Initial Jobless Claims Rise to 4-month High

By Katherine Hobson

Bloomberg Business News

WASHINGTON _ The number of Americans filing initial jobless claims rose to a four-month high, while the moving average for claims climbed to the highest level in more than 2 years.

"It may signal that slowdown is greater than we assume," said Mike Englund, chief economist for MMS International in Belmont, California.

New claims for state unemployment insurance rose by 9,000 to a seasonally adjusted 389,000, the highest since Jan. 29, when post-holiday layoffs pushed the total to 401,000. In the previous week, new claims increased by 13,000 to 380,000.

Meanwhile, the four-week average for claims, a less volatile gauge of employment conditions, rose to 376,000 from 371,500 the previous week _ the highest since Oct. 17, 1992, when the average stood at 379,250.

Before Friday's U.S. Labor Department's report, economists anticipated a decrease of 4,000 first-time jobless claims to 376,000, according to a survey by Bloomberg Business News.

"Initial claims are definitely moving higher, indicating a slowing labor market," said Dana Saporta, an economist with Stone

McCarthy Research Associates in Princeton, New Jersey.

Weekly jobless claims hovered in the 325,000 range late last year and gradually increased this year as the economic expansion moderated. The economy grew at a 2.7 percent annual rate during the first quarter, following the scorching 5.1 percent annualized pace clocked in the final quarter of last year.

The Federal Reserve raised the overnight bank lending rate seven times since Feb. 4, 1994, in an attempt to slow the economy enough to remove the threat of inflation.

The resulting deceleration of growth is filtering through to the job market, which generally lags the overall economy.

"Labor market measures have begun to reflect the weakness in output," said Lewis Alexander, chief economist with the Commerce Department.

Claims in the current range suggest monthly non-farm payroll growth of about 150,000 to 175,000, analysts said. That's consistent with sustainable, non-inflationary economic growth, and the much-vaunted "soft landing" scenario, said Englund, the MMS chief economist.

Still, a decline of three-quarters of a percentage point in long-term interest rates since May 1 should rejuvenate sluggish housing markets. And that may translate into a resurgence of growth in the second half, analysts said. That view was reinforced by Wednesday's revised first-quarter report on the gross domestic product, which showed that the buildup of unsold goods by businesses and farms wasn't as large as it first appeared.

"Slower growth, particularly in the current quarter, does not mean that the current expansion is in danger," said Everett Ehrlich, undersecretary of economic affairs at the Commerce Department. The Clinton administration is sticking by its prediction of 2.5 percent growth for all of 1995, Ehrlich said.

Today, the Labor Department will release the employment report for May, which analysts expect will show the economy added about 166,000 jobs during the month. In addition, analysts expect the Labor Department to revise upward its April employment figures to show job growth of about 100,000, not the 9,000 loss originally reported.

Labor Department officials acknowledged this week that they mistakenly excluded 17,000 striking grocery workers in California from April's job total. Analysts said the goof, combined with BLS's annual revisions, will cause upward revisions to the employment figures.

Meanwhile, analysts said the unemployment rate likely fell to 5.7 percent in May from 5.8 percent in April. Unemployment surged last month from March's 5.5 percent rate as manufacturers and construction companies laid off more workers than they hired, the government reported.

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 26 states or territories reported increased claims in the week ended May 20 while 27 reported decreases.

In addition, the Labor Department reported that in the week ended May 20, the total number of people on the unemployment rolls rose by 83,000 to 2.618 million, while the insured unemployment rate rose to 2.4 percent from 2.3 percent in the previous week. 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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