October 14, 2010 8:34 AM
- Text
New Jobless Claims Make Unexpected Jump
Bad economy - depressed man with head in hand, stocks and money in background (CBS/iStockphoto)
(CBS/AP)
New claims for unemployment benefits rose more than expected last week, the government said Wednesday, as layoffs spread throughout the economy, more evidence the labor market is weakening as the recession deepens.
The Labor Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.
That's also the highest level of claims since November 1982, though the work force has grown by about half since then.
A Labor Department analyst said auto-related layoffs were a factor in the increase.
Meanwhile, the bad economic news sent oil prices tumbling Wednesday, with a barrel of crude briefly fetching less than $37 in thin Christmas Eve trading.
The four-week average of initial unemployment claims, which smooths out fluctuations, increased to 558,000. That's the highest since December 1982, when the economy was emerging from a steep recession.
There was some improvement in the number of Americans continuing to seek unemployment benefits, which dropped slightly to 4.37 million from 4.39 million the previous week. Wall Street economists had expected the number to increase to 4.4 million.
But some economists think that the recent economic data, which included reports of shrinking home sales and productivity Tuesday, will continue to pour in without some meaningful economic stimulus.
"Until we see an economic stimulus plan that gives us confidence, it's gonna be hard to see our way out of the current downturn," economist Mary Kay Plantes told CBS News Radio.
Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 353,000.
The elevated level of new jobless applications is just one of several signs that the labor market has deteriorated rapidly in recent months.
The Labor Department said earlier this month that employers cut a net total of 533,000 jobs in November, sending the unemployment rate to 6.7 percent, the highest in 15 years.
Mass layoffs are taking place in a wide range of industries. Industrial conglomerate Textron Inc. on Tuesday said it has cut 2,200 jobs, while technology services provider Unisys Corp. said Monday it will eliminate 1,300 jobs. Sovereign Bancorp Inc.'s bank unit said last week it is laying off 1,000 employees.
Meanwhile, the Commerce Department reported Wednesday that consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs.
Americans' incomes fell by a worse-than-expected 0.2 percent. It was the first decline since July and reflected in part the fact that more than a half-million jobs were cut in November as the recession deepened.
The 0.6 percent drop in consumer spending followed an even larger 1 percent fall in October. However, the steep plunge in gasoline prices, which is actually good news for consumers, made the declines look worse.
Excluding price changes, consumer spending would have dropped 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.
Still, economists think the overall trend for consumer spending is down, given the problems facing the economy including the longest recession in a quarter century, a severe financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.
All of those troubles have left retailers braced for what could be their worst holiday shopping season in decades.
Economists don't think the hard times will end any time soon. The government reported Thursday that the overall economy, as measured by gross domestic product, was contracting at an annual rate of 0.5 percent in the July-September quarter and analysts believe the contraction will accelerated in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing in 26 years.
Many analysts say GDP will also fall in the first and second quarters next year before beginning a modest rebound in the summer. If that forecast turns out to be accurate, it would make the current recession, which began in December 2007, the longest in the post World War II period.
The economic weakness is helping to keep inflation under control. A price gauge tied to consumer spending fell by a record 1.1 percent in November, the second monthly decline. Excluding the cost of energy and food, the price index was unchanged last month.
Over the past 12 months, consumer prices are up 1.4 percent, the smallest 12-month change since August 2002.
The Labor Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.
That's also the highest level of claims since November 1982, though the work force has grown by about half since then.
A Labor Department analyst said auto-related layoffs were a factor in the increase.
Meanwhile, the bad economic news sent oil prices tumbling Wednesday, with a barrel of crude briefly fetching less than $37 in thin Christmas Eve trading.
The four-week average of initial unemployment claims, which smooths out fluctuations, increased to 558,000. That's the highest since December 1982, when the economy was emerging from a steep recession.
There was some improvement in the number of Americans continuing to seek unemployment benefits, which dropped slightly to 4.37 million from 4.39 million the previous week. Wall Street economists had expected the number to increase to 4.4 million.
But some economists think that the recent economic data, which included reports of shrinking home sales and productivity Tuesday, will continue to pour in without some meaningful economic stimulus.
"Until we see an economic stimulus plan that gives us confidence, it's gonna be hard to see our way out of the current downturn," economist Mary Kay Plantes told CBS News Radio.
Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 353,000.
The elevated level of new jobless applications is just one of several signs that the labor market has deteriorated rapidly in recent months.
The Labor Department said earlier this month that employers cut a net total of 533,000 jobs in November, sending the unemployment rate to 6.7 percent, the highest in 15 years.
Mass layoffs are taking place in a wide range of industries. Industrial conglomerate Textron Inc. on Tuesday said it has cut 2,200 jobs, while technology services provider Unisys Corp. said Monday it will eliminate 1,300 jobs. Sovereign Bancorp Inc.'s bank unit said last week it is laying off 1,000 employees.
Meanwhile, the Commerce Department reported Wednesday that consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs.
Spending fell 0.6 percent last month, slightly smaller than the 0.7 percent drop that economists had expected.
Americans' incomes fell by a worse-than-expected 0.2 percent. It was the first decline since July and reflected in part the fact that more than a half-million jobs were cut in November as the recession deepened.
The 0.6 percent drop in consumer spending followed an even larger 1 percent fall in October. However, the steep plunge in gasoline prices, which is actually good news for consumers, made the declines look worse.
Excluding price changes, consumer spending would have dropped 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.
Still, economists think the overall trend for consumer spending is down, given the problems facing the economy including the longest recession in a quarter century, a severe financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.
All of those troubles have left retailers braced for what could be their worst holiday shopping season in decades.
Economists don't think the hard times will end any time soon. The government reported Thursday that the overall economy, as measured by gross domestic product, was contracting at an annual rate of 0.5 percent in the July-September quarter and analysts believe the contraction will accelerated in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing in 26 years.
Many analysts say GDP will also fall in the first and second quarters next year before beginning a modest rebound in the summer. If that forecast turns out to be accurate, it would make the current recession, which began in December 2007, the longest in the post World War II period.
The economic weakness is helping to keep inflation under control. A price gauge tied to consumer spending fell by a record 1.1 percent in November, the second monthly decline. Excluding the cost of energy and food, the price index was unchanged last month.
Over the past 12 months, consumer prices are up 1.4 percent, the smallest 12-month change since August 2002.
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