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US jobless claims drop, but clouded by auto shutdowns

(Agencies)
Updated: 2009-07-16 21:34

WASHINGTON -- 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.

Job seekers are seen 6th Annual Grand Slam Career Fair held at Citizens Bank Park in Philadelphia, Wednesday, July 15, 2009. [Agencies]

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 around 575,000.

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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 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. Since that didn't happen, seasonally-adjusted claims fell.

Those adjustment difficulties also were behind a big drop reported for people continuing to draw unemployment benefits, the analyst said.

The number of people still collecting benefits fell by a seasonally adjusted 642,000 to 6.27 million, the lowest level since mid-April.

The unadjusted figures for continued claims showed an increase of 63,714.

The layoffs picture is expected to be muddied by the auto shutdowns in the weeks ahead, the department analyst said.

The shutdowns typically occur in the summer, but took place over the last two months as GM and Chrysler LLC sought bankruptcy protection and implemented sweeping restructuring plans. That means the government data is more volatile than usual, making it harder to draw firm conclusions from the report about the direction of the economy and the pace of future layoffs.

The Fed, in a new forecast issued Wednesday, predicted the jobless rate would top 10 percent this year. It rose to 9.5 percent, a 26-year high, in June.

The recession, which started in December 2007 and is the longest since World War II, has snatched a net total of 6.5 million jobs.

Earlier this week, US Airways announced that it will cut 600 jobs this fall as it continues to struggle with the slow economy. Gannett Co. recently said it planned to eliminate 1,400 positions and credit card issuer Advanta Corp. says it's laying off half its work force.