Initial claims for unemployment benefits likely dropped sharply last week after surging the previous week due to a backlog in state agencies that process the claims.
A Labor Department report Thursday is forecast to show new requests for unemployment insurance dropped by 32,000 to a seasonally adjusted 450,000, according to Wall Street economists surveyed by Thomson Reuters.
Last week’s report showed that first-time claims jumped by 36,000 to 482,000, a surprise showing that undermined hopes of many analysts that the economy might be generating a net gain of jobs.
A Labor Department spokesman said much of the increase was due to an administrative backlog in the states that had built up over the holidays.
Economists closely watch initial claims, which are considered a gauge of the pace of layoffs and an indication of companies’ willingness to hire new workers.
Before last week, claims had dropped steadily since last fall, as companies cut fewer jobs. In late December, claims fell to their lowest level since July 2008, before the financial crisis intensified that September. Thursday’s report is due at 8:30 a.m. EST.
Despite the downward trend over the winter, the economy is not yet consistently generating net increases in jobs. The Labor Department said earlier this month that employers cut 85,000 jobs in December, after adding 4,000 in November. November’s small increase was the first in nearly two years. The unemployment rate was unchanged at 10 percent.
The number of people continuing to claim benefits, meanwhile, is forecast to remain unchanged at 4.6 million. Those figures lag initial claims by a week.
But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.
More than 5.9 million people were receiving extended benefits in the week ended Jan. 2, the latest data available. That means more than 10 million people are receiving unemployment assistance.
The increasing number of people claiming extended unemployment insurance indicates that even as layoffs are declining, hiring hasn’t picked up. That leaves people out of work for longer and longer periods of time.
Some employers are continuing to cut jobs. Home Depot Inc. said Tuesday that it will layoff 1,000 employees. And Wal-Mart Stores Inc. said it will cut 11,200 jobs in its Sam’s Club stores as it outsources product demonstrations.
SOURCE: The Associated Press (c) 2010