U.S. Initial Jobless Claims Rose to 478,000 Last Week

By Shobhana Chandra

Oct. 23 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits rose last week, a sign the deepening credit crisis is hurting employment.

Initial jobless claims increased by 15,000 to a larger-than- forecast 478,000 in the week ended Oct. 18, from a revised 463,000 the prior week, the Labor Department said today in Washington. The number of people staying on benefit rolls was little changed, holding near the highest level in five years.

The combination of tight credit and waning demand will cause more companies to retrench by trimming payrolls and investment. Mounting job losses may further restrict consumer spending, which accounts for more than two-thirds of the economy, and reinforce the risk of a protracted recession.

``The labor market remains weak,'' said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, who had forecast claims would rise. ``Consumer spending will drag down third- quarter growth, and we expect it to weaken further.''

Treasuries rose, pushing down yields. The benchmark 10-year note yielded 3.54 percent as of 8:44 a.m. in New York, down 5 basis points from yesterday. Stock futures were lower.

Initial claims were estimated to rise to 468,000 from 461,000 initially reported for the prior week, according to the median projection of 39 economists in a Bloomberg News survey. Estimates ranged from 431,000 to 490,000.

Hurricane Ike

Firings related to Hurricane Ike in Texas accounted for about 12,000 of last week's claims, a Labor spokesman said.

The four-week moving average of initial claims, a less volatile measure, fell to 480,250 from 484,750, today's report showed. So far this year, weekly claims have averaged 388,000, compared with an average 321,000 for all of 2007.

The number of people continuing to collect jobless benefits decreased to 3.72 million in the week ended Oct. 11, from 3.726 million the prior week that was the highest since mid 2003. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.8 percent. These data are reported with a one-week lag.

Thirty-nine states and territories reported an increase in new claims, while 13 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.

Today's figures represent claims from the survey week for nonfarm payrolls, and will be closely watched by economists for signals on the job market in October. The number of applications were up by 20,000 compared with the September survey week. The total drop in payrolls this year reached 760,000 in September, according to the Labor Department.

The economy probably lost jobs for another month in October, according to some economists. The Labor Department will report the figures on Nov. 7.

More Firings

Yahoo! Inc. said it plans to cut at least 10 percent of its staff, or about 1,500 jobs, after online advertising spending slowed. The Sunnyvale, California-based Internet company will also trim the number of contractors and cut real-estate costs.

``The focus is to make sure we are better positioned to handle a long-term, protracted recession if that does occur,'' Chief Financial Officer Blake Jorgensen said in an interview on Oct. 21. ``We're also making sure those costs get out of the system for good.''

Also this week, National City Corp., Ohio's largest lender, announced plans to eliminate 4,000 jobs while Merck & Co., the third-largest U.S. drugmaker, said it will cut 7,200 jobs.

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