November 21, 2008 in Business

Sign of the times

Unemployment claims jump to 16-year high
By CHRISTOPHER S. RUGABER Associated Press
 
File Associated Press photo

Paul Nawrocki, from Beacon, N.Y., wears a sign as he walks through Times Square seeking employment in New York earlier this month. The government says new claims for unemployment benefits jumped last week to a 16-year high, providing more evidence of a rapidly weakening labor market.
(Full-size photo)

WASHINGTON – With the number of new claims for U.S. jobless benefits hitting a 16-year high, some economists warn of further waves of layoffs in the months ahead.

Even already battered industries such as construction and manufacturing are expected to see more job cuts. Layoffs also are likely to spread to relatively unscathed areas such as retail, transportation and hotels and restaurants.

“I don’t think any of these sectors have reached the bottom,” said Carl Riccadonna, senior U.S. economist at Deutsche Bank.

The Labor Department said Thursday that new claims for jobless benefits rose last week to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week, much higher than Wall Street economists expected.

That is also the highest level of claims since July 1992, the department said, when the U.S. economy was emerging from a recession. The four-week average of claims, which smoothes out fluctuations, was even worse: It rose to 506,500, highest in more than 25 years.

The news contributed to another disastrous day on Wall Street. The Dow Jones industrial average plunged more than 444 points.

After news of the soaring jobless claims, the Senate approved legislation to extend unemployment benefits through the holidays. The White House said President Bush would quickly sign the bill.

The measure will provide seven additional weeks of payments to those who have exhausted their benefits. Those in states where the unemployment rate exceeds 6 percent would be eligible for an additional 13 weeks, for a total of 20 extra weeks. Benefit checks average about $300 a week nationwide.

That’s on top of a 13-week extension approved by Congress last June. Jobless benefits, which are jointly administered by the states and federal government, normally last up to 26 weeks.

Without the legislation, its proponents say, 1.1 million people will have exhausted their unemployment insurance by the end of the year.

The New York-based Conference Board, meantime, said its monthly forecast of economic activity declined 0.8 percent in October, worse than the 0.6 percent drop analysts had expected.

Riccadonna said Deutsche Bank now projects that the economy will suffer a net reduction of about 425,000 jobs this month, up sharply from a previous estimate of 325,000. That would boost the unemployment rate to 6.8 percent, from October’s 6.5 percent.

The Labor Department said Nov. 7 that the number of unemployed workers reached 10.1 million last month, a 25-year high.

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