Economists say the higher than anticipated number of unemployment benefits in the week ending Sept. 27 is not only consistent with recession, but is actually worse. Initial jobless claims rose to 497k, the Department of Labor reported on Thursday, while continuing claims set another cyclical high at 3.591 million for the week ending Sept. 20.
Ian Shepherdson, chief U.S. economist at HFE, said initial claims rose "well above the 475K consensus," adding that the underlying trend "seems to be about 450K" once the impact of the Hurricanes is taken into account, "which is still disconcertingly high."
The BLS said claims were elevated by 45k due to Hurricanes Ike and Gustav.
Similarly, Marie-Pierre Ripert, U.S. economist at Natixis, said that even when discounting losses from the Hurricane, the amount of jobless claims is consistent with recession.
By comparison, Shepherdson said the peak in claims during the 2001 recession - excluding the aftermath of September 11 - was only 400k.
"Payrolls have not fallen as fast as in 2001, though, suggesting the pace of gross hiring has not dropped as much as usual in a recession," he added, while noting that payrolls will probably begin to fall at a more rapid pace in the months ahead.
Ripert said she expects the elevated trend in claims to continue in the coming months "as the economy will weaken sharply." She said all indicators point towards a substantial loss in the BLS employment situation report on Friday, which she expects to drop by 115k, or possibly more.
The four-week moving average for initial claims is now 474k, up from 462k last week. Jobless claims have been above the 400k threshold for 11 weeks now.
Continuing claims were expected to come in at 3.550 million for the week ending Sept. 20, following the previous week's upwardly revised figure of 3.543 million.
Economics strategist Ian Pollick from TD Securities said the four-week average is still elevated because of the regulatory changes that made filing for unemployment benefits easier. "However, this is a real number and implies to us that job seekers are having a harder time to find employment," he said.
By Patrick McGee and edited by Sarah Sussman
©CEP News Ltd. 2008