Surprise Rise in Jobless Claims Stokes Recovery Worries July 1, 2010
WASHINGTON (Reuters) - New claims for state unemployment aid unexpectedly rose last week, heightening fears the U.S. economic recovery is stalling.
Initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 472,000, the Labor Department said on Thursday.
Analysts polled by Reuters had expected claims to slip to 452,000 from the previously reported 457,000, which was revised slightly up to 459,000 in Thursday's report.
While layoffs have slowed sharply from early last year, businesses remain skeptical of the strength of the recovery and are holding back on hiring, keeping claims for unemployment benefits at uncomfortably lofty levels.
High unemployment is a sore point for President Barack Obama, whose approval ratings have plummeted.
The economy's failure to create sufficient employment to absorb the more than 8 million Americans who lost their jobs during the recession could hurt the Democratic Party in the November mid-term elections.
"It's looking more and more like the job market is treading water. Layoffs are down from 2009, but hiring hasn't really picked up and this is disappointing," said Stephen Bronars, a senior economist at Welch Consulting in Washington.
"There is a lot of uncertainty on the hiring side that's causing things to remain sluggish. In order for the recovery to give people confidence it needs to cut across different sectors of the economy."
U.S. stock index futures extended losses on the data, while Treasury debt prices added to gains. The U.S. dollar fell versus the yen.
The claims data has no implications for the June employment report due on Friday as it falls outside the survey period.
Nonfarm payrolls likely fell 110,000 last month, the first decline this year, as the bulk of May's 411,000 temporary census jobs ended, according to a Reuters survey. Employment increased 431,000 in May.
However, there is a risk payrolls could show a steeper decline after an independent report on Wednesday showed private employers added only 13,000 jobs last month.
Separately, the number of planned layoffs at U.S. companies rose slightly last month, but the level remained close to a four-year low, global outplacement consultancy Challenger, Gray & Christmas said.
Employers announced 39,358 planned job cuts in June, up 1.4 percent from 38,810 in May. Announced layoffs touched a four-year low in April at 38,326.
In the Labor Department report, the four-week moving average of new jobless claims, considered a better measure of underlying labor market trends, rose 3,250 to 466,500 -- the highest level since early March.
"What we are seeing here is a sideways move in the labor markets. I don't think we are seeing renewed deterioration. We are getting regular reminders that we are not ready for any significant job creation," said Kevin Flanagan, chief fixed income strategist at Morgan Stanley Smith Barney in Purchase, New York.
The number of people still receiving benefits after an initial week of aid increased 43,000 to 4.62 million in the week ended June 19, the Labor Department said. The level was above market expectations for 4.54 million.
The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was unchanged for a third week at 3.6 percent in the week ended June 19. (Reporting by Lucia Mutikani; Additional reporting by John Parry in New York; Editing by Andrea Ricci)
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