Thursday, July 19, 2012

Soaring Unemployment Claims Reflect Dismal Jobs Market

The number of Americans seeking unemployment benefits surged last week, reversing a big drop caused by seasonal factors.

Applications for benefits rose by 34,000 to a seasonally adjusted 386,000, the Labor Department said Thursday. The increase followed a drop of 24,000 the previous week and was the biggest jump since April 2011.

But economists view the recent numbers with skepticism. The government struggles to adjust the data to reflect temporary summertime layoffs in the auto industry, they note. And this year, many automakers skipped those typical shutdowns to keep up with demand. That led to fewer layoffs two weeks ago, which the Labor Department didn't anticipate.

"All of this is statistical noise," Joshua Shapiro, chief U.S. economist at MFR Inc., wrote in a note to clients. "What will be more important than these short-term gyrations is where claims settle down after the distortions end. We suspect that the data will point to a soggy labor market."

The less volatile four-week average fell by 1,500 to 375,500.

When applications fall below 375,000, it typically suggests hiring is strong enough to pull the unemployment rate down. Applications had been trending near or above that level this spring.

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