Jul 4, 2002 By Jeannine Aversa Associated Press Writer 3 min read

WASHINGTON (AP) – New claims for unemployment benefits dropped to a 15-month low last week, suggesting that companies are reducing layoffs. But that doesn’t mean there will be a big wave of hiring, economists predicted.

For the week ending June 29, new applications for unemployment insurance fell by a seasonally adjusted 11,000 to 382,000, the Labor Department reported Wednesday.

That was the lowest level since March 24, 2001, and the fifth straight week below 400,000.

The more stable four-week moving average, which smoothes out weekly fluctuations, dipped to 392,000, the lowest in just over three months.

Economists viewed the decline as an encouraging sign that the pace of layoffs was stabilizing. But they said it would take time for companies to feel more secure about the economic recovery and step up hiring.

“The drop in claims to a 15-month low says that housecleaning by corporations of excess labor – with the possible exception of telecommunications companies – is over,” said economist Clifford Waldman of Waldman Associates.

“But the jobs market is sluggish and hiring is not matching the good news in the slowing of layoffs.”

The government will release June’s employment report Friday and analysts are predicting the jobless rate will edge up to 5.9 percent or possibly 6 percent from the current 5.8 percent.

Analysts estimate that around 75,000 jobs were created in June.

As other parts of the economy gain ground, the labor market has continued to feel the lingering effects of last year’s recession.

Companies whose profits and revenues took a hit during the slump have been worried about the recovery’s staying power and have been wary of making big commitments in hiring and in capital investment.

To this end, Wednesday’s report showed that the number of unemployed workers continuing to draw jobless benefits rose to 3.7 million for the week ending June 22, suggesting that not a lot of hiring was going on.

“The economy is the big engine that could,” said Tim O’Neill, chief economist at Bank of Montreal.

“We have a couple of bends in the track to get around. One is a labor market recovery and the other is a turnaround in capital spending.”

In another report, orders to factories rose by 0.7 percent in May – the same increase as the month before and the third month in a row in which factories saw orders grow, the Commerce Department said.

The report provided further evidence that the nation’s manufacturers – hardest hit by last year’s recession – continue to revive.

Computers, machinery and metal products were among the categories posting gains in orders, while cars and household appliances showed declines.

Orders for nondurable goods, such as food and clothes, went up 0.4 percent, down from a 0.9 percent increase the month before.

Citing uncertainties about the recovery’s vitality, Federal Reserve policy-makers left short-term interest rates at 40-year lows last week, the fourth time this year they held rates steady.

Americans’ confidence in the economy, as measured by the Conference Board, fell in June to a four-month low, pulled down by accounting scandals and worries about jobs.

“The high-profile corporate problems, including WorldCom, could lead to more layoffs, raising the risk that the hiring market may be softer for longer than we thought,” said Carl Tannenbaum, chief economist at LaSalle Bank.

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On the Net:

Jobless:

http://www.doleta.gov/

Factory orders:

http://www.doc.gov/