New Jobless Claims Fall; Average at 31-month High

Bloomberg Business News

WASHINGTON _ The number of Americans filing initial jobless claims fell last week as government offices closed for Memorial Day, though the average for claims remained at a more than two-and-a-half year high, government figures showed Thursday.

"It's not clear that the upward trend has ended," said Dana Saporta, an economist with Stone McCarthy Research Associates in Princeton, New Jersey.

New claims for state unemployment insurance fell by 7,000 to a seasonally adjusted 372,000. In the previous week, new claims decreased by 1,000 to 379,000, originally reported as a 9,000 gain.

States had less time to compile their reports due to the shortened holiday work week, which often leads to large revisions, the Labor Department said. Even with the revision, however, the four-week average for claims, a less volatile gauge of employment conditions, rose to 374,500 from 373,500 the previous week _ the highest since Oct. 17, 1992, when the average stood at 379,250.

Before Thursday's Labor Department report, economists anticipated a decrease of 2,000 first-time jobless claims to 387,000, according to a survey by Bloomberg Business News.

Both the weekly jobless claims and monthly employment reports suggest the Federal Reserve's seven interest-rate increases since February 1994 have had their intended effect of slowing the economy.

Weekly claims, which hovered in the 325,000 range late last year, have risen steadily this year. The sharp increase in the past few weeks surprised many analysts, who expected a more gradual increase in claims.

"The disturbing thing is there's nothing to show they're slowing down," said Saporta.

Meanwhile, a separate government report released last week showed the economy shed 101,000 jobs during May, the biggest decline since April 1991, although the unemployment rate fell to 5.7 percent from 5.8 percent the previous month.

The monthly employment report showed "pretty dramatic weakness," said Carl Steen, an economist with Maria Fiorini Ramirez in New York. Still, "no one is calling for a recession.

"As long as the unemployment rate stays below 6 percent, we won't go much above 400,000" new weekly claims, said Steen.

Others were less optimistic. "The current levels of initial claims and the slowing in nonfarm payroll" growth "sends out warnings about a recession, but it shows a soft landing is possible," said Saporta.

While weekly jobless claims reports track how many people are filing first-time unemployment claims at state offices, the more comprehensive monthly employment report surveys households and businesses to gauge job creation as well as unemployment.

Separately in Thursday's report, the Labor Department said 27 states or territories reported increased claims in the week ended May 27 while 26 reported decreases.

The department also said that in the week ended May 27, the total number of people on the unemployment rolls rose by 3,000 to 2.592 million, while the insured unemployment rate was unchanged at 2.4 percent. These figures, like state details, are reported with a two-week lag.

The insured unemployment rate measures the number of people collecting unemployment benefits divided by the number of employed workers covered by the program.

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