Unemployment claims drop for 4th time in 5 weeks

October 7, 2010 6:10:06 AM PDT
Applications for unemployment benefits fell last week for the fourth time in five weeks, a sign that layoffs are declining. The Labor Department said Thursday that initial claims for jobless aid dropped by 11,000 to a seasonally adjusted 445,000. It's the lowest level since the week ending July 10.

Stock futures rose after the report's release. Wall Street analysts had expected a small increase.

Economists were mildly encouraged by the drop. But they also pointed out that claims remain at an elevated level consistent with weak job growth. Employers aren't hiring enough to bring down the 9.6 percent unemployment rate.

"While it's comforting to see claims grinding lower, the fact is that they remain at levels that suggest continued sub-par job growth," Sal Guatieri, an economist at BMO Capital Markets, wrote in a note to clients.

Weekly applications have rarely fallen below 450,000 this year, and never for longer than two weeks. Economists say a sustained drop below 425,000 would signal employers are stepping up hiring. The four-week average of new claims, a less volatile measure, dropped to 455,750, the sixth straight decline.

Separately, retailers reported surprisingly strong sales gains for September due to healthy back-to-school shopping. The results raised hopes for a positive holiday shopping season.

Numerous chains reported better-than-expected results, including Macy's Inc., Victoria's Secret and Bath and Body Works parent Limited Brands Inc. and Abercrombie & Fitch.

The claims report, while volatile, is considered a real-time snapshot of the job market. It is also a measure of the pace of layoffs and an indication of companies' willingness to hire.

Claims have fallen sharply since June 2009, the month the recession ended. They topped 600,000 at the end of that month.

But the improvement has largely stalled this year. Initial claims have generally fluctuated around 450,000 since January. Any sustained decline below that level would be a positive sign that the job market is improving.

The report comes a day before the government is scheduled to release its monthly jobs report for September. Private companies are forecast to have added a net total of 75,000 jobs last month. But that's likely to be offset by the loss of 75,000 temporary census jobs. Overall, economists expect no change in total payrolls, according to a survey by Thomson Reuters.

The unemployment rate is projected to rise to 9.7 percent from 9.6 percent, as more people enter the labor market searching for work.

Total unemployment benefit rolls, meanwhile, dropped by 48,000 to 4.46 million, the Labor department said. That doesn't include several million people who are receiving benefits under extended programs approved by Congress during the recession.

The number of people on extended benefits rose by about 250,000 to 5.1 million in the week ending Sept. 18, the latest data available. All told, about 8.9 million people received unemployment aid that week.

Some companies are hiring despite the weak economy. Daryl Dulaney, chief executive of Siemens Industry Inc., says his company's parent, Siemens USA, has 1,200 job openings. About 40 percent require an engineering or information technology background, and the company has had difficulty finding qualified candidates, despite the high jobless rate, Dulaney said.

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