Economists say initial and continuing jobless claims continue to signal severe weakness in the U.S. labour market, and that the absence of any impact from Hurricanes Gustav and Ike imply that such weakness cannot be written off with seasonal or temporary factors.

Initial jobless claims came in at 481k in the week ending Nov. 1, a slightly higher figure than expected despite falling 4k, as the previous figure was revised up by 6k to 485k. This is the second week in a row that the Bureau of Labor Statistics hasn't mentioned any impact from the hurricanes, so even though claims are well below the 499k hit four weeks ago, the underlying trend is worse.

"There doesn't seem to be any special factor going on, so I think we need to take this at face value," said Eric Lascelles, senior economics and rates strategist at TD Securities. "Even more worryingly, it's the continuing claims that are really spiking, signalling not only that people are losing their job, but others are not finding them."

Continuing claims soared by 122k to reach 3.843 million in the week ending Oct. 25, a new cyclical high. The four-week average also rose significantly to a new cyclical high, moving up to 3.754 million from the previous week's 3.711 million.



The only positive Lascelles could see in the report is the possibility that layoffs in October were particularly high and that there would be improvement to come. However, he said the evidence for that is slim so far.

"It's fair to say that October could be worse than others, but you're still going to see these things trend upwards, because there is simply not an appetite to hire. October and September were probably a little bit special, but I don't get the sense that we're going to see a huge improvement going forward," he said.

"I still think there are some pretty severe problems going on in the economy. If anything, there could be a lag in the response from companies, and so we could continue to see some fairly bad figures for the next few months just in response to what happened in September and October," he added.

Considering the sharp rise in sustained unemployment, John Ryding and Conrad DeQuadros from RDQ said an extension of unemployment benefits would likely be part of the next stimulus package from Congress.

Looking ahead to Friday's official nonfarm payrolls report, they said the jobless claims data signals "a rapidly contracting labor market and a continued rise in the unemployment rate." They said these figures would be consistent with nonfarm payrolls dropping -250k in October.

By Patrick McGee and edited by Stephen Huebl
©CEP News Ltd. 2008