The Labor Department said the number of initial jobless claims increased by 6,000 to a seasonally adjusted 490,000 for the week ended Oct. 13, well above Wall Street's expectations.
"The level is just slowly creeping upward to a pretty severe recession level," said Kurt Karl, chief economist at Swiss Re in New York. "It's a lot of people out of work and growing."
In a sign workers are remaining jobless, the number of Americans continuing to claim state unemployment benefits for the week ended Oct. 6 the most recent week for which the data were available rose by 152,000 to 3.65 million, the highest level in more than 18 years.
Last week's gain in first-time jobless claims, followed a 51,000 decrease a week earlier. That decrease, driven primarily by seasonal factors in a shortened workweek, was first reported as a 67,000 fall-off.
Analysts agree the weekly numbers have become more volatile than usual and they look more to monthly averages to gauge the U.S. labor picture.
The four-week moving average of initial claims, which irons out weekly fluctuations, rose to 491,250 for the latest period, its highest level in more than ten years and the fourth consecutive weekly gain.
For the work week ending Oct. 6, 40 states and territories reported an increase in claims and 12 reported a decrease. The state information lags a week behind the national figures and is not seasonally adjusted.
California reported the biggest increase in claims, up by 5,157, reflecting layoffs in the trade, services and agriculture industries.
Illinois had the second-biggest rise with an increase of 3,523 as air transportation and service companies laid off workers. North Carolina reported the third biggest increase with 3,273 because of job losses in the textile and furniture businesses.
Before the attacks, the labor market was already suffering because of the country's more than yearlong economic slump. Now, economists believe the jobless picture will get worse in the coming months.
Many economists believe the nation's unemployment rate, which held steady at 4.9 percent in September, could jump to 5.3 percent in October as the damage from the attacks show up in monthly labor statistics.
With new uncertainties raised by the attacks, many economists believe a recession this year is unavoidable. The economy grew at an anemic 0.3 percent rate in the second quarter and many economists believe economic output fell in both the third and fourth quarters.
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