U.S. jobless claims jump
November 29, 2001 Posted: 1756 GMT
NEW YORK (CNN/Money) -- New jobless claims rose in the United States last week after falling for four straight weeks, while the number of Americans out of work for more than a week hit the highest level in nearly a decade, the government said Thursday.
But separate government reports also said new-home sales and sales of long-lasting products like airplanes, computers and cars rose in October, with both surpassing forecasts by most Wall Street economists.
The Labor Department said new claims for unemployment benefits rose to 488,000 in the week ended Nov. 24 from a revised 434,000 a week earlier. Economists surveyed by Briefing.com expected 430,000 new claims.
It was the first rise in new claims after four straight declines and highlighted the continuing weakness in the world's largest economy. Economists declared earlier this week that the United States fell into a recession in March, the first in a decade after the longest stretch of growth on record.
"We still have a labor market that's deteriorating, and today's numbers epitomize that," said Anthony Chan, chief economist at Banc One Investment Advisors. "We're going to continue to see deterioration, which will pose serious challenges to consumer confidence and keep the economy soft for another quarter or two."
And the number of continued claims, or jobless people still looking for work, jumped to 4 million in the week ended Nov. 17, the latest week for which such data are available, from a revised 3.7 million the prior week. It was the highest level of continued claims since 3.8 million in the week ended Dec. 25, 1982.
"Continuing claims numbers are very closely tied to unemployment, and they are skyrocketing," Chan said.
More encouraging, however, was the Commerce Department's report that orders of goods meant to last at least three years jumped 12.8 percent in October after falling a revised 9.2 percent in September. Economists surveyed by Briefing.com expected durable goods orders to rise only 2.1 percent.
It was the biggest jump in durable goods orders since the Commerce Department began keeping track of the data in March 1992.
In addition, new home sales rose 0.2 percent in October to an annual rate of 880,000 units, the Commerce Department said in another report, compared with a September rate revised to 878,000 from an initial reading of 864,000. Economists surveyed by Briefing.com expected new home sales of 850,000 units.
The housing market, propped up by low mortgage rates, has been a pillar of strength in the weak economy, and some observers saw that and the durable goods orders as optimistic signs of the overall health of the economy.
"The housing sector has been quite good all along, even with increasing unemployment," said Henry Willmore, chief economist at Barclays Capital. "It shows you the power of low mortgage rates.
"On balance, I'd say the numbers this morning were more good than bad," Willmore added.
On Wall Street, stocks were slightly higher in early trading, as investors possibly agreed with Willmore and shook off fears about the imminent collapse of Enron (ENE: down $0.18 to $0.43, Research, Estimates). U.S. Treasury bond prices also rose.
To keep consumers spending despite mounting job cuts and an unemployment rate that rose to 5.4 percent in October, the Federal Reserve has cut its target for short-term interest rates 10 times this year.
Though its target rate of 2.0 percent is at a 40-year low, some economists expect the Fed to cut rates again at its next policy meeting, scheduled for Dec. 11, especially since the unemployment rate could rise above 6.0 percent in the coming months.
"Although durable goods orders bounced back last month, the turnaround is not strong or broad-based enough to prevent the Fed from easing at the Dec. 11 meeting if it feels that another rate cut is appropriate," Wachovia Securities economist Jay Bryson said in a research note.
Members of the Fed's policy committee said this week that they thought the Fed should keep its aggressive rate-cutting stance in place, and the Fed's Beige Book report saw widespread economic weakness in October and early November. That view was supported by the National Bureau of Economic Research, which Monday said the recession began in March.
More encouraging was the four-week moving average of jobless claims, which smoothes out volatility in the weekly data; it fell to 454,000 last week from a revised 456,000 the week before.
The surge in durable goods orders was also encouraging for the beleaguered manufacturing sector, which has borne the brunt of a slowdown in the U.S. economy that has lasted more than a year. For much of that time, the slowdown was largely the result of slow spending by businesses. After Sept. 11, consumer spending also suffered.
Economists were quick to point out that October's jump in orders was largely a result of a jump in orders for transportation products, which rose by 38.8 percent after falling 16.2 percent in September.
Orders for airplanes jumped a staggering 233.2 percent, while defense capital goods jumped 206.3 percent. Those numbers appear to reflect the impact of the government's initiation of its Joint Strike Fighter program, a $200 billion job given to Lockheed Martin in October.
"What we are looking at here is a bounce that is boosted by defense and aircraft, coming back from extremely weak September levels," J.P. Morgan economist Calvin Schnure told Reuters. "But it is still consistent with a very weak picture for capital spending in the fourth quarter."
A 10.6 percent jump in demand for cars and trucks was largely the result of aggressive sales incentives, including zero-percent financing. Excluding transportation goods, durable good orders rose 3.4 percent, compared with a drop of 6.4 percent in September.
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