Unemployment Applications Hit 8-Month High

The number of people applying for unemployment benefits surged last week to the highest level in eight months, a troubling sign a day ahead of the government's report on April employment.

The Labor Department said Thursday that applications rose by 43,000 to a seasonally adjusted 474,000 last week. But that was largely the result of unusual factors, including a high number of school systems in New York that closed for spring break, the department said.

Still, it marked the third increase in four weeks. Applications have jumped 89,000, or 23 percent, in the past month. The four-week average, a less volatile measure, rose for the fourth straight week to 431,250.

"The trend is clearly upward, so that's disconcerting," said Kurt Karl, chief U.S. economist for Swiss Re. "When you get three or four weeks in a row of special factors, they're no longer so special."

Rising unemployment applications and other weak economic data this week have prompted some analysts to worry that higher fuel prices may be causing employers to slow their pace of hiring.

Applications near 375,000 are typically consistent with sustainable job growth. Weekly applications peaked during the recession at 659,000.

Separately, the Labor Department said U.S. companies squeezed more work out of their staffs in the first three months of the year. But the overall gain in productivity was much slower than in the previous three months.

A slowdown in productivity growth is bad for the economy if it persists for a long period. But it can be good in the short term when unemployment is high because it signals companies must hire more workers in order to make further gains.

Still, rising unemployment applications and other weak economic data this week have prompted some analysts to worry that higher fuel prices may be causing employers to slow their pace of hiring.

The government is scheduled to release its April jobs report on Friday. Economists are projecting the economy likely added 185,000 jobs in April and the unemployment rate was unchanged at 8.8 percent. But some now say the number of jobs added could be lower and that May hiring could slow, too.

A Labor Department spokesman blamed much of last week's rise in unemployment applications on the unexpected spike caused by New York schools. That resulted in 25,000 layoffs. The department didn't anticipate the closures when making seasonal adjustments, the spokesman said. The employees affected were hourly workers, such as bus drivers and cafeteria workers, and not teachers.


One economists was skeptical that school recesses, presumably that have been on the calendar all year, would be difficult to adjust for.

"Whatever school holidays may have occurred in New York were most likely associated with the Easter and Passover holidays, which should not have come as a surprise to those who calculated the seasonal adjustment factors for this year," said Joshua Shapiro, chief U.S. economist at MFR Inc.

Other factors also contributed to the increase, the Labor spokesman said. Oregon launched its own extended unemployment benefit program, which caused an increase in overall applications in the state for unemployment benefits.

And auto-related layoffs rose, Some companies have shut down or slowed production because of parts shortages stemming from the earthquake in Japan. Those disruptions are mostly affecting Japanese automakers with plants in the North America. Honda Motor Corp. has slowed production at 10 of its U.S. and Canadian plants. Toyota has cut its U.S. production by two-thirds. Both have said they aren't laying off workers. But the slowdowns also affect auto-supply companies.

Still, applications have risen sharply in recent weeks, raising concerns that high gas and food prices are cutting into consumer spending and slowing the economy. Businesses are also facing higher costs for raw materials, which reduce profit margins. They may be cutting back on hiring as a cost-saving measure.

The national average for gas was $3.99 a gallon on Thursday, according to the AAA Daily Fuel Gauge. That is 30 cents higher than a month earlier.

Other recent data have also pointed to a weaker job market. A private trade group said Wednesday that a measure of employment growth in the service sector, which employs 90 percent of the work force, slowed for the second straight month. The report, by the Institute for Supply Management, still showed that employment rose, but at the slowest pace in 7 months.

The number of people continuing to receive benefits rose 74,000 to 3.7 million. Millions more unemployed are receiving aid from extended benefit programs put in place during the recession. All told, more than 8 million people received unemployment benefits for the week ending April 16, the most recent data available. That was 170,000 fewer than the previous week.

This program aired on May 5, 2011. The audio for this program is not available.


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