February 11, 2010 in Business, Nation/World

Jobless claims figures raise hopes for recovery

Associated Press
 

Initial jobless claims fall sharply

Jobless claims down: New unemployment insurance claims fell by 43,000 last week, the government said Thursday. Analysts had expected a drop of 15,000.

Hope for job market: Layoffs are easing as the economy slowly recovers. The figure is the first of the year that wasn’t elevated by a backlog of claims that built up over the holidays.

Outlook muddy: Employment data will likely be distorted for the next several weeks due to the severe weather on the East Coast, so a clearer outlook on jobs may not be available for several weeks.

Stocks trade flat as EU pledges support for Greece

Stocks fluctuated in a tight range Thursday as European leaders issued a vague pledge to help Greece with its growing debt crisis.

Investors also reacted coolly to a Labor Department report that showed first-time claims for jobless benefits fell more than expected last week.

Greece’s debt problems have been spooking global markets for weeks, and hopes that a rescue was on the way helped lead stocks higher in the U.S. and Europe over the past three days.

Expectations had been building that a Thursday summit of European leaders would produce a solution for the problem, but the verbal commitment that emerged to provide unspecified help to Greece later only partly assuaged investors’ concerns.

European officials are not expected to disclose specifics of the plan until early next week.

WASHINGTON — The number of newly laid-off workers seeking unemployment benefits fell more than expected last week to the lowest total in a month, a sign the job market may be improving.

The Labor Department said that first-time claims for unemployment insurance dropped by 43,000 to a seasonally adjusted 440,000. Wall Street economists expected a smaller decline of 15,000, according to a survey by Thomson Reuters.

The jobless claims report was the first of the year that wasn’t affected by a holiday backlog. The easing of the backlog had elevated the numbers for the previous three weeks. The latest figures likely provide a clearer picture of the job market.

And they raise some hopes for the economic rebound.

“The recovery is slowly taking root,” Diane Swonk, chief economist at Mesirow Financial, wrote in a research note.

Still, she added, “Any gains we see are likely to remain muted given the depth of the losses we endured, especially when it comes to jobs.”

And the jobs outlook is about to get muddy again.

The unemployment claims numbers for this week that will be reported next week will likely be affected by the closing of businesses and government offices due to the snowstorms in the Mid-Atlantic region.

This week is also the period when the government gathers information for the February report on the unemployment rate and employer payrolls. The severe weather may distort those figures, too, economists said. That could make it hard to get an accurate picture of the job market for several weeks.

The snowstorms could cost the economy more than 100,000 jobs in February, according to Carl Riccadonna, senior U.S. economist at Deutsche Bank. Construction companies and retailers may hire fewer people. And government hiring for the 2010 Census could also be delayed, he said.

The weather will likely disrupt other economic indicators, in addition to employment data. These include retail sales, industrial production, housing starts and construction spending.

“It’s going to throw a monkey wrench into the whole forecasting process,” Riccadonna said.

Economists may have to wait until March figures are reported in April to get a truer picture of the economy.

Still, severe weather events don’t generally knock the economy off track, Riccadonna said. So any declines in February will likely be reversed in March.

The four-week average of jobless claims fell by 1,000 to 468,500. It was the first drop after three weeks of increases. Many economists say the four-week average would need to fall consistently below 425,000 to signal that the economy will start generating net job gains.

First-time claims are now close to the low levels they reached in late December, when they dropped to their lowest point in nearly 18 months.

Still, jobs remain scarce. The Labor Department said last week that the unemployment rate fell to 9.7 percent from 10 percent. But most analysts expect it to remain near 10 percent through the end of the year.

The Obama administration estimated Thursday that the economy will generate an average of 95,000 jobs a month this year. That wouldn’t be enough to drive down the jobless rate, which the administration predicts will stay near 10 percent through year’s end.

Employers cut a net total of 20,000 jobs in January, the Labor Department said last week.

The number of people claiming benefits for more than a week, meanwhile, fell by nearly 80,000 to 4.5 million. That was a steeper decline than expected.

But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

Nearly 5.7 million people were receiving extended benefits in the week ended Jan. 23, the latest data available, down from nearly 5.9 million the previous week. The extended benefit data isn’t seasonally adjusted and is volatile from week to week.

Among the states, Pennsylvania reported the largest increase, of nearly 10,500, which it attributed to layoffs in the construction and service industries. Illinois, North Carolina, Georgia and Missouri had the next largest increases.

New Jersey reported the largest drop, of 1,819, which it said was due to fewer layoffs in services. Kansas, Connecticut, Virginia and Puerto Rico had the next largest drops.

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