Weekly Jobless Claims Post Surprise Jump, Hit 500,000 Published: Thursday, 19 Aug 2010 | 9:05 AM ET Text Size By: Reuters
New U.S. claims for unemployment benefits unexpectedly climbed to a nine-month high last week, yet another setback to the frail economic recovery.
Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended August 14, the highest since mid-November, the Labor Department said on Thursday.
Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week, which was revised up to 488,000 in Thursday's report.
A Labor Department official said there was nothing unusual in the state level data. The data covered the survey week for the government's closely watched employment report for August, scheduled for release early next month.
"There are some technical factors out there and the seasonal factors seem to be pushing it up a little bit. But given the trend of claims it looks like the economy ran into a wall in August," said Chris Rupkey, chief financial economist at Bank of Tokyo-MitsubishI UFJ in New York.
U.S. stock index futures turned negative after the report, while Treasury debt prices pared losses. The dollar fell against the yen.
A 9.5 percent unemployment rate and weak housing market are hobbling the economy's recovery from its most brutal recession since the Great Depression.
The economy's poor health has handed President Barack Obama a tough challenge and put at risk the Democratic Party's majorities in the U.S. House of Representatives and Senate in November's mid-term elections.
Obama's approval ratings have tumbled to the mid- to lower 40 percent range and Congress' ratings are hovering at about 20 percent.
The four-week average of new jobless claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 8,000 to 482,500, the highest since early December.
Claims for unemployment benefits have been stuck at lofty levels for much of this year, which many economists say points to unemployment staying uncomfortably high for some time.
Claims have not come close to the 400,000 level that most analysts generally view as the dividing line between payrolls growth and contraction. Payrolls grew in the first five months of this year, partly due to hiring for the decennial census, and have declined in both June and July.
The economy grew at a 2.4 percent annualized rate in the second quarter, much slower than the 3.7 percent pace in the first three months of the year.
However, recent trade and business inventory data have indicated a much more sluggish pace. According to a preliminary Reuters survey, the government could lower the second-quarter growth estimate to a rate of about 1.4 percent when it publishes its first revision next Friday.
The number of people still receiving jobless benefits after an initial week of aid fell 13,000 to 4.48 million in the week ended Aug. 7 from an upwardly revised 4.49 million the prior week. Analysts polled by Reuters had forecast so-called continuing claims rising to 4.50 million from a previously reported 4.45 million.
"The drop in continued claims is an encouraging sign," said Robert Dye, senior economist at PNC Financial Services in Pittsburgh.
"When you take the life signs on the labor market, it's not all bad news, but it's not where we would like," he added.
The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was unchanged at 3.5 percent during that period.
The number of people on emergency benefits increased 260,105 to 4.75 million in the week ended July 31.
