New Jobless Claims Surge to 626,000
Thursday, February 5, 2009; 11:36 AM
New claims for unemployment benefits spiked to a quarter-century high of 626,000 last week, as businesses continued shedding workers to cope with the economic downturn.
The number represents a larger-than-expected increase over the 591,000 people who filed for benefits the week before, and it sets the stage for another jump in the January unemployment rate when it is released Friday.
The number of people continuing to collect benefits also rose, to nearly 4.8 million, and is now at the highest point since recordkeeping began about 40 years ago.
Weekly claims can be volatile -- major storms or other events can affect them on a short-term basis. But economists have watched the number of claims rise steadily in recent months to historically elevated levels. With tens of thousands of new layoffs announced in recent weeks and continued signs of weakness in retail, housing and other sectors of the economy, that trend may well continue.
"The wave of layoffs is still rising, and the run of terrible payroll numbers will continue," said Ian Shepherdson, chief U.S. economist for the High Frequency Economics consulting firm.
Weakness in the labor market did create one positive note for business: Productivity jumped at a 3.2 percent annual rate during the last three months of 2008, as the decline in the number of hours worked outstripped a decline in the output of goods and services. Rising productivity helps control labor costs and keep inflation in check. The figure for the last quarter of the year was double that of the prior three months.
With unemployment currently at 7.2 percent and more than 10 million people out of work, creating jobs is a central aim of the economic stimulus plan being debated in Congress. The situation has become particularly acute in recent months, as job losses accelerated and major corporations announced layoffs numbering in the tens of thousands.
The crush of new benefit applicants has created backlogs at state unemployment agencies, and other data out today offered little prospect of relief.
Major retailers reported soft January sales, as consumers continued to keep their pocketbooks closed amid uncertainty about the future of the economy. Though some stores beat expectations, it was often because sales simply had not declined as much as expected -- modestly good news tucked inside a bad result.
Orders to U.S. factories also dropped for the sixth consecutive month in December, falling 3.9 percent. It is the longest period of decline since the Census Bureau began publishing the statistic in 1992.
Overseas, other governments are grappling as well for ways to boost economic activity. The Bank of England today cuts its benchmark interest rate to 1 percent from 1.5 percent, another record in the bank's centuries-old history. The European Central Bank kept rates stable, but officials opened the door to a rate cut in March.
The weak data sent U.S. markets lower, with the Dow Jones industrial average off more than 1 percent in early trading, but it rebounded by late morning.