New jobless claims drop from 16-year high

Image: Career Fair Held At Izod Center
Job seekers attend a career day sponsored by the New Jersey Nets. The government says jobless claims fell more than expected last week from a 16-year high.Spencer Platt / Getty Images
/ Source: The Associated Press

New jobless claims fell more than expected last week from a 16-year high, the government said Wednesday, though they remain at elevated levels due to the slowing economy.

The Labor Department reported that initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. That is lower than analysts' expectations of 537,000.

Despite the improved number, initial claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.

The number of people continuing to claim unemployment insurance also dropped unexpectedly to 3.96 million, down from the previous week's 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.

Economists consider jobless claims a timely, if volatile, sign of how fast companies are laying off workers. Employees who quit or are fired for cause are not eligible for benefits.

The economy has been hit hard in recent months by the housing slump and the broader financial crisis, which have led consumers and businesses to cut back on spending.

The government said Tuesday the economy shrank at an annual rate of 0.5 percent in the third quarter, more than its previous estimate of a 0.3 percent decline.

The nation's unemployment rate, meanwhile, is 6.5 percent, a 14-year high, and is expected to climb. Employers have cut payrolls every month so far this year. The total number of unemployed in October was just over 10 million, the most in 25 years.

Higher unemployment can lead to a downward spiral, as laid-off workers are more likely to fall behind on mortgage payments and other debt. Those who remain employed also may keep their wallets shut out of concern for their jobs.

Several companies announced layoffs in the past week, including Bank of New York Mellon Corp., Western Union Co. and the Dillards Inc. department store chain.

In an effort to jump-start consumer spending, the government on Tuesday announced an $800 billion effort to encourage more consumer lending in the form of auto loans, credit cards and mortgages.