Jobless Claims Rise In Latest Week;
Average Highest Since May

October 3, 2002

WASHINGTON — Total new claims for jobless benefits rose 5,000 in the latest week, the government said Thursday, while a more accurate barometer of labor trends hit its highest level in nearly five months.

First-time jobless claims — seen as an early reading on the state of the labor market — rose to 417,000 in the Sept. 28 week from a revised 412,000 in the previous week and above Wall Street expectations for a rise to 409,000, the Labor Department said. The government had initially reported claims at 406,000 for the Sept. 21 week.

For six weeks straight, new claims have been above the 400,000 mark, a level associated with a sluggish job market.

The four-week moving average, seen by analysts as a more accurate measure because it smooths out week-to-week fluctuations, rose to 423,000 in the week ended Sept. 28 from 420,500 the prior week. That was its highest level since 429,500 in the May 4 week.

Companies, whose profits took a hit during last year's recession and are still hurting, have been reluctant to make big commitments in capital spending spending and in hiring, factors restraining the economy's recovery. Economic uncertainties, including worries about a possible war with Iraq, are weighing heavily on businesses, economists say.

The nation's unemployment rate stood at 5.7% in August and many economists believe it climbed to 5.9% in September as profit-challenged companies sought to control costs and keep their workforces lean. The government will release September's employment report on Friday. Economists also believe that job growth for the month will be a mediocre 20,000.

Thursday's report also showed that the number of unemployed people still collecting jobless benefits increased to 3.68 million for the work week ending Sept. 21, the most recent period for which the information is available. That represented the highest level since the middle of June and suggests that not a lot of hiring is going on.

Consumers, whose spending accounts for two-thirds of all economic activity in the United States, have been the main force for economic growth. Low interest rates, rising home values and a refinancing boom that has left people with extra cash has supported consumer spending this year, helping to blunt other negative factors, including the stagnant jobs market, the roller coaster stock market and eroding consumer confidence.

Some economists worry that consumers may not have the energy to continue buying at a strong enough pace to keep the economy afloat, especially if the job market were to worsen.

Some economists believe the unemployment rate could rise to just over 6%, possibly higher, later this fall. Economists also worry that weak profits might force companies to conduct a new wave of layoffs.

The Federal Reserve has opted to hold short-term interest rates at 41-year lows all this year in an effort to spur consumers and businesses to spend and invest more, something that would help along the limping recovery. Some economists believe the Fed might decide to cut rates for the first time this year at its next meeting in November.

http://www.usatoday.com/money/economy/employment/2002-10-03-jobless_x.htm