- The Washington Times - Thursday, January 2, 2003

WASHINGTON, Jan. 2 (UPI) — The Labor Department reported Thursday that new claims for state unemployment benefits during the week ended Dec. 28 rose by 13,000 to a seasonally adjusted annual rate of 403,000.

Economists on Wall Street were expecting first-time claims to rise by 2,000 during the Christmas holiday shortened week.

Since reaching a high for the year in March of more than 500,000, jobless claims have been hovering between 375,000 and the 400,000 levels. The 400,000 level, economists have said, signals a weak job market. Generally, economists associate the 400,000 level as the dividing line between a strengthening and weakening labor market.

The latest report from the Labor Department showed the four-week moving average of claims, considered a more reliable indicator because it eliminates week-to-week fluctuations, rose to 418,750 from 407,500 the prior week.

Economists pay particular attention to the jobless claims report, often one of the first signals the economy has reached bottom. Investors watch claims because they are an easy way to gauge the strength of the job market. A stronger job market generates a healthier economy.

However, unemployment claims can fall to such a level that businesses have a tough time finding new workers. They might have to pay overtime wages to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets.

Federal Reserve officials are always looking for inflationary pressures.

By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it's a good bet interest rates will rise and bond and stock prices will fall.

The Labor Department said the number of workers drawing unemployment benefits for more than a week fell to 3.42 million from 3.83 million during the latest week for which that information is available.

The figures do not include some 783,000 workers who were receiving federal benefits that are available to some workers who exhaust their state benefits, typically after 26 weeks.

The federal program expired last Saturday and President Bush has urged Congress to renew the federal benefits program when the lawmakers return for their new session. But, lawmakers have not yet worked out a compromise to bring the program back to life. Analysts noted about 95,000 workers exhaust their state benefits each week.

The Labor Department said the unemployment rate for workers with unemployment insurance remained at 2.7 percent. The ratio represents people claiming benefits as a percentage of the workforce potentially eligible for these benefits.

The Labor Department also said 30 states and territories reported an increase in new claims during the week that ended Dec. 21, while 22 states and territories reported a decline.

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