Unemployment Claims Jumped Last Week Due to Weather-Related Factors
February 25, 2010 - 12:50 PMNew claims for unemployment benefits jumped unexpectedly last week, mostly because state agencies processed a backlog of claims caused by snowstorms the previous week.
The severe weather also increased temporary layoffs in the weather-sensitive construction and transportation industries.
Still, the increase in claims underscored concerns that layoffs are no longer slowing as they had in the second half of last year. More layoffs means consumers will have less money to spend, hindering the economic recovery.
"The fact that these snowstorms - as bad as they were - could have such an impact is more testimony to the fragility of the recovery," Diane Swonk, chief economist at Mesirow Financial, wrote in a note to clients. "The recovery is still on thin ice and lost momentum in the first quarter."
The jobless claims report, along with economic anxiety in Europe, contributed to unease on Wall Street. In early-afternoon trading, the Dow Jones industrial average fell about 165 points, or about 1.6 percent. Broader stock averages also dropped.
A separate report Thursday on orders for big-ticket manufactured goods was mixed. The Commerce Department said durable goods orders shot up in January by 3 percent, the most in six months.
But that gain resulted from a surge in orders for aircraft. Excluding transportation, durable goods orders fell by 0.6 percent, a weaker showing than economists had expected.
Economists weren't overly alarmed by that drop. They noted that the figures are volatile month-to-month. And they pointed out that the government raised its estimate for orders, excluding transportation, in December to show a 2 percent gain.
In its report on jobless claims, the Labor Department said first-time claims for unemployment insurance rose by 22,000 to a seasonally adjusted 496,000. Wall Street analysts polled by Thomson Reuters expected a drop to 455,000.
Economists closely watch initial claims, which are considered a gauge of the pace of layoffs and an indication of companies' willingness to hire new workers.
The four-week average of claims, which smooths volatility, rose by 6,000 to 473,750. The four-week average has risen by about 30,000 in the past month. The average had fallen sharply over the summer and fall from its peak last spring of about 650,000. But the improvement has stalled since the year began.
The four-week figure is now well above the 425,000 level that many economists say would signal net hiring.
The higher claims figures in recent weeks mean the unemployment rate likely rose in February and more jobs were lost. The unemployment rate in January was 9.7 percent, and employers cut a net total of 20,000 jobs. The Labor Department will issue the February employment report next week.
Many analysts expect this month's snowstorms cost up to 100,000 jobs and will artificially inflate the unemployment rate. A clear reading of the job picture may not be available until March or April.
Also Thursday, Federal Reserve Chairman Ben Bernanke told a congressional committee that the snowstorms are likely to have a short-term - but not permanent - effect on unemployment and layoffs. He said policymakers will "have to be careful about not overinterpreting" the upcoming data.
The Fed said last week that it expects the rate will average between 9.5 percent and 9.7 percent this year.
The economy has grown for six months but is not yet spurring new hiring. Many economists point out that the current recovery is weak compared to the aftermath of previous deep recessions. Employers have shed 8.4 million jobs since the recession began.
The gross domestic product, the broadest gauge of the economy's output, grew at an annual rate of 5.7 percent in last year's October-December quarter. But that figure is expected to decline in the current quarter. The government will release a revised estimate of fourth-quarter GDP on Friday. Economists expect the number to come in unchanged at around 5.7 percent.
The number of people continuing to claim unemployment benefits, meanwhile, was essentially unchanged at 4.6 million. Those figures, known as "continuing claims," lag initial claims by a week.
But there are now many more people receiving extended unemployment benefits that aren't included in the continuing claims figures. Congress has provided up to 73 weeks of extra benefits, paid for by the federal government, for jobless workers who have used up the standard 26 weeks of benefits customarily provided by states.
About 5.7 million people received extended benefits in the week that ended Feb. 6, down from more than 6 million the previous week. All told, more than 11 million Americans are receiving unemployment benefits.
AP Economics Writers Martin Crutsinger and Jeannine Aversa contributed to this report.
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