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Ease In Layoffs Spurs Hiring Hopes

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AP / CBS
New claims for unemployment insurance fell last week to their lowest level in eight months, a hopeful sign that companies may be having a bit more faith in the staying power of the economic recovery and thus are easing the pace of layoffs.

The Labor Department reported Thursday that for the work week ending Oct. 4 new applications for jobless benefits dropped by a seasonally adjusted 23,000 to 382,000, the best showing since Feb. 8. That marked a better performance than analysts were forecasting. They were predicting claims would dip to 395,000 last week.

New claims hit a high this year of 459,000 in the middle of April. With claims last week dipping below 400,000, a level associated with a sluggish labor market. Economists are encouraged that the pace of firings may now be stabilizing.

The more stable, four-week moving average of new claims, which smooths out weekly fluctuations, declined by 11,500 last week to 393,500, also the lowest level since Feb. 8.

The number of unemployed people collecting jobless benefits for more than a week also went down by 7,000 — to 3.6 million for the week ending Sept. 27, the most recent period for which that information is available.

Hopeful signs on the labor market front come as the economy, which grew at an annual rate of 3.3 percent in the April-to-June quarter of this year, is believed to have picked up more speed and grown at a rate of around 5 percent in the July-to-September quarter, economists said.

For the first time in eight months, the economy actually added jobs in September — 57,000 of them — helping to keep the nation's unemployment rate at 6.1 percent, the government reported last week.

While that employment report offered hope that job seekers may be seeing better days ahead, economists said steady improvement in the battered job market will take time. They said companies will want profits to get stronger and feel more confident in the vigor of the economic rebound before they go on a hiring and spending spree.

In September, 9 million people were unemployed and 2.1 million of them had been out of work for 27 weeks or longer.

Unemployed people are those who are out of work but have reported some effort to find a job. Jobless people who are not actively seeking work are not considered part of the labor force and not counted in the official employment rate. There are about 75,000 working-age people who are not part of the workforce — a figure that increased by 257,000 from August to September.

Federal Reserve Chairman Alan Greenspan and his colleagues are expected to hold a main short-term interest rate at a 45-year low of 1 percent when they meet next on Oct. 28, economists said. By holding rates at such low levels, businesses and consumers might be more inclined to boost spending and investment, something that would lift economic growth.

After their last meeting, the Fed's Open Market Committee said the chances of growth were about even, but the risk of disinflation — a fall in the rate in which prices rise — was greater than the risk of inflation. Disinflation is bad because if prices don't rise at a steady rate, businesses have very little "breathing room" to keep profits ahead of costs.