Unemployment benefits claims fall for third week
WASHINGTON (AP) – New claims for unemployment insurance fell for the third straight week, suggesting the economic recovery is motivating companies to lay off fewer workers. But that doesn’t mean they will be in a rush to hire. For the week ending May 4, new claims dropped by a seasonally adjusted 11,000 to 411,000, the lowest level since March 16, the Labor Department reported Thursday. Claims fell by 5,000 and by 25,000 in the prior two weeks.
Even if companies reduce the speed at which they lay off workers, the jobless rate will keep rising if companies are reluctant to hire employees back.
“The bulk of the big job cuts are behind us. Companies are getting more right sized for the current economic conditions,” said Ken Mayland, president of ClearView Economics. “But with all the uncertainties, companies are not going to be rehiring with gusto.”
The nation’s unemployment rate jumped to 6 percent in April – the highest in nearly eight years – as jobseekers streamed back into the market faster than companies added new positions.
Companies – whose revenues and profits took a hit during the slump – are worried about the recovery’s staying power and are reluctant to quickly hire back workers, crank up spending and make other big commitments until they are convinced the turnaround is for real, economists said.
Although a slowing pace of layoffs may reduce some workers’ fears about losing their jobs, laid-off workers are still finding it difficult to get one. The number of unemployed workers continuing to draw jobless benefits rose to 3.8 million for the work week ending April 27. That was the highest level since April 9, 1983. Economists predict the jobless rate will peak at around 6.5 percent by June. That assumes companies will be slow to hire and job growth won’t be sufficient to handle those entering the labor force.
In another report, the nation’s largest retailers, including Wal-Mart and Target, said April’s sales were dampened by cool weather and Easter in March, making shoppers less inclined to hit the malls.
Analysts, however, said it remained to be seen whether April’s lackluster performance marked a significant change in consumer spending from the rebound the retail industry saw from January through March.
Concerns about how consumers, who kept on spending during the recession, will hold up during the recovery was a factor in the Federal Reserve’s decision Tuesday to keep short-term interest rates – now at 40-year lows – unchanged.
The Fed has voted to leave rates unchanged at all three of its meetings so far this year and many analysts believe the central bank will not begin to push rates higher until fall, after unemployment peaks and begins to improve.
Minutes of the March 19 Fed meeting released on Thursday showed that policy-makers were concerned about potential threats to the U.S. economy from the worsening situation in the Middle East and the possible disruptions this could cause to oil markets.
Fed officials voted unanimously to keep interest rates unchanged in March, just as they did at this week’s meeting. Minutes of the most recent discussions will be released after the next Fed meeting on June 25-26.
Economists worry that rising unemployment might make consumers, whose spending accounts for two-thirds of all economic activity, to pull back. Low interest rates, however, might persuade them to keep on buying and help along the economic recovery.
In the jobless claims report, even with the decline in new claims, the level was still a bit inflated as a result of a technical fluke that has clouded the layoff picture for several weeks, said Labor Department analyst Thomas Stengle.
The distortion comes from a requirement that laid-off workers seeking to take advantage of a federal extension for benefits must submit new claims. Legislation signed into law by President Bush provided a 13-week extension of jobless benefits.
The impact of the refilling requirement on the new jobless claims figures, however, appears to be coming to an end, Stengle said.
The more stable four-week moving average of new claims, which smoothes out weekly fluctuations, also fell last week to 428,000, the lowest level since the end of March.
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Jobless report: http://www.doleta.gov/