The number of newly laid off people filing claims for unemployment benefits bolted past 400,000 last week as companies trimmed their work forces to cope with a slowing economy and fallout from a collapsed housing market.
The Labor Department reported Thursday that the number of new applications filed for these benefits rose by a seasonally adjusted 34,000 to 406,000 for the week ending July 19.
That matched the level seen in late March. The last time claims were higher was after the devastation of the Gulf Coast hurricanes in mid-September 2005. Then, they spiked to 425,000.
The new snapshot of layoffs was worse than economists were forecasting. They were expecting claims to rise to 375,000 according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.
A year ago, new claims were much lower — at 308,000. The rise in claims underscores the deterioration in employment conditions.
Another report out Thursday showed a housing market still in chaos, a huge problem that has spawned damage throughout the economy.
Sales of previously owned homes dropped 2.6 percent to a seasonally adjusted pace of 4.86 million units in June, the National Association of Realtors reported. With a glut of unsold and foreclosed homes on the market, prices continued to sag.
The median price for a home sold in June was $215,100, a 6.1 percent decline from a year ago. That was the fifth largest year-over-year price drop on record. The median price is the midpoint where half sell for more and half sell for less.
On Wall Street, the fresh batch of economic news pulled stocks lower. The Dow Jones industrials were off more than 100 points in morning trading.
The White House, while noting that layoff filings can bounce around from week to week, acknowledged that the job market needs to be bolstered.
“The bottom line is that unemployment, while relatively low by historical standards, is still higher than we would like, and we continue to take action to return to strong job creation,” said White House press secretary Dana Perino.
Meanwhile, the number of people continuing to draw unemployment benefits dipped slightly to 3.1 million for the week ending July 12, the most recent period for which that information is available. However, a year ago, that figure stood at 2.54 million.
Several companies that announced job cuts in July are: IndyMac Bancorp Inc., Chrysler LLC, Pilgrim’s Pride and American Axle.
Nervous employers, chafing under high energy prices and uncertain about the economy’s direction and their own sales prospects, have cut jobs for six months in a row. That has left total job losses at 438,000 so far this year, the government reported earlier this month.
The unemployment rate didn’t budge at 5.5 percent in June, after zooming in May by the most in two decades. The unemployment rate is expected to climb to 6 percent or higher by early next year.
The Federal Reserve, in a fresh snapshot of business conditions released on Wednesday, said that the country is getting whammed by both slower growth and rising prices for fuel, food and other things.
Consumer spending, a major shaper of national economic activity, was reported as sluggish or slowing in many places, although the government’s tax rebates spurred sales for electronics and some other goods, the Fed reported.
One of the biggest factors influencing whether consumers will keep their pocketbooks and wallets open in the months ahead, is the state of the jobs market. If job creation and wage growth continue to falter, that could spell more trouble for the economy, analysts say.
However, faced with dueling threats — sluggish growth and higher inflation — the Fed, for now, is expected to hold a key interest rate steady at 2 percent when it meets next on Aug. 5.
Out of concern about an inflation flare-up, the Fed in June halted a nearly yearlong rate-cutting campaign aimed at shoring up the wobbly economy.
The Fed isn’t inclined to lower rates again because it will aggravate inflation. Yet, if it were to boost rates too soon to fend off inflation, that could deal a set back to the fragile economy and the already crippled housing market.