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May 1, 2008
The number of Americans receiving unemployment insurance climbed to a four-year high, a sign of a weakening labor market as employers remain reluctant to hire. First-time claims for jobless benefits also rose.
The total number of people getting assistance increased to 3.019 million, the most since April 2004, in the week ended April 19, the Labor Department said today in Washington. Initial claims increased by 35,000 to a four-week high of 380,000 in the week ended April 26.
Companies are firing staff as the worst housing recession in more than a quarter century reduces home prices, and slows consumer spending and business investment. The department tomorrow may report the U.S. lost jobs for a fourth straight month in April, according to a Bloomberg News survey of economists.
"This is the level of jobless claims we would expect to see because we've got job losses in the economy,'' Ellen Zentner, economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in an interview with Bloomberg Television. "This is a labor market where employers are conducting hiring freezes. They've delayed hiring plans.''
The Commerce Department said separately that consumer spending rose 0.4 percent in March, more than forecast, as households paid more for goods and services. Stripping out the effect of inflation, spending ticked up 0.1 percent.
Economists' Forecasts
Initial jobless claims were forecast to increase to 365,000 from a previously reported 342,000 in the prior week, according to the median projection of 35 economists in a Bloomberg survey. Estimates ranged from 340,000 to 375,000.
The four-week moving average, a less volatile measure, declined to 363,750 from 370,250.
The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, rose to 2.3 percent from 2.2 percent. Forty-five states and territories reported a decrease in new claims, while eight had a increase. These data are reported with a one-week lag.
Employers cut 75,000 jobs in April, according to economists surveyed by Bloomberg. That would bring the total number of reductions this year before revisions to 307,000, the most since 2003. The Labor Department is scheduled to release the report tomorrow at 8:30 a.m. in Washington.
Less Than in Past
Still, workers struggling to find jobs aren't yet lining up for government assistance as fast as they have in past slowdowns. During the last official U.S. recession, from March 2001 through November 2001, initial claims averaged 415,600 a week. During the contraction from July 1990 to March 1991, first-time claims averaged 434,000 a week.
Initial jobless claims have averaged 354,400 so far this year, compared with an average of 321,000 a week for all of 2007, when the economy generated an average of 91,000 new jobs each month.
The Federal Reserve yesterday lowered its main interest rate by a quarter of a percentage point to 2 percent, the seventh cut since the onset of a global credit squeeze that's eroded economic growth.
"Recent information indicates that economic activity remains weak,'' the Fed said in a statement. "Household and business spending has been subdued and labor markets have softened further.''
GDP Growth
The U.S. economy, teetering on the edge of a recession, expanded at a 0.6 percent annual pace in the first quarter, matching the rate of the previous three months, the Commerce Department said yesterday in Washington. The last time the economy grew less was in the fourth quarter of 2002.
Financial services companies are among those cutting jobs as they face mounting losses from the housing slump and the surge in foreclosures and subprime mortgage defaults. McGraw-Hill Cos., owner of Standard & Poor's, said April 29 it may cut more jobs if business continues to deteriorate. The company eliminated 611 jobs the last three months of 2007.
"In the face of challenging market conditions, we are currently considering more staff reductions,'' Chief Executive Officer Terry McGraw said on a conference call discussing first- quarter earnings.
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