New weekly US jobless claims rise - Unemployment expected to hit 9.6% in July

New weekly US jobless claims rise - Unemployment expected to hit 9.6% in July
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: July 30 2009 15:13 | Last updated: July 30 2009 16:11
http://www.ft.com/cms/s/0/22905bc4-7d11-11de-9f29-00144feabdc0.html


The number of US workers claiming unemployment benefits rose last week, but remain below levels seen during the depths of the recession, raising optimism that the labour market could slowly be starting to heal.

New jobless claims rose by 25,000 to 584,000, official figures showed on Thursday. That increase was slightly more than economists expected, but the total number of Americans claiming benefits fell for the third week running. Continuing claims declined by 54,000 to 6.2m.

“Obviously claims are still high and pointing to substantial payroll losses, but things appear to be gradually improving,” said Abiel Reinhart, an economist at JPMorgan Chase.

The less volatile four-week average of first-time unemployment claims declined last week, dropping by 8,250 to 559,000.

Economists noted that last week was the first in more than a month that jobless figures were not distorted by shifting shutdowns in the auto sector. Some warned, however, that the decline in continuing claims could be due to workers that have been unemployed for a long time falling off benefits payrolls.

For the week ending July 18, the insured unemployment rate held steady at 4.7 per cent.

Analysts have been keeping a close watch on jobless claims ahead of next week’s non-farm payrolls report. In June, figures showed that the US economy shed another 467,000 jobs, pushing the unemployment rate to a 26-year high of 9.5 per cent. That is expected to climb to 9.6 per cent for July with another 340,000 jobs lost.

States suffering the most from growing benefits claims included Florida, California and Michigan, which continues face job cuts from the car industry.

Although the worst could be over for the labour market, the slow pace of improvement has caused fears that a labour market recovery could lag painfully behind the rest of the economy. Rising unemployment is also a drag on the overall economy because it saps consumer spending, which represents nearly three-fourths of gross domestic product.

“The improvement is still unusually modest, leading to fears that the US economy is set for another jobless recovery,” said Paul Ashworth, an economist at Capital Economics. “Even if GDP starts to expand again in the second half of this year, employment probably won’t start rising again until the end of 2009.”

In the first quarter the US economy contracted at an annualised rate of 5.5 per cent and analysts are expecting official figures to show on Friday that output fell by a more moderate 1.5 per cent in the second quarter.