POSTED: 1:30 a.m. HST, Aug 13, 2010
WASHINGTON » The economy is looking bleaker as new applications for jobless benefits rose last week to the highest level in almost six months.
It's a sign that hiring remains weak and employers may be going back to cutting their staffs. Analysts say the increase suggests companies won't be adding enough workers in August to lower the 9.5 percent unemployment rate.
First-time claims for jobless benefits edged up by 2,000 to a seasonally adjusted 484,000, the Labor Department said yesterday. That's the highest total since February. Analysts had expected claims to fall.
Initial claims have now risen in three of the last four weeks and are close to their high point for the year of 490,000, reached in late January. The four-week average, which smoothes volatility, soared by 14,250 to 473,500, also the highest since late February.
The report "represents a very adverse turn in the labor market, threatening income growth and consumer spending," Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.
Economists closely watch weekly claims, which are considered a gauge of the pace of layoffs and an indication of employers' willingness to hire.
The government's July jobs report, released Friday, showed that the economy lost a net total of 131,000 jobs last month. Excluding the impact of the elimination of 143,000 temporary census jobs, the economy added a meager 12,000 positions, as layoffs by state and local governments almost canceled out weak hiring by businesses.
Yesterday's report on jobless claims indicates that trend might not change soon. Claims fell steadily last year from their peak of 651,000, reached in March 2009. But they have mostly leveled out this year at or above 450,000. In a healthy economy with rapid hiring, claims usually drop below 400,000.
The rise in claims is a sign that private employers may be ramping up layoffs, which declined as recently as June, according to a separate government report released Wednesday.
States with the largest increases in claims two weeks ago cited rising layoffs in the construction and manufacturing industries. The state data lags the national report by one week.
Claims could also be rising because of large job cuts by state and local governments, which are struggling with unprecedented budget gaps. State and local governments cut 48,000 jobs in July, the most in a year.
Some economists speculate that many census workers whose jobs are finished are requesting unemployment benefits.
Another possibility is that small companies, facing tight credit, are still reducing their staffs, even as larger corporations slowly resume hiring.
The report comes after the Federal Reserve said Tuesday that "employers remain reluctant to add to payrolls."