of jobless benefits under legislation signed by President George W. Bush in June. The government hasn't been able to quantify the program's impact on initial claims.

``The claims data has been clouded over the past month by the extension of unemployment benefits,'' said Ellen Zentner, U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.6 percent. Thirty states and territories reported an increase in claims, while 23 had a decrease. These data are reported with a one-week lag.

Automakers, homebuilders and banks have been leading the cutbacks in employment.

GM Incentives

General Motors Corp., the largest U.S. automaker, is offering early retirement incentives to about 9,000 U.S. salaried employees, or 28 percent of that workforce, people familiar with the plan said last week.

Superior Industries International Inc., the world's second- largest maker of automotive wheels, plans to trim 29 percent of its U.S. workforce and shut a Kansas plant because of lower sales of pickups and sport-utility vehicles.

The Pittsburg, Kansas, factory will close in December, accounting for about 600 job cuts, the Van Nuys, California- based company said Aug. 19.

Companies in the oil and mining industries continue to hire after prices surged to records.

Halliburton Co., the second-largest U.S. provider of oilfield services, said it will hire 13,000 to 14,000 workers this year to meet rising demand from customers seeking to tap new sources of petroleum production.

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.netBob Willis in Washington at bwillis@bloomberg.net