- The Washington Times - Friday, July 17, 2009

The number of newly laid-off Americans signing up for unemployment benefits last week, and those using this safety net over a longer period, both plunged. But the government figures released Thursday were clouded by difficulties adjusting for temporary shutdowns at auto plants.

Even if the recession ends this year as the Federal Reserve and many private economists expect, companies are expected to keep trimming payrolls. The unemployment rate will climb because companies won’t be in any mood to hire until they feel certain a recovery is firmly rooted.

The Labor Department said new applications for unemployment insurance dropped by a seasonally adjusted 47,000 to 522,000, the lowest level since early January. Economists polled by Thomson Reuters expected claims to rise to about 575,000.

A department analyst said the drop in new claims didn’t point to improvements in economic conditions. The second straight weekly decline reflected problems adjusting layoffs for temporary shutdowns at General Motors and Chrysler plants to retool for new models.

The unadjusted figures for last week actually showed that new claims rose by 86,389 last week, which would push the total to 667,534.

The department’s seasonal adjustment process expected a large increase in claims from auto workers and some other manufacturers, the analyst said. Because that didn’t happen, seasonally adjusted claims fell.

“Seasonal adjustment problems are wreaking havoc with the layoffs data” and will continue to for another few weeks, said Richard Yamarone, economist at Argus Research Corp.

Initial claims staying well below 600,000 in August would indicate some fundamental improvement in a still-weak jobs market. “That would be a clear sign that layoffs are slowing down,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

But more job losses are in the pipeline.

Harley-Davidson Inc. said Thursday it is cutting 1,000 more employees due to weaker motorcycle sales and McGraw-Hill Cos. said it has cut 550 jobs. Earlier this week, US Airways announced that it will cut 600 jobs this fall as it continues to struggle with the slow economy.

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