U.S. Initial Jobless Claims Rose to 524,000 Last Week

By Bob Willis

Jan. 15 (Bloomberg) -- First-time claims for U.S. unemployment benefits last week rose more than forecast, signaling companies stepped up the pace of firings at the start of the year.

Initial jobless claims jumped by 54,000 to 524,000 in the week that ended Jan. 10, from a revised 470,000 the prior week, the Labor Department said today in Washington. The total number of people collecting benefits decreased from a 26-year high.

The worst holiday sales season in at least four decades and the lack of credit will probably prompt even more payroll reductions in coming weeks and months. President-elect Barack Obama, who takes office next week, has proposed a stimulus plan aimed at saving or creating up to 4 million jobs.

“We’ve had consistent numbers that are worse than expectations,” Dan North, chief U.S. economist at Euler Hermes ACI in Owings Mills, Maryland, said in an interview with Bloomberg Television. “That kind of tells you that the recession seems to be accelerating just a little bit and puts the forecast of a second-half recovery at risk.”

Another Labor report showed wholesale prices fell 1.9 percent in December and were down 0.9 percent for all of 2008. Last year’s drop was the largest since 2001.

New York Manufacturing

The Federal Reserve Bank of New York reported manufacturing in New York state contracted for a ninth straight month in January and a gauge of expectations for six months from now was negative for the first time on record.

The New York Fed’s general economic index rose to minus 22.2 from a revised minus 27.9 in December that was lower than previously reported, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking.

Jobless claims were projected to rise to 503,000 from the 467,000 initially reported the previous week, according to the median projection of 42 economists in a Bloomberg News survey. Estimates ranged from 442,000 to 700,000.

The four-week moving average, a less volatile measure, fell to 518,500 compared with 526,500 the prior week.

The number of people staying on benefit rolls dropped to 4.497 million in the week ended Jan. 3 from 4.612 million, the highest level since 1982.

Jobless Rate

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.4 percent. The unemployment rate and continuing claims are reported with a one- week lag.

Twenty-seven states and territories reported an increase in new claims for the week ended Jan. 3, while 25 had a decrease.

Jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly payroll report -- slows.

The government last week reported employers cut 524,000 workers from payrolls in December, bringing the total number of job losses for 2008 to 2.6 million.

Economists surveyed by Bloomberg early this month forecast the jobless rate will rise to 8.4 percent by the end of 2009 from 7.2 percent reported for December 2008. Job losses this year may total 3 million, according to Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts.

The U.S. economy weakened further in the past month across almost all regions, hurt by a lack of credit and declines in retail sales, the Federal Reserve said yesterday in its regional business survey.

Broad Weakening

“Most districts noted reduced or low activity across a wide range of industries,” the Fed said in its Beige Book release. “Overall economic activity continued to weaken.”

General Motors Corp., Chrysler LLC and Ford Motor Co. have idled plants and slashed production to clear out inventories after sales last month fell 36 percent from a year earlier, capping the worst year for sales since 1992.

U.S. job cuts are also increasingly reflecting the spreading worldwide slowdown.

Seagate Technology, the biggest maker of hard-disk drives, said it will cut 800 U.S. jobs as part of a downsizing of about 6 percent of its global workforce as profit falls, according to a regulatory filing today.

ING Groep NV, the biggest Dutch financial services company, will eliminate 750 jobs in the U.S. across all lines of business, spokesman Dana Ripley said this week.

“Like most companies operating in the U.S., we need to take the appropriate steps in the short term to navigate through these challenges,” Ripley said.

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