New jobless claims unexpectedly plunge to 601K

AP Economics Writer

WASHINGTON (AP) — New applications for jobless benefits plunged
to the lowest level in 14 weeks, a possible sign that the massive wave
of layoffs has peaked. Still, the number of unemployed workers getting
benefits climbed to a new record.

The Labor Department reported
Thursday that the number newly laid off workers applying for benefits
dropped to 601,000 last week. That was far better than the rise to
635,000 claims that economists expected.

But the total number of people receiving jobless benefits climbed to 6.35 million, a 14th straight record.

four-week moving average of initial jobless claims, which smooths out
volatility, totaled 623,500 last week, a decrease of more than 30,000
from the high in early April. Goldman Sachs economists have said a
decline of 30,000 to 40,000 in the four-week average is needed to
signal a peak.

In a separate report, the government said that
productivity, the key ingredient to rising living standards, grew at a
0.8 percent annual rate in the January-March quarter, slightly better
than the 0.6 percent increase that economists had expected. Wage
pressures, as measured by unit labor costs, increased at a 3.3 percent
rate, down from a 5.7 percent spike in the fourth quarter.

wage pressures outpacing productivity normally would raise alarm bells
about inflation, the threat of any price spikes is seen as remote.
Regulators and economists are not worried about inflation since many
workers are more concerned about keeping their jobs in the recession
than demanding higher wages.

Even with the big drop in new
applications for jobless benefits last week, the claims remained at
elevated levels. By comparison, weekly jobless claims totaled 372,00 a
year ago.

But since peaking at 674,000 in late March, claims have
been trending lower, raising hopes that the huge wave of layoffs that
have rocked the country could be easing a bit.

Even if the recent
declines signal that layoffs have peaked, economists do not expect them
to return to pre-recession levels anytime soon. They expect the jobless
rate will keep rising through the rest of this year even if their
forecasts for an end to the recession in the second half of 2009 are

The government is scheduled to release unemployment
data for April on Friday. Analysts expect the jobless rate will climb
to 8.9 percent from the current 25-year high of 8.5 percent. Many
analysts expect the jobless rate will hit 10 percent by the end of this

The rise in continuing claims to 6.35 million was
registered for the week ending April 25, the latest data available.
That was up from 6.30 million in the previous week and marked the
highest tally on records dating to 1967.

The high level of continuing claims is a sign that many laid-off workers are having difficulty finding work.

than 5 million jobs have vanished in the recession, and Federal Reserve
Chairman Ben Bernanke on Tuesday predicted “further sizable job losses”
in the coming months.

Among the states, Michigan saw the largest
increase in claims with 9,998 more for the week ending April 25, which
it attributed to more layoffs in the automobile industry, according to
the Labor Department. The next largest increases were in Massachusetts,
Kentucky, North Carolina and New York.

California saw the largest
drop in claims with 10,833, which it said was due to fewer layoffs in
the construction and service industries. The next biggest declines were
in Georgia, South Carolina, Wisconsin and New Jersey.

companies recently announced job cuts. General Motors Corp. laid out a
restructuring plan that includes cutting 21,000 U.S. factory jobs by
next year. Microsoft Corp. said it was starting thousands of the 5,000
job cuts it announced in earlier this year and left the door open to
even more layoffs. Chip maker Atmel Corp. last week said it would lay
off 300 people, or 5 percent of its work force.

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