Economists say the worrying trend of jobless claims adds further evidence that payrolls will continue to decline for many months. The weekly report showed continuing claims reached a cyclical high, while initial claims fell back from a seven-year peak but remain in deep recessionary territory.
Initial claims for unemployment benefits in the United States fell back to 478k in the week ending Oct. 4, down from an upwardly revised 498k in the prior week, the Department of Labor reported on Thursday. Continuing claims rose to 3.659 million - the highest level since June 2003 - for the week ending Sept. 27.
"The recession appears to be deepening at the beginning of the fourth quarter," said economists from RDQ.
The four-week moving average for initial claims is now 483k - the highest since Oct. 20, 2001 - up from 474k last week. Initial jobless claims were expected to drop to 475k.
Ian Shepherdson, chief U.S. economist at HFE, noted that claims are "well above" the peak seen in the 2001 recession. "The only thing preventing a run of 2001-style drops in payrolls is that companies have not yet cut the pace of gross hiring as much as they have raised the pace of gross firing," he said.
The BLS said claims were elevated by 17k due to Hurricanes Ike and Gustav, compared to a 45k boost last week.
"The underlying trend is hard to see through the noise but there is every reason to expect the trend, whatever it is, to rise further as the real economy shrinks further," Shepherdson said. "
xpect faster payroll declines," he added.
Continuing claims have been above the 3 million mark for 22 consecutive weeks. The four-week moving average is now 3.563 million, up from the moving average of 3.532 million in the previous week.
Millan Mulraine, economics strategist at TD Securities, said that "Overall, the report does suggest that the U.S. labour market continues to be in a state of distress." Given the weakening state of the economy, he said it would be "unlikely to see any meaningful turnaround in labour market conditions anytime soon."
On the trading floor reaction, Ian Lyngen from RBS Greenwich commented: "The market caught a modest bid in the wake of the data, although we stress modest as the market remains under pressure ahead of this morning's reopening auctions."
Claims have recently been higher than normal following new rules introduced by the Department of Labor that made filing for unemployment benefits easier, as well as effects from recent hurricanes.
By Patrick McGee and edited by Stephen Huebl
©CEP News Ltd. 2008