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Layoffs climb amid a raft of worries

/ Source: staff and news service reports

Layoffs are rising as companies dig in amid a slew of worries: stalled debt ceiling talks in Washington; a looming financial crisis in Europe; and signs the recovery is going nowhere.

The Labor Department said Thursday that applications for unemployment benefits rose by 10,000 to a seasonally adjusted 418,000. The four-week average, a less volatile measure, dipped to 421,250. It was the third straight week that applications have risen.

And in a sign that hiring is sluggish, applications have also topped 400,000 for 15 straight weeks. They had fallen in February to 375,000, a level that signals healthy job growth, and stayed below 400,000 for two months. But applications then surged to an eight-month high of 478,000 in April and have declined slowly since then.

Consumers have pulled back on spending this year, besieged by high unemployment, stagnant wages, and high gas prices.

"Jobless claims are a leading economic indicator. These numbers don't support the case for having 3.5 to 4 percent growth in the second half of the year that some people had talked about. The economy is moving forward at a modest pace but we don't seem to be picking up momentum," said John Silvia, chief economist for Wells Fargo.

The four-week moving average of claims slipped 2,750 to 421,250.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 50,000 to 3.70 million in the week ended July 9.

The number of Americans on emergency unemployment benefits declined 80,133 to 3.15 million in the week ended July 2, the latest week for which data is available.

A total of 7.33 million people were claiming unemployment benefits during that period under all programs, down 159,000 from the prior week.

Stock markets took the news in stride. Part of that was because the data, while weaker than expected, remained within the recent range.

"We're just stuck in this trend between 410,000 and 430,000. Generally we're just really not seeing any improvement but also not much worsening, so neither discouraging nor encouraging," said Jeffrey Greenberg, an economist for Nomura Securities.

The Federal Reserve has said that it expects the economy to improve in the second half. But if it doesn't, the Fed is ready to step in and help it along.

A top Fed official said Thursday that the central bank should rummage in its toolbox to find new ways to aid the economy.

The Fed has held short-term rates near zero since December 2008 and, in an unprecedented move, bought a total of $2.3 trillion of long-term securities to stimulate an economy struggling to right itself after the worst downturn since the 1930s.

But signs the U.S. recovery is flagging - again - suggest the economy needs more gas, and soon, Chicago Federal Reserve Bank President Charles Evans told a small group of reporters in a joint interview.

"If it were easy to do, if we had a very effective policy tool like a positive funds rate, if we could cut that by 100 basis points, then I would almost surely be advocating something like that," Evans said. "But in the absence of that, I think we have to think about the other tools."