U.S. Economy: Jobless Claims Climb to Highest Level Since 1982
By Shobhana Chandra
The number of Americans seeking jobless benefits last week climbed to the highest level in 26 years, providing a reminder that unemployment will keep mounting long after the economy stabilizes.
Initial jobless claims swelled by 12,000 to 669,000 in the week ended March 28, the most since 1982, the Labor Department said today in Washington. A Commerce Department report showed orders to factories improved in February for the first time in seven months.
Attention now turns to tomorrow’s monthly employment report that is projected to show the jobless rate climbed in March to a 25-year high. The biggest slump in profits in five decades means companies will cut more staff to reduce expenses in coming months, even as orders begin to trickle in.
“There are positive signs in the economy, solid signs that the downdraft has diminished,” said Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “But because the labor market lags, we don’t think we’ve seen the worst of that yet.”
Stocks gained, extending a global rally, as investors welcomed a change in regulation that may boost bank profits, and leaders of the most powerful nations, meeting in London, neared agreement on joint efforts to stem the recession. The Standard & Poor’s 500 index was up 3.8 percent to 841.86 at 11:19 a.m. in New York. Treasury securities fell and oil jumped.
First-time jobless claims were estimated to fall to 650,000 from 652,000 initially reported for the prior week, according to the median projection of 43 economists in a Bloomberg News survey. Estimates ranged from 630,000 to 682,000.
Job Cuts
The report from Labor also showed the total number of people collecting benefits soared in the week ended March 21 to a record 5.73 million. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, increased to 4.3 percent in the same week, the highest since 1983.
The jobless rate last month climbed to 8.5 percent, the highest level since 1983, according to the median forecast in a Bloomberg survey before tomorrow’s report. Payrolls probably fell by 660,000 workers, bringing total job losses since the downturn began to about 5 million.
Less employment and slowing incomes may thwart a rebound in consumer spending, setting back prospects for an economic turnaround in the second half of 2009.
“It is difficult to sustain any rebound in consumer spending when you have such sharp declines in employment,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “It’s getting harder to get a job once you lose it.”
Factory Orders
Orders placed with factories rose 1.8 percent in February, the first gain since July, reflecting a rebound in demand for construction machinery, computers and air-conditioning equipment that signals the worst of the manufacturing slump has passed.
The gain followed a 3.5 percent drop in January that was larger than previously estimated, the Commerce Department said.
A pickup in bookings, combined with plunging stockpiles, is setting the stage for gains in output in coming months that may stem the slide in factory employment.
“There are signs that the pace of decline in manufacturing activity may be slowing,” said Tim Quinlan, economic analyst a Wachovia Corp. in Charlotte, North Carolina.
The Commerce report showed demand for motor vehicles and parts rose 1.1 percent in February, and improving sales indicate gains may continue.
Auto Purchases
Auto purchases last month were stronger than forecast, rising to a 9.9 million annual pace from a three-decade low of 9.1 million in February, according to industry figures released yesterday. Carmakers were forced to spend a record $3,169 on incentives per vehicle on average, surpassing the previous mark set in September 2004, to entice consumers.
“It’s one month in a row, and it’s of interest and there may be a small sign of hope,” Chrysler LLC President Jim Press said on a call with reporters yesterday. “But if you look at the trends out there, there’s a lot of concern.”
President Barack Obama earlier this week gave General Motors Corp. and Chrysler deadlines to “fundamentally restructure” or lose government aid that has kept them running. He rejected the companies’ recovery plans and forced GM Chief Executive Officer Rick Wagoner to resign.
In addition to providing funds to the U.S. automakers, policy makers are trying to unclog credit. The Financial Accounting Standards Board voted today to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.
The changes allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost their first-quarter net income by 20 percent or more.
source :Bloomberg
