Bushonomics: Weak economy pushes jobless claims to 7-year high

The unemployed singing the blues, Bushonomics at work.

2 October 2008

By CHRISTOPHER S. RUGABER

WASHINGTON -New applications for unemployment benefits rose slightly last week to a seven-year high due to a weakening economy and the impact of Hurricanes Ike and Gustav, the Labor Department said Thursday.

The department reported that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000. That's significantly above analysts' estimate of 475,000. The total is the highest since just after the Sept. 11 terrorist attacks seven years ago.

U.S. stock futures declined on the report. Dow Jones industrial average futures dropped 102 to the 10,785 level, pointing to a lower opening for shares.

The hurricanes, which hit Texas and Louisiana earlier this month, added about 45,000 claims from the two states for the week ending Sept. 27, the department said.

The hurricanes have led to higher claims for several weeks. As a result, the four-week average of claims, which smooths out fluctuations, jumped to 474,000, up 11,500 from the previous week.

In the week ending Sept. 20, Texas reported a 22,235 jump in claims, while Louisiana said claims rose by 9,671.

The number of people continuing to receive benefits increased to 3.59 million, up 48,000 and higher than analysts' estimates. That's the highest total in five years.

Jobless claims are at elevated levels even excluding the hurricanes. Weekly claims have now topped 400,000 for 11 straight weeks, a level economists consider a sign of recession. A year ago, claims stood at 324,000.

The economy is struggling with the financial crisis and slowing consumer spending, leading to increased layoffs by the nation's employers.

Economists expect a separate Labor Department report Friday on payrolls to reflect further weakness in the labor market. They predict the report will show that the nation's employers cut 100,000 jobs last month. That's on top of 605,000 jobs that were eliminated in the first eight months of this year.

The report is expected to show that the jobless rate remains at 6.1 percent. The rate jumped above 6 percent for the first time in five years in August.

The financial crisis will likely cause greater job cuts in the coming months. Several large, troubled banks have been bought by competitors and layoffs are likely.

Citigroup Inc. on Monday purchased Wachovia Corp., which had about 120,000 employees. JPMorgan Chase & Co. last week bought Seattle-based Washington Mutual, which employed roughly 43,000.

Several companies have announced layoffs in the past week, including aluminum company Alcoa Inc., auto retailer CarMax, Inc. and chicken producer Pilgrim's Pride Corp.