Jobless Claims Hit 4½ Year Low but Drop May Be Reporting Glitch

Thursday, 11 Oct 2012 08:38 AM

By Newsmax Wires

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Fewer Americans than forecast filed first-time claims for unemployment benefits last week, which may reflect difficulty adjusting the volatile data for seasonal swings at the start of a new quarter or be the result of an incomplete report.

Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed Thursday.

Economists forecast 370,000 claims, according to the median estimate in a Bloomberg News survey.

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Last week’s decline in claims may be short-lived. Before adjusting the data for seasonal variations, claims typically surge at the start of a quarter as people receiving benefits reapply in order for the government to recertify their applications, a Labor Department spokesman told Bloomberg News.

The unadjusted increase in claims last week was smaller than projected because one large state showed a drop rather than an increase, said the spokesman, who declined to name the state. The breakdown by state will show up in next week’s report.

Economists Daniel Silver at JPMorgan Chase & Co. in New York and Ted Wieseman at Morgan Stanley in New York were among those speculating that California may be the only state large enough to cause such swings.

California “provided all required” claims data on a “timely” basis to the Labor Department, Dan Stephens, a spokesman for California’s Employment Development Department, said in an e-mail to Bloomberg.

Regardless, the seemingly good news could help President Barack Obama in his tight race for re-election on November 6 against Republican challenger Mitt Romney, who says Obama has mishandled the economy.

But a second report released on Thursday hinted at weaker U.S. and global demand. The U.S. trade deficit widened in August to $44.2 billion, as U.S. goods exports fell for the fifth consecutive month and imports declined fractionally, Reuters reported.

Meanwhile, estimates for first-time claims ranged from 355,000 to 377,000 in the Bloomberg survey of 49 economists. The Labor Department revised the number of applications for the prior week up to 369,000 from a previously estimated 367,000. The four-week moving average for jobless claims, a less-volatile measure, fell to 364,000 from 375,500.

Thursday's report follows a report last week that said the unemployment rate fell in September to 7.8 percent. It was the first time since January 2009 that the rate dropped below 8 percent.

Unemployment benefit applications are a proxy for layoffs. When they consistently drop below 375,000, it suggests that hiring is strong enough to lower the unemployment rate.

Unadjusted claims typically surge at the start of a quarter as people receiving benefits reapply in order for the government to recertify their applications, the Labor Department spokesman told Bloomberg. The year’s increase was smaller than projected, because one large state showed a drop rather than an increase, the spokesman told Bloomberg. The breakdown by state will show up in next week’s report.

Waning dismissals may help clear the way for bigger hiring gains with any improvement in demand. At the same time, the global economy cooling and a lack of clarity on U.S. fiscal policy are hurdles for faster gains in employment.

“Job destruction is really not the problem,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, told Bloomberg News before the report. “It’s been the relatively weak pace of new hiring.”

The total number of people receiving unemployment benefits also fell, the Labor Department said. A little more than 5 million Americans received benefits in the week ending Sept. 22, the latest data available. That's down about 44,000 from the previous week.

The number of people continuing to collect jobless benefits dropped by 15,000 to 3.27 million in the week ended Sept. 29. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 23,000 to 2.14 million in the week ended Sept. 22.

The unemployment rate among people eligible for benefits held at 2.6 percent in the week ended Sept. 29. Twenty-eight states and territories reported an increase in claims, while 25 reported a decrease.

Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates.

Last week's report noted that the unemployment rate declined to 7.8 percent in September from 8.1 percent in August because a government survey of households found that 873,000 more people had jobs. It was the biggest jump in nearly 10 years, although it was largely because of an increase in part-time employment.

A separate survey of businesses showed that employers added only 114,000 jobs in September. That's generally enough to keep pace with population growth but not enough to rapidly bring relief to more than 12 million who are unemployed.

Hiring over the summer was stronger than previously estimated. The economy gained an average of 146,000 jobs a month in the July-September quarter. That's more than double the monthly pace in the April-June quarter.

Another report Wednesday suggested hiring will likely remain modest. Employers posted slightly fewer open jobs in August compared with July, the Labor Department said. It was the second straight monthly drop and the fewest openings since April.

A key problem is the economy is not growing fast enough to generate much hiring. Growth slowed to a tepid annual rate of 1.3 percent in the April-June quarter, down from 2 percent in the previous quarter. Most economists see growth staying at or below 2 percent in the second half of the year.

Businesses’ hiring and firing plans, nonetheless, could affect work opportunities in coming weeks. Cummins Inc., a maker of engines, said this week it expected to cut as many as 1,500 jobs by the end of 2012 as its outlook for revenue and profit worsened.

“We continued to see weak economic data in a number of regions during the third quarter, increasing the level of uncertainty regarding the direction of the global economy,” Chief Executive Officer Tom Linebarger said in an Oct. 9 statement.

“As a result of the heightened uncertainty, end customers are delaying capital expenditures in a number of markets, lowering demand for our products.”

Some economists said they want to see more data before suggesting the job market is turning around.

"Should this level hold for another week, it would flag a meaningful improvement in October" hiring, said Sal Guatieri, senior economist at BMO Capital Markets, in a note to clients.

Dan Greenhaus, chief market strategist at BTIG LLC, is also reserving judgment. "Are things that much better all of a sudden? Perhaps. We're going to wait for some corroborating data," he told the AP.

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

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