WASHINGTON - The number of Americans filing applications for unemployment benefits shot up last week by the largest amount in 16 months, reversing two weeks of big declines.
The Labor Department reported Thursday that 325,000 newly laid-off workers filed claims for jobless benefits last week, an increase of 36,000 from the previous week. That was the biggest one-week rise since a surge of 96,000 claims the week of Sept. 10, 2005, when devastated Gulf Coast businesses laid off workers following Hurricane Katrina.
The increase of 36,000 was bigger than the 20,000 rise that had been forecast. Analysts, however, cautioned that it is difficult to read the claims figures at this time of year because of unusually wide swings caused by the holidays and other factors.
Yahoo News has some further details:
Based on past trends, claims numbers often surge in third week of the month as retail businesses shed seasonal workers hired to help with the crush of holiday shoppers. However, this year, the layoffs were much higher than in past years.
[....]
The 36,000 increase in layoffs followed two weeks in which jobless claims had fallen by a combined 36,000. The four-week moving average for layoffs, designed to smooth out the weekly volatility, edged up slightly to 309,250 from 207,750 the previous week.
For the week ending Jan. 13, a total of 33 states and territories reported an increase in claims before adjusting for seasonal variations while 20 states and territories reported declines in claims.
The increases were led by California, which saw jobless claims rise by 10,115, an increase blamed on higher layoffs in construction and service industries. Layoffs were up by 8,870 in Michigan and 6,418 in Texas.
The states with the biggest decline in layoffs were New York, down by 26,764; North Carolina, down by 10,072 and Georgia, down by 8.987.
The state data is not adjusted for seasonal variations.
I'm not sure if this increase in jobless claims is a result of the seasonal jobs being shed, or if there is a more serious underlying problem. We've seen that Ford has posted a $12.7 billion dollar loss for 2006. Such a huge loss will certainly result in layoffs of Ford employees. According to the New York Times:
About 40 percent of Ford’s hourly workers — some 30,000 employees — have agreed to leave their jobs this year in exchange for buyout or early-retirement packages, and the company is also shedding about 14,000 salaried positions. Those cuts, along with plans to close nine plants by the end of next year, are part of the Way Forward plan, which is meant to return the company to profitability in North America by 2009.
I'm not saying that Ford's woes have caused the rise of jobless claims. But I do wonder if Ford's woes will exacerbate the problems in the job market. A second underlying problem we've certainly been seeing has been the housing crash. According to this New York Times story, titled Sales of Existing Homes in ’06 Had Biggest Drop in 17 Years:
WASHINGTON, Jan. 25 (AP) — Sales of existing homes fell last month, closing out a year when demand for homes slumped by the largest amount in 17 years.
The National Association of Realtors reported that sales of existing homes were down 0.8 percent in December, a bigger decline than had been expected. For the year, sales fell by 8.4 percent, the biggest annual decline since 1989, when sales of existing homes fell by 14.8 percent.
This cooling of the housing market may now be reflecting itself within the unemployment rolls with job losses in the construction industry. According to this January 7, 2007 Minneapolis Star-Tribune story:
For 2007, Global Insight is forecasting a GDP growth rate of just 2.3 percent, a full percentage point lower than in 2006. That would be the slowest pace since the economy grew by just 1.6 percent in 2002, a year when the country was struggling to recover from the 2001 recession.
The slower growth means that unemployment will be rising, with many analysts expecting the jobless rate to hit 5 percent in 2007, up from a five-year low of 4.4 percent in October. That would still be a relatively low overall civilian jobless rate in historical terms.
For certain sectors of the economy, job losses will have a much bigger impact, however.
Economists at Goldman Sachs estimate that housing-related industries — construction, furniture manufacturing and sales, real estate agents, mortgage brokers — will see more than 1 million jobs evaporate over the next two years because of the housing slowdown after five boom years for sales.
More to come.
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