U.S. Initial Jobless Claims Rose to 542,000 Last Week

By Bob Willis

Nov. 20 (Bloomberg) -- First-time claims for U.S. unemployment insurance unexpectedly rose last week to the highest level since 1992, a sign the labor market is deteriorating as the economic slump deepens.

Initial jobless claims increased by 27,000 to a higher- than-forecast 542,000 in the week ended Nov. 15, from 515,000 the prior week, the Labor Department said today in Washington. The number of people staying on benefit rolls the prior week rose to 4.012 million, the most since December 1982.

Job losses in the U.S. have totaled 1.2 million this year as the economy entered a downturn exacerbated by the worst credit crisis in seven decades. More firings will weigh on the economy and consumer spending, putting pressure on President- elect Barack Obama and Congress to agree on legislation that will stimulate growth.

``Layoffs are picking up at a more rapid pace,'' said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. ``This is a reflection of the level of caution that hit the economy in October. Payrolls are likely to get worse before they get better.''

Treasuries rose, pushing yields lower. The benchmark 10- year note yielded 3.21 percent as of 8:45 a.m. in New York, down 12 basis points from yesterday. Stock-index futures were lower.

Economists surveyed by Bloomberg had anticipated a reading of 505,000, based on the median of 40 projections in a Bloomberg News survey, from the originally reported 516,000 in the prior week. Estimates ranged from 490,000 to 550,000 initial claims.

Four-Week Average

The four-week moving average of initial claims, a less volatile measure, increased to 506,500 last week from 490,750 a week earlier. So far this year, weekly claims have averaged 404,000, compared with an average of 321,000 for all of 2007, when the economy added a total of 1.1 million jobs.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3 percent, the highest since June 2003. These data are reported with a one-week lag.

Forty-three states and territories reported an increase in new claims, while 10 reported a decrease.

Initial jobless claims averaged 416,000 a week during the last recession, from March 2001 to November 2001, and rose to a high of 517,000 in the last week of September after the terrorist attacks on New York and Washington.

The jobless rate rose to 6.5 percent in October, a 1.5 percentage point jump from six months earlier and one sign the economy may have entered a recession. The economy contracted 0.3 percent in the third quarter and economists surveyed by Bloomberg forecast negative growth of about 1 percent for the next six months.

Banks, Automakers

Companies are trimming staff as consumer spending is forecast to fall through at least March, according to economists surveyed by Bloomberg early this month. Banks, faced with mounting losses and writeoffs as the financial crisis spread over the past year, have been sacking thousands of workers.

Citigroup Inc., the fourth-largest U.S. bank, will eliminate 52,000 jobs over the next year, twice the target announced last month, as loan losses surge and the economy shrinks, the company said Nov. 17.

``We thought last year the bottom had been reached, but it hasn't,'' Citigroup Chairman Win Bischoff said in a conference in Dubai. ``Most responsible companies are getting into a planning cycle with more pessimistic budgets than they have been in the past.''

Carmakers are also shedding workers. Ford Motor Co. plans temporary shutdowns at nine North American plants this quarter, idling as many as 23,000 workers, as it slashes production after an 18 percent drop in U.S. sales this year, the company said Nov. 12.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net