New unemployment claims dip, but layoffs continue

By CHRISTOPHER S. RUGABER
Associated Press
2008-12-19 06:16 AM

Job seekers take an appraisal test at the South LA WorkSource Center Thursday, Dec. 11, 2009, in South Los Angeles. The Labor Department says that new applications for jobless benefits fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. Thats slightly below economists expectations of 558,000 claims.

Job seekers take an appraisal test at the South LA WorkSource Center Thursday, Dec. 11, 2009, in South Los Angeles. The Labor Department says that new applications for jobless benefits fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. That's slightly below economists' expectations of 558,000 claims.

Fewer Americans than expected requested unemployment benefits last week, but the dip is likely to be temporary as more companies lay off workers, and economists expect the jobless rate to rise as the recession deepens.Companies ranging from satellite radio operator Sirius XM Radio Inc. to heavy equipment maker Caterpillar Inc. announced job cuts Thursday. New York-based Sirius said it would cut more than 450 jobs, or about 20 percent of its work force, by the end of the year. Peoria, Illinois-based Caterpillar said it will lay off more than 800 workers.

The stock markets fell on investor concerns about the economy and a ratings downgrade on an American icon. Standard & Poor’s Ratings Service lowered its outlook for General Electric Co. and its GE Capital finance arm to negative from stable. The Dow Jones industrial average dropped more than 219 points, or about 2.5 percent, to 8,604.99.

Graphic shows change in weekly jobless claims and monthly size of U.S. workforce

Graphic shows change in weekly jobless claims and monthly size of U.S. workforce

Still, some good economic news emerged Thursday. The Freddie Mac mortgage giant said mortgage rates have fallen to the lowest level on records dating back to 1971, in part due to the Federal Reserve’s cut of its key short-term rate to nearly zero Tuesday.

Separately, federal regulators adopted sweeping new rules for the credit card industry that will shield consumers from increases in interest rates on existing account balances. And President-elect Barack Obama indicated that more regulatory changes are coming.

But the latest jobless claims numbers were sobering. They showed that besides laying off workers, employers are slow to hire, trends that economists said will send the unemployment rate higher in coming months.

The Labor Department reported that new applications for jobless benefits fell to a seasonally adjusted 554,000 for the week ending Dec. 13, from an upwardly revised figure of 575,000 the previous week.

One likely reason for the improvement is that the figure was inflated two weeks ago by applicants who delayed filing their claims during the Thanksgiving holiday week, a Labor Department analyst said. The government tries to account for such volatility with its seasonal adjustments but is not always successful.

Still, the four-week moving average, which smooths out fluctuations, rose slightly to 543,750 claims, the highest since December 1982. The labor force has grown by about half since then.

The department reported earlier this month that employers cut a net total of 533,000 jobs in November, boosting the unemployment rate to 6.7 percent, the highest in 15 years.

Total job losses this month “could well be larger than the November decline,” Abiel Reinhart, an analyst at JPMorgan Chase Bank, wrote in a client note.

The jobless claims numbers also suggest that the unemployment rate could rise by at least 0.2 percentage point this month, Reinhart wrote.

Consumer lending news was more upbeat. Freddie Mac reported that average rates on 30-year fixed-rate mortgages dropped to 5.19 percent, down from the year’s previous low of 5.47 percent, set last week.

New credit card rules _ which were approved by the Federal Reserve and other regulators Thursday but don’t take effect until July 2010 _ mark the most sweeping clampdown on that industry in decades. They are aimed at protecting consumers from arbitrary hikes in interest rates and ensuring that cardholders have adequate time to pay their bills before payments are deemed late.

Obama pledged to overhaul financial rules to prevent a repeat of the types of financial and credit debacles that have helped plunge the U.S. into a painful recession.

He also named several key regulatory officials: Mary Schapiro to run the Securities and Exchange Commission, Gary Gensler to head the Commodity Futures Trading Commission and Dan Tarullo to be a member of the Federal Reserve. All three picks must be approved by the Senate.

Separately, the New York-based Conference Board’s index of leading economic indicators fell for the second straight month, dropping 0.4 percent in November. That was slightly better than the 0.5 percent decline economists expected and better than the 0.9 percent drop in October.

The index is designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits and unemployment insurance claims.

The number of people continuing to receive jobless benefits improved slightly last week, declining to 4.38 million from 4.43 million in the previous week. Economists expected a slight increase to 4.45 million.

Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 349,000 and more layoffs were announced this week.

Water treatment and storage systems maker Pentair Inc. said Thursday it will cut more than 10 percent of its work force, or about 1,600 jobs, due to a faster-than-expected drop-off in demand and consumer spending. On Wednesday, hard drive maker Western Digital Corp., managed-care company Aetna Inc., and Newell Rubbermaid Inc., maker of products including Rubbermaid storage containers and Sharpie pens, announced job cuts.

Pharmaceutical company Bristol-Myers Squibb Co., International Paper Co. and Bank of America Corp. also announced layoffs in the past week.

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~ by Lan on 2008 MonUTC2008-12-22T11:09:18+00:00. 15.

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