New Jobless Claims Make Unexpected Drop
New claims for unemployment benefits dropped unexpectedly last week while the number of people continuing to seek aid rose sharply, the government said Thursday.
The Labor Department reported that initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending Jan. 3. Wall Street economists expected initial claims to increase to 540,000. The figure partly reflects seasonal volatility that occurs around the New Year's holiday.
The four-week average of initial claims, which smoothes out fluctuations, fell by 27,000 to 525,750.
But the number of people continuing to claim jobless benefits jumped unexpectedly by 101,000 to 4.61 million. That was above analysts' expectations of 4.5 million and the highest level since November 1982.
"The recession is not at its worst point yet - it will probably hit bottom sometime around the middle of 2009. The unemployment rate is going to go up," Prof. Peter Sperling of Touro College told CBS Radio New.
The high level of ongoing claims indicates that laid off workers are having a harder time finding new jobs.
Last week was the second in a row that claims have come in below 500,000, after seven weeks above that level.
Still, the improvement could be temporary. Three states said earlier this week that their online and phone filing systems for unemployment benefits crashed due to the heavy volume of first-time filers. The impact of that volume won't be seen until next week's data.
And companies have resumed mass layoffs after a brief respite over the holidays. This week alone, insurance provider Cigna Corp., aluminum producer Alcoa Inc., data-storage company EMC Corp. and computer products maker Logitech International have announced large job cuts.
"Instead of trying to cut salaries and wages, which can be very demoralizing, very difficult [and] hard to reverse, most companies, when they face these economic problems, tend to lay people off," Sperling told CBS Radio News.
The sales figures confirmed fears that the holiday season was the weakest in four decades as the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.
The unemployment data comes as President-elect Barack Obama prepared to deliver a pre-inauguration speech on the economy, hoping to drum up support for his multibillion stimulus plan. Obama said the nation's recession could "linger for years" unless Congress acts, according to the text of the speech to be delivered at George Mason University in Fairfax, Va.
On Wall Street, stocks headed for a lower open Thursday after news of a poor holiday season added to the struggles of the nation's retailers. The market dropped 245 points Wednesday.