More Americans than projected filed applications for unemployment benefits last week, a sign firings remain elevated even as the economy is expanding.
Initial jobless claims jumped by 37,000 to 464,000 in the week ended July 17, exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The survey median projected claims would climb to 445,000. The number of people receiving unemployment insurance and those getting extended payments dropped.
The figures underscore projections that a lack of jobs will restrain consumer spending, the biggest part of the economy, and lead to slower growth in the second half of the year. It will probably take a “significant amount of time” to restore the almost 8.5 million jobs lost in 2008 and 2009, Federal Reserve Chairman Ben S. Bernanke told Congress yesterday.
“Underlying demand for labor is fairly sluggish,” said Omair Sharif, an economist at RBS Securities in Stamford, Connecticut, who had forecast claims would rise to 460,000. “If that continues, it will have an impact on wages and salaries and clearly have some negative implications for consumer spending.”
Stocks held gains after the report and Treasuries remained lower. Futures on the Standard & Poor’s 500 Index were up 1.2 percent at 8:47 a.m. in New York, and the yield on 10-year notes was 2.91 percent compared with 2.88 percent late yesterday.
The rebound in part reflects the unwinding of decreases in the prior two weeks as fewer factories closed for mid-year retooling than the government estimated. The influence of the manufacturing closures will probably take another week or two to wash out of the numbers, a Labor Department spokesman said.
The forecast was based on the median projection of 42 economists surveyed. Estimates ranged from 420,000 to 460,000. The Labor Department revised the prior week’s figure to 427,000 from a previously estimated 429,000.
The four-week moving average, a less volatile measure than the weekly figures, climbed to 456,000 last week from 454,750, today’s report showed.
The number of people continuing to receive jobless benefits dropped by 223,000 in the week ended July 10 to 4.49 million. The figure does not include the number of Americans receiving extended benefits under federal programs.
Those who’ve used up traditional benefits and are now collecting emergency and extended payments decreased by about 368,000 to 3.93 million in the week ended July 3 after Congress failed to pass legislation extending the assistance.
The Senate yesterday approved an extension of unemployment insurance that restores aid to 2.5 million people who lost their benefits. The legislation now goes to the House, where a vote is scheduled today. House approval would send the measure to President Barack Obama for his signature.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 3.5 percent in the week ended July 10 from 3.7 percent in the prior week.
Thirty-four states and territories reported an increase in claims, while 19 reported a decline. These data are reported with a one-week lag.
Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. That relationship has broken down in recent months as some companies continue to cut staff, while others expand, pointing to an uneven recovery.
Today’s report reflects jobless applications for the week the Labor Department will survey employers to tabulate July payrolls. In June, private employers added fewer workers than projected by economists, while overall payrolls fell, reflecting a drop in federal census workers.
It may take years to recoup the loss of jobs during the recession that began in December 2007, economists said. The unemployment rate, which reached a 26-year high of 10.1 percent in October 2009, will end 2010 at 9.5 percent, the same as in June, according to this month’s Bloomberg survey.
Bernanke yesterday said central bankers “remain prepared” to act as needed to aid growth even as they get ready to eventually raise interest rates from almost zero and shrink a record balance sheet.
Companies announcing job reductions in July include New Brunswick, New Jersey-based Johnson & Johnson. The health- products company, under U.S. congressional investigation for a recall of children’s medicines, said it’ll reorganize the plant where the withdrawn drugs were made and cut 300 positions.
Workers at the Fort Washington, Pennsylvania, manufacturing plant who lose their jobs will continue to get regular pay and benefits through at least mid-September, then get a severance package based on the number of years they worked, J&J said.