New unemployment claims decline
1/1/2010WASHINGTON - The number of newly laid-off workers filing claims for unemployment benefits dropped unexpectedly last week, a sign the job market is healing as the economy slowly recovers.
New jobless claims have dropped steadily since September, raising hopes that the economy may soon begin creating jobs and the unemployment rate could decline. That, in turn, would give households more money to spend and add fuel to the broader economic rebound that began earlier this year.
The U.S. Labor Department said yesterday that new claims for unemployment insurance fell by 22,000 to a seasonally adjusted 432,000, the lowest since July, 2008. That's much better than the rise to 460,000 that Wall Street economists expected.
Among the states, Michigan had the largest increase in initial claims, with 8,382, which it attributed to layoffs in the auto industry.
The four-week average, which smooths fluctuations, fell for the 17th straight week to 460,250, the lowest since September, 2008, when the financial crisis intensified. The crisis led to widespread mass layoffs, which sent jobless claims to as high as 674,000 last spring.
Analysts cautioned that the weekly data could be artificially low due to seasonal factors, such as the Christmas holiday and recent snowstorms.
Still, many economists saw the claims figures as a positive sign that employers could soon step up hiring. Abiel Reinhart, an economist at JPMorgan Chase, said in a note to clients that he estimates employers added a net total of 40,000 jobs in December, after cutting 11,000 the previous month.
A record 21 million people collected unemployment benefits at some point in 2009, a year that ended with the jobless rate at 10 percent. A larger proportion of the unemployed received jobless benefits in the last steep recession in 1981-82, but the work force has grown by about one-third since then.
Fifteen million Americans are out of work, an increase of 3.8 million since the start of 2009. There are six unemployed people, on average, for each available job. And the so-called underemployment rate, counting part-time workers who want full-time jobs and laid-off workers who have given up their job hunt, stands at 17.2 percent.
The Labor Department will report the December unemployment rate and jobs figures Jan. 8. Mr. Reinhart said the rate will likely be 10 percent, matching the previous month and down from 10.2 percent, a 26-year high, in October.
Still, most economists expect the unemployment rate to remain above 9 percent through 2010, as companies are likely to hire at a slow pace as they wait to see if the current recovery continues.
Economists closely monitor initial claims, which are considered a gauge of the pace of layoffs and an indication of companies' willingness to hire new workers.