Claims hit nine-year high
WASHINGTON (AP) – The number of U.S. workers filing new claims for state unemployment insurance last week surged to a nine-year high, reflecting continued damage from the slumping economy and the start of the auto industry’s annual plant retoolings.
New applications for jobless benefits jumped by a seasonally adjusted 42,000 to 445,000 for the week ending July 7, the Labor Department reported Thursday.
A government analyst suggested part of the increase came from layoffs in the automobile industry as manufacturers temporarily shut plants to retool assembly lines for new models of cars and trucks. This annual practice generally occurs around this time of year.
Paul Taylor, chief economist for the National Automobile Dealers Association, said Ford and General Motors have temporarily closed all of their U.S. plants, and that Mercedes-Benz, Mitsubishi and Subaru-Isuzu have shuttered some plants.
Last week’s rise in claims left them at the highest level since July 25, 1992, when they stood at 539,000.
”It’s abnormally high because of layoffs of automotive workers, but ongoing profit difficulties at many U.S. companies are also causing them to shed workers, Taylor said.
The more stable four-week moving average of jobless claims, which smoothes out week-to-week fluctuations, also rose last week to 410,750, the highest point since late June.
In an effort to revive the ailing economy, the Federal Reserve has cut interest rates six times this year.
The economic slowdown has been hard on companies, especially manufacturers and auto makers, struggling with slumping demand. To cope, they have cut production and laid off workers.
Last week, the government reported that the nation’s unemployment rate rose to 4.5 percent in June as businesses eliminated 114,000 jobs.
”It’s clear to me that if you put together the jump in jobless claims with the sharp drop in payrolls, they show the job market is continuing to deteriorate and might even be getting worse as profit problems come to roost,” said economist Clifford Waldman of Waldman Associates.
The biggest fear among economists is that the labor market will seriously weaken, causing consumers to curtail their spending and tip the economy into recession.
Still, many economists are hopeful that the Fed’s aggressive credit-easing campaign, along with tax-cut refunds of up to $600, will fuel economic growth later this year.
Waldman, however, isn’t so sure. ”I think the real trend in the labor market now is one of continued deterioration and that makes the prospects of an economic recovery late in the year harder than ever to believe.”
On the Net:
Jobless claims report: http://www.ows.doleta.gov/news/news.asp
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