Jobless Benefit Rolls Hit 20 Year High

The number of Americans claiming jobless benefits late last month hit its highest in more than 20 years, the government said on Thursday in a report underscoring persistent weakness in U.S. labor markets.

The number of idled workers on the benefit rolls jumped by 87,000 in the week ended June 28 to 3.82 million, the highest level since Feb. 1983, the Labor Department said.

It also said first-time claims for unemployment insurance rose by 5,000 to a seasonally adjusted 439,000 last week from 434,000 a week earlier, surprising economists on Wall Street who had expected claims to edge down a bit.

Other reports on Thursday offered mixed readings on the manufacturing sector and showed rising U.S. import prices, while top retailers said June sales were hurt by wet weather.

While clear signs have yet to emerge showing the economic pace has picked up after a sluggish start to the year, a closely watched poll of forecasters out on Thursday found projections of growth had recently been tweaked higher.

Economists cautioned about drawing conclusions on the near-term direction of the labor market from the jobless claims numbers, saying the Independence Day holiday on July 4 and auto plant shutdowns may have skewed the figures.

"It was a holiday week, so we don't take it too seriously", said David Wyss, chief economist at Standard & Poor's Rating Service in New York. Still, he said it was not good news for the economy: "It's a continued jobless recovery."

Investors in a Funk

The claims data deepened a pall hanging over financial markets that already were fretting over the outlook for corporate profits after Internet giant Yahoo's results came in below expectations earlier in the week.

The Dow Jones industrial average finished down 120.17 points, or 1.31%, at 9,036.04, with all but one of the 30 Dow components ending lower. The technology-laced Nasdaq Composite Index dropped 31.77 points, or 1.82%, to 1,715.69.

The claims figures came on the heels of a report last week that showed the U.S. jobless rate surged to a nine-year high of 6.4% in June. That report also showed the number of workers experiencing long-term unemployment hit 2.04 million, the highest level since Dec. 1992.

"If and when the economy begins to gain some momentum, the dismal labor market should slowly start to improve, but it's entirely possible we could be stuck here for a long time", said Oscar Gonzalez, an economist with John Hancock Financial Services in Boston.

In an interview with Reuters, Commerce Secretary Don Evans predicted some improvement in job prospects next year as the effects of Bush administration tax cuts kick in with a lag.

"We would expect the unemployment number would trend down in 2004, I think that's a reasonable kind of expectation", Evans said.

Retooling a Factor

While auto plant shutdowns for annual retooling may have affected the claims figures last week, a four-week moving average of claims, which smooths out week-to-week volatility, also suggested no improvement. That barometer rose by a slight 1,000 to 426,750, ending a string of three weekly declines.

As for initial claims, the latest rise pushed them to their highest level in five weeks.

Claims have been above the 400,000 level economists say separates jobs growth from loss for 21 straight weeks, the longest stretch since a prolonged slump ended in July 1992.

Better times for job searchers could lie ahead if forecasts for faster growth pan out, although economists warn that job gains usually lag improvements in the overall economy.

The closely watched Blue Chip newsletter reported that the consensus growth forecast from its panel of 50 economists had moved slightly higher. The panel now expects the economy to advance by a solid 3.6% in the third quarter and 3.8% in the final three months of the year.

Separately, a survey of 53 manufacturing firms by the Manufacturers Alliance/MAPI offered what the group called a "mixed but hopeful" outlook for the factory sector.

However, the Chicago Federal Reserve Bank said its gauge of Midwest manufacturing activity fell for a fourth month in a row in May, showing no improvement in production even after most of the fighting in Iraq had drawn to a close.

Top U.S. retailers on Thursday reported June sales largely in line with muted expectations as a mid-month burst of warmer weather spurred demand for summer goods.

Unusually cool, wet weather across parts of the United States last month stalled summer sales in the first half of the month, leaving many retailers with a glut of shorts and swimsuits just as back-to-school clothes arrive.