Saturday, September 27, 2008

New Claims for Jobless Benefits Jumped to 7-Year High

Recently, the Labor Department had reported that new claims for jobless benefits increased last week to their highest level in seven years due to the effect of a slowing economy and Hurricanes Ike and Gustav.

According to the Labor department, new requests for jobless benefits for the week ending Sept. 20 raised by 32,000 to a seasonally-adjusted 493,000, much higher than analysts' expectations of 445,000. The department said, the two hurricanes added about 50,000 new claims in Texas and Louisiana. The four-week moving average rose to 462,500. In addition, the level of new claims was reached the highest shortly after the 9/11 attacks, it reached 517,000.

The number of people continuing to draw jobless benefits last week was 3.54 million, up 63,000 from the previous week and nearly a five-year high. The four-week average of continuing claims was 3.49 million.

David Resler, chief economist of Nomura Securities, said that the result reflects a marked deterioration in the job market, and that deterioration may well accelerate as the distress in the financial markets deepens and the effect of credit impairment spreads to other sectors.

Hurricane Gustav first had an impact on jobless claims for the week ending Sept. 13. The department said Thursday that Louisiana reported an increase in claims of 18,409 during that week, mostly due to Gustav.

The financial crisis, falling home prices and slowing consumer spending continue to apply the brakes to the U.S. economy. The jobless rate raised unexpectedly to 6.1% in August, the highest level in five years.

Even excluding the effects of the hurricanes, jobless claims remain at elevated levels. Weekly claims have now reached 400,000 for ten straight weeks; a level economist considers a sign of recession, or more even worst, the collapse. A year ago, claims stood at 309,000.

Recently, drug maker Schering-Plough Corp. said it plans to cut 1,000 sales jobs to reduce costs, part of a 10% reduction in staff announced in April. In addition, the nation's largest chicken producer, Pilgrim's Pride Corp., announced it would reduce 100 jobs besides the 600 job losses it previously announced.

On the other hand, Wall Street was more focused on Washington, though, where lawmakers and the administration appeared to be moving closer to a $700 billion rescue package for the financial system. Stocks rose, with the Dow up more than 200 points in early trading.

The Commerce Department said that orders for big-ticket manufactured goods fell by 4.5% in August, far more than the 1.6% decline economists expected. In addition, new home sales fell by 11.5% in August, the Commerce Department said in a separate report, to a seasonally adjusted annual rate of 460,000, the lowest level in more than 17 years.

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