NEW YORK (CNNfn) - New claims for unemployment benefits jumped to the highest level in nine years last week, the government said Thursday, as job cuts from last month's terror attacks hurt the travel and tourism industries.|
Separately, orders to factories were unchanged in August, the government said, suggesting a long recession in manufacturing may have been bottoming out before the Sept. 11 attacks. The Commerce Department said new U.S. factory orders were flat at about $332.6 billion in August after a revised 0.1 percent decline in July. Analysts had forecast a drop of 0.4 percent.
In its report, the Labor Department said new claims for state jobless benefits shot up 71,000 to 528,000 after jumping 64,000 the prior week to the highest level since late July 1992. Economists had expected jobless claims to come in at 466,000, according to a survey by Briefing.com.
"Labor markets are deteriorating quickly in the wake of the terrorist attacks on September 11," said Steven Wood, economist with FinancialOxygen. "The economy was quite weak before the attacks, which have accelerated the pace of layoffs. As layoffs spiral higher, hiring activity has stopped, giving a strong upward push to joblessness."
The big advance in the latest claims figures comes in part from layoffs in the airline, tourism and other travel-related businesses, so-called secondary effects of the Sept. 11 attacks, department spokeswoman Cindy Ambler said, according to Reuters.
The four-week moving average for jobless claims, which smoothes out fluctuations in the weekly data, rose to 453,500, the highest since Dec. 28, 1991.
On Wall Street, stocks managed modest gains in early trading, boosted by strength in technology shares, notably Dell Computer (DELL: up $1.97 to $22.61, Research, Estimates), which reaffirmed its outlook for quarterly profit.
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Since the attacks, more than 100,000 layoffs have been announced, consumer confidence has tumbled and billions of dollars worth of business has been lost. With new uncertainties raised by the attacks and many economists forecasting a recession, businesses will be reluctant to hire new workers in coming months, economists said.
To boost consumer confidence in such an environment, the Federal Reserve has cut its target for short-term interest rates nine times this year and twice since the attacks, taking rates to levels not seen since 1962.
The unemployment rate shot up to 4.9 percent in August from 4.5 percent, the biggest one-month jump in more than six years as businesses eliminated 113,000 jobs. It is expected to rise further when the government releases its jobs report Friday, the first monthly data since the attacks. Many economists are expecting the report will show that the jobless rate climbed to 5 percent in September as businesses slashed payrolls by 100,000.
But those forecasts probably underestimate the damage stemming from the attacks, analysts say, adding that the job market will get worse in coming months as the full impact of the attacks, along with the weakening U.S. economy, show up in labor statistics.
"A further deterioration in the labor market is inevitable," said Merrill Lynch chief economist Bruce Steinberg.
Continuing claims for workers who have received at least a week of benefits rose to 3.41 million for the week ending Sept. 22, the latest data available, from a revised 3.28 million the previous week.
On Thursday, President Bush is expected to propose extending the 26-week period for unemployment benefits by an additional 13 weeks, and will call for block grants to states to provide health care coverage and job training to out-of-work residents.
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Before the attacks, U.S. manufacturing, which had suffered most from a prolonged slowdown in the economy, began to show signs of a recovery, and Thursday's data reinforced that idea.
Orders for machinery rose 2.3 percent to a seasonally adjusted $24.16 billion. Orders for computers and electronic products also posted a gain, of 1.7 percent to $32.46 billion. New orders apart from transportation equipment rose 0.2 percent and excluding defense, orders were also up 0.2 percent.
Factories have suffered from major inventory problems this year as a sharp slowdown in the U.S. economy left firms scrambling to pare abundant inventories that were built up on the belief that the good times would continue.
The inventory-to-shipments ratio – which measures how long it would take to fully deplete stocks at the current pace of business – was unchanged from July at 1.38 months.
-- from staff and wire reports