Image: Job fair in New York
Seth Wenig  /  AP file
People wait in line to enter a job fair in New York on April 18, 2011. The number of Americans applying for unemployment benefits unexpectedly surged last week to the highest level in eight months.
msnbc.com news services
updated 5/5/2011 11:08:20 AM ET 2011-05-05T15:08:20

The number of Americans applying for unemployment benefits unexpectedly surged last week to the highest level in eight months, a troubling sign a day ahead of the government's report on April employment.

The Labor Department said Thursday that the 43,000 spike in applications to a seasonally adjusted 474,000 last week was largely the result of unusual factors, including spring break layoffs and the introduction of an emergency benefits program.

Still, it marked the third increase in four weeks. The four-week average, a less volatile measure, rose for the fourth straight week to 431,250. Applications have jumped 89,000, or 23 percent, in the past four weeks.

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"The trend is clearly upward, so that's disconcerting," said Kurt Karl, chief U.S. economist for Swiss Re. "When you get three or four weeks in a row of special factors, they're no longer so special."

Applications near 375,000 are typically consistent with sustainable job growth. Weekly applications peaked during the recession at 659,000.

Rising unemployment applications and other weak economic data this week have prompted some analysts to worry that higher fuel prices may be causing employers to slow their pace of hiring.

The government is scheduled to release its April jobs report on Friday. Economists are projecting that the economy likely added 185,000 jobs in April and the unemployment rate may remain 8.8 percent, but some are now saying the numbers could be lower. Thursday's report also doesn't bode well for hiring in May, economists said.

A Labor Department spokesman blamed much of the latest increase on the unexpected spike caused by New York schools. That resulted in 25,000 layoffs. The department didn't anticipate the closures when making seasonal adjustments, the spokesman said.

Other factors also contributed to the increase, the spokesman said. Oregon launched its own extended unemployment benefit program, which caused an increase in overall applications in the state for unemployment benefits. And auto-related layoffs rose, as some companies have shut down or slowed production due to parts shortages stemming from the earthquake in Japan.

Labor Department analysts have attributed previous increases to other "special factors," such as the unusually late timing of the Easter holiday.

Still, applications have risen sharply in recent weeks, raising concerns that high gas and food prices are cutting into consumer spending and slowing the economy. Businesses are also facing higher costs for raw materials, which reduce profit margins. They may be cutting back on hiring as a cost-saving measure.

Other recent data have also pointed to a weaker job market. A private trade group said Wednesday that a measure of employment growth in the service sector, which employs 90 percent of the work force, slowed for the second straight month. The report, by the Institute for Supply Management, still showed that employment rose, but at the slowest pace in 7 months.

A separate report Thursday showed U.S. companies squeezed more work out of their staffs in the first three months of the year, but the gain in productivity was much slower than the previous three months.

Productivity rose at an annual rate of 1.6 percent in the January-March period compared to a 2.9 percent increase in the previous quarter, the Labor Department reported. Labor costs rose at a 1 percent annual rate in the January-March period after falling 1 percent in the previous three months.

The Associated Press and Reuters contributed to this report.

Video: Weekly jobless claims spike

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