WASHINGTON — Even though new claims for jobless benefits fell more than expected last week, dipping below 600,000 for the first time since early January, the number of Americans seeking this safety net points to an economy that is still very weak.
Layoffs are slowing, but jobs are scarce, leaving nearly seven million Americans collecting unemployment checks and retailers looking for customers.
The number of newly laid-off workers requesting unemployment insurance fell by 52,000 to a seasonally-adjusted 565,000, the U.S. Labour Department said Thursday. But the drop was mostly due to a shift in the timing of auto-related layoffs, leading many economists to discount the decline.
Weekly claims remain far above the 300,000-350,000 range that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007. The lowest level this year was 488,000 for the week ended Jan. 3.
The figure Thursday indicates that “very steep job losses” likely will continue and that the unemployment rate will keep rising, said Zach Pandl, an economist at Nomura Securities International.
Claims may not drop to 350,000 until the middle of next year, he said.
Employers cut 467,000 jobs in June, more than analysts expected, while the unemployment rate rose to 9.5 per cent, the highest in 25 years. The lack of jobs is limiting consumer spending, which will weaken or even delay any economic recovery.
Meanwhile, the number of people on the jobless benefit rolls jumped 159,000 to 6.88 million, the Labour Department said. That’s the highest tally on records dating from 1967. Continuing claims had fallen in two of the previous three weeks. The data lag initial claims by a week.
Economists said the increase showed employers remain hesitant to add new workers, despite some recent signs the economy is stabilizing.
“The problem is, no one is hiring,” said Mark Vitner, senior economist at Wells Fargo Securities.
That will likely keep driving up the unemployment rate even as layoffs slow, he said. Wells Fargo projects the rate will peak at 10.5 per cent next year.
Continuing claims need to drop by at least 500,000 before the jobless rate will improve, Vitner said.