- Associated Press - Thursday, August 26, 2010

WASHINGTON (AP) — New requests for unemployment benefits fell sharply last week, the first decline in a month and a hopeful sign after a raft of negative economic reports.

New claims for jobless aid dropped by 31,000 to a seasonally adjusted 473,000, the Labor Department said Thursday. Still, claims remain much higher than they would be in a healthy economy. Employers are reluctant to hire as economic growth appears to be slowing.

The drop comes after a steep rise the previous three weeks that sent claims to their highest level in nine months. Those increases raised fears that businesses were starting to layoff more workers.

Even with last week’s decline, the four-week average, a less volatile measure, rose to 486,750, the most since November 2009.

The report is “mildly encouraging” but should be treated with caution, said Doug Porter, an economist at BMO Capital Markets, because the weekly claims report is highly volatile.

Separately, the Mortgage Bankers Association said that one in 10 American households with a mortgage was at risk of foreclosure this summer.

The number of Americans missing mortgage payments and falling into foreclosure has followed the upward trend in unemployment, which has been near double digits all year and has shown no sign of dropping soon.

Also, mortgage buyer Freddie Mac said the average rate for a 30-year fixed loan fell to 4.36 percent this week. That’s the ninth time in 10 weeks that the average rate has dropped to the lowest level since Freddie Mac began tracking rates in 1971.

Rates have fallen since the spring as investors, spooked by a slowing economy, shifted money into the safety of Treasury bonds. That has lowered the yield on Treasurys and mortgage rates tend to track those yields.

The jobless claims report helped send stocks up slightly in morning trading. The Dow Jones industrial average rose almost 34 points. Broader indexes also edged up.

The Labor Department, meanwhile, also said the total unemployment benefit rolls climbed steeply, as more people join extended unemployment aid programs that were renewed last month by Congress. During the recession, Congress added up to 73 weeks of emergency aid on top of the 26 weeks typically provided by the states.

All told, about 10.1 million people were receiving unemployment checks in the week ended Aug. 7, the latest data available. That’s up about 260,000 from the previous week.

The extended program lapsed in June, throwing nearly 2 million people off the rolls. But since Congress renewed the program, the total benefit rolls have increased by 2.2 million, according to Dan Greenhaus, chief economic strategist at Miller Tabak.

That suggests “that there is little if any meaningful hiring throughout the economy,” Mr. Greenhaus wrote in a note to clients.

The economy has grown for four straight quarters. But the pace has slowed from a 5 percent annual rate in last year’s fourth quarter to 3.7 percent in the January-to-March period. It has weakened even further in the past several months.

Story Continues →