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Jobless claims fall for a second week

/ Source: The Associated Press

The number of newly laid off workers filing claims for unemployment benefits unexpectedly fell last week although the decline was not viewed as evidence of an improving job market.

The Labor Department reported that 322,000 persons filed applications for jobless benefits, down by 15,000 from the previous week when claims had declined by 20,000.

While the second straight drop in weekly claims caught analysts by surprise, it was not seen as a sign of a fundamental improvement in the labor market, which has been coming under strains that have raised concerns about a possible recession.

Labor Department analysts said the declines of the past two weeks were more the result of difficulties in adjusting the numbers around the Christmas and New Year’s holidays when state claims offices are open fewer days.

The four-week average for jobless claims dipped slightly to 341,000, the lowest in a month.

Meanwhile, many of the nation’s big chain retail stores reported Thursday that the holiday shopping season turned out to be even weaker than expected, raising more worries about consumer spending in the months ahead.

Particularly hard hit were clothing sellers including Limited Brands Inc. However, the nation’s biggest retailer, Wal-Mart Stores Inc., exceeded Wall Street expectations.

Last Friday, the government reported that the unemployment rate surged to 5 percent in December, up from 4.7 percent in November. That represented the biggest one-month gain in the jobless rate since October 2001 when unemployment spiked as the result of disruptions caused by the Sept. 11 terror attacks.

Many private economists believe the risks of an outright recession have risen to 50-50. President Bush is examining a variety of proposals that could be part of an economic stimulus package aimed at averting a downturn — or at least softening it.

Bush has said that he will announce his decisions around the time of his Jan. 28 State of the Union address. If Bush opts for a stimulus package, it is expected to contain temporary tax cuts for individuals and businesses.

The bad December unemployment and a string of other data pointing to economic weakness have raised the odds that the Federal Reserve will cut interest rates for a fourth time when they meet at the end of this month.

The central bank is trying to combat the adverse effects of a steep slump in housing and a credit crisis that has roiled financial markets since August.

Many economists believe that the overall economy, which grew at a solid annual rate of 4.9 percent in the July-September quarter, skidded to an anemic growth rate of 1 percent or less in the final three months of this year and may weaken further in the current three months.