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Published: 7/13/2012

Jobless claims fall, but likely to be temporary

ASSOCIATED PRESS

WASHINGTON -- The number of people seeking U.S. unemployment benefits plunged last week. But a big reason is that automakers have skipped some of their usual summer shutdowns to keep up with demand, causing fewer temporary layoffs.

Economists expect the number of Americans seeking unemployment aid to go back up in coming weeks.

The auto industry's recovery has helped support the struggling U.S. economy. U.S. auto sales in the first half of the year jumped 15 percent over the same period a year ago. Sales of new vehicles surged in June.

The Labor Department adjusts the number of applications for unemployment aid to account for seasonal factors. But it underestimated this summer's drop in temporary shutdowns of auto plants. That distorted the seasonally adjusted data it released Thursday.

And that may largely explain why applications for unemployment aid tumbled 26,000 last week to a seasonally adjusted 350,000 -- the fewest since March, 2008.

Automakers traditionally close their plants in the first two weeks in July to prepare them to build new models, and their employees often file for unemployment benefits. But Ford Motor Co. said in May that it would reduce its usual two-week closing to just one week. And Chrysler canceled the two-week shutdowns at three factories.

Applications for unemployment benefits measure the pace of layoffs. When they consistently fall below 375,000, it suggests hiring is strong enough to reduce the unemployment rate.

At the same time, hiring has slowed sharply compared with the first three months of the year. Employers added only 80,000 jobs in June, the third straight month of weak hiring. The unemployment rate was stuck at 8.2 percent.



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