IE 11 is not supported. For an optimal experience visit our site on another browser.

New jobless claims take surprise jump

New U.S. claims for unemployment benefits unexpectedly rose last week, government data showed, underscoring a weak labor market and the fragile economic recovery.
Image: File image of a man looking at employment opportunity postings in San Francisco
A man looks over employment opportunities at a jobs center in San Francisco. New U.S. claims for unemployment benefits took a surprise jump last week.ROBERT GALBRAITH / X90034
/ Source: The Associated Press

Initial requests for jobless benefits rose last week to their highest level since April, a sign that hiring remains weak and some companies are still cutting workers.

The Labor Department said Thursday that new claims for unemployment insurance rose by 19,000 to a seasonally adjusted 479,000. Analysts had expected a small drop. Claims have risen twice in the past three weeks.

Some of the increase in claims stemmed from difficulties the government has in adjusting for seasonal factors.

But the jump in claims is a cautionary sign that higher corporate profits and a slowly recovering economy aren't spurring companies to generate many jobs.

"The very unyielding flow of layoffs now clearly evident discourages any thought that employers are more comfortable with the size of their staffs," Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.

Also on Thursday, retailers reported modest sales gains in July, raising concerns about the health of the back-to-school shopping season. Many stores, including teen specialists Abercrombie & Fitch Co. and American Eagle Outfitters Inc., had to discount more than they had planned in June and July to pull in recession-scarred shoppers.

Recent economic data has heightened concerns that the recovery is slowing. Americans are spending cautiously as they save more and pay down debt. Home sales and construction have slumped after a popular homebuyers' tax credit expired on April 30. The impact of the federal government's stimulus efforts is fading.

President Barack Obama said on Thursday that his economic recovery efforts were beginning to pay off but that the U.S. economy still needed more time to heal.

"We've still got a long way to go," Obama told workers at a Ford assembly plant in Chicago. "Our economy is not back to where it needs to be."

Some analysts said seasonal factors that began in early July are still skewing the jobless claims numbers and must be considered before reading too much in to the report.

GM skips shutdowns
The Labor Department anticipated a large decline in claims last week as many auto companies usually shut their plants temporarily in early July. Claims were expected to rise during the shutdown and then fall. But this year General Motors and other manufacturers skipped the shutdowns, so claims didn't fall last week as much as expected.

"Claims have averaged 463,000 since the beginning of the year, and at this point we still consider the underlying trend to be around this level," said Ryan Wang, an economist at HSBC Securities.

The seasonally adjusted four-week average of claims, which smooths out volatility, rose by 5,250 to 458,500.

Economists closely watch initial claims because they are considered a gauge of the pace of layoffs and an indication of employers' willingness to hire.

Applications for unemployment insurance have fluctuated between 450,000 and 480,000 all year, after declining steadily last year from a peak of 651,000 in March 2009. In a healthy economy with rapid hiring, claims usually fall below 400,000.

The tally of laid-off workers continuing to claim unemployment benefits fell by 34,000 to 4.54 million. That doesn't include an additional 3.9 million people receiving extended unemployment benefits paid for by the federal government.

During the recession, Congress added up to 73 weeks of extra benefits on top of the 26 weeks typically provided by states. Those extended benefits were interrupted in June when Republicans blocked an extension. But Congress has since reinstated the program through November.

The economy began growing last year and that growth accelerated in the winter and spring. It spurred some modest hiring, but not enough to rapidly reduce the unemployment rate, which is 9.5 percent.

More jobs are needed to give consumers more spending power to help support a sustainable recovery.

But it's not clear if the new jobs will come fast enough. On Friday, the Labor Department will issue the July jobs report and economists expect it will show the nation lost a net total of 65,000 jobs. That includes the end of about 150,000 temporary census jobs.

Excluding government employment, private companies are expected to add a net total of 90,000 jobs.

Service sector
Thursday's report follows some positive news on the job front. A trade group said Wednesday that the service sector expanded in July for the seventh straight month.

The Institute for Supply Management, an association of purchasing executives, also said its survey's measure of hiring expectations rose in July for only the second time since December 2007.

Some companies are adding staff. Cognizant Technology Solutions Corp., a New Jersey company that provides consulting and information technology outsourcing, posted big gains in profit and revenue in the second quarter as corporate customers restarted projects that had been on hold during the recession.

The company said it added 3,200 jobs to its payrolls during the quarter, an increase in its work force of nearly 4 percent.

Other firms are still struggling. Cypress Bioscience LLC said Wednesday it is discontinuing its personalized medicine services business and will slash 86 percent of its work force to cut costs. The layoffs will affect 123 workers.