Tag Archives: Unemployment

U.S. jobless claims reach six-month high, spurring labor market worries

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits rose to a six-month high last week, suggesting some loss of momentum in the labor market amid a sharp economic slowdown and major stock market selloff.

Another report on Thursday showed factory activity in the mid-Atlantic region improved in January as shipments rebounded, but still contracted for a fifth straight month. That indicates national manufacturing activity remained in the doldrums at the start of this year.

Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 293,000 for the week ended Jan. 16, the highest reading since early July, the Labor Department said. It was the second straight week of gains and confounded economists’ expectations for a drop to 278,000.

“The picture does not look great. Unemployment claims need to come back down in a hurry to make us sure that the jobs market has not lost its edge,” said Chris Rupkey, chief economist at MUFG Union Bank.

While layoffs appear to have picked up a bit in recent weeks, the increases might not suggest a material weakening in labor market conditions as claims data is difficult to adjust around this time of the year.

Claims have now been below the 300,000 mark, which is associated with strong labor market conditions, for 46 straight weeks. That is the longest streak since the early 1970s.

The jump in claims came against the backdrop of a stock market rout that has seen the S&P 500 index drop 8.4 percent since Dec. 31.

At the same time, data on retail sales, exports, inventories and industrial production have suggested economic growth slowed abruptly at the end of 2015. The economy has been buffeted by the headwinds of a strong dollar, slowing global demand and relentless spending cuts in the energy sector.

An inventory overhang has also left businesses placing fewer new orders with factories, leading to predictions that fourth-quarter gross domestic product increased at an annual rate of less than 1 percent after expanding at a 2 percent pace in the July-September quarter.

Stocks on Wall Street were trading higher on European Central Bank President Mario Draghi’s comments that the ECB could “review and possibly reconsider” its monetary policy stance when it meets in March.

U.S. Treasuries fell marginally, while the dollar firmed to a two-week high against the euro.

OIL PAIN

The increase in jobless claims so far this month has been concentrated in oil-producing states like Texas, Louisiana and Alaska. Outside the energy, mining and manufacturing sectors, which have been devastated by a slump in crude oil prices and the impact of a strong dollar, layoffs have been generally low as the labor market approaches full employment.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 6,500 to 285,000 last week, the highest reading since mid-April.

The claims data covered the survey period for January nonfarm payrolls. The four-week average of claims rose 14,250 between the December and January survey periods. While that suggests a drop in payroll gains from December’s robust 292,000 jobs, employment growth in January is expected to top 200,000.

“Our first threshold of concern on payrolls would be a four-week average above 325,000, which would signal to us a significant pickup in layoff activity,” said John Ryding, chief economist at RDQ Economics in New York. “At this point, therefore, the rise in claims is not a concern to us, but we will be watching these data closely over the next few weeks.”

In a separate report, the Philadelphia Federal Reserve said its general activity index rose to -3.5 this month from a reading of -10.2 in December.

The new orders index remained negative, but increased 10 points to -1.4, while the shipments index increased 12 points, its first positive reading in four months. Factories in the mid-Atlantic region continued to report a drop in inventories, as well as shrinking order books and shorter delivery times.

“Slowing global growth and a strong dollar will continue to weigh on the manufacturing sector, but this report suggests lower odds of another sharp break downwards,” said Jesse Edgerton, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Federal Reserve Expected to Raise Interest Rates Wednesday

The U.S. Federal Reserve is widely expected to vote to raise a key interest rate for the first time in nearly a decade when it meets on Wednesday, according to multiple published reports.

The effects of such a vote could have wide-ranging implications throughout the economy, affecting things like interest on savings accounts, mortgages, auto loans and credit cards.

The rate the Federal Reserve is considering raising is called the effective federal funds rate. It deals with how banks borrow money from one another, thus setting a bar for all other lending.

The rate has been close to nothing since 2008, during the Great Recession. The rate was at 5.26 percent in July 2007, according to the Federal Reserve Bank of St. Louis, but the bank lowered the rate nearly every month through the end of 2008 to help jumpstart a struggling economy.

The rate has not been raised since that. In fact, it hasn’t been raised at all since June 2006, when the Federal Reserve raised it to the 5.26 percent level at which it stood until the recession.

But the economy is in better shape than it was during the recession. The civilian unemployment rate is down to 5 percent, according to the Federal Reserve Bank of St. Louis. In 2009, after the fallout from the financial crisis, it reached 10 percent. That was its highest level in 27 years.

Why is the Federal Reserve even considering raising the rate again? Essentially, the bank needs to find a balance that ensures the economy stays stable and healthy.

The Washington Post reported that if the Federal Reserve waits too long to raise the rate, it could create bubbles in the stock market or rampant inflation, where prices rise at a rate that employee wages aren’t able to match. But if the Federal Reserve hikes the rate too early, it could jeopardize the recovery — especially if people can’t obtain affordable loans for what they need.

A vote to raise the rate is seen as a vote of confidence for the economy. CBS News reported if the Federal Reserve doesn’t act Wednesday, especially because just about everyone on Wall Street is expecting it to, it could lead to a decline in the stock market because it would suggest the bank’s policymakers think the economy couldn’t cope with a rate increase, even one that’s fractional.

And any rate increase is expected to be slight. CNN reported that the Federal Reserve is expected to raise rates slowly, from its current level of about .12 percent to a new level near .25 percent. Any effects on the economy aren’t expected to be felt for several months, according to the report.

Still, some question the timing of the increase and whether the economy is truly as healthy as evidence suggests.

U.S. Unemployment Rate Up, But Consistent with Healthy Labor Market

The Labor Department said that for the week ending November 28th, claims for state unemployment benefits increased 9,000 to a seasonally adjusted 269,000, as reported by Reuters. Claims held below 300,000, for a 39th straight week which is normally associated with a healthy labor market.

Data on Thursday showed planned job cuts in November were the lowest in 14 months, with the purge in the oil sector appearing to be slowing. Factory orders picked up in October after two straight months of declines.

Bloomberg reports that according to figures released Wednesday from the ADP Research Institute in Roseland, New Jersey, there was a 217,000 increase in employment which was the biggest in five months.

According to Bloomberg, employers are keeping those already on their payrolls as the labor market tightens because it is difficult for them to find workers who are skilled and experienced.

Federal Reserve policy makers have been monitoring progress as they consider whether the economy has the strength to handle an increase in interest rates, a decision that will be reached in Federal Reserve meetings December 15th and 16th.

Janet L. Yellen, the Federal Reserve chairwoman has recently stated in multiple media reports that she believes the economy is healthy enough to support the benchmark interest rate increase.

Number of Americans Applying for Unemployment Benefits Rises to Five Week High

There were more Americans applying for unemployment benefits last week.  Applications increased by 16,000 to 276,000 in the week ending October 31st.  

The Labor Department report showed the biggest advance since the end of February.  The four-week average of claims climbed from it’s lowest in four decades.  The total number of claims has not topped 300,000 since March.

Employers have been holding off on letting go of workers and attempting to adjust hiring plans instead in response to overseas economies.  

A jobs report from the labor department for the month of October is due to be released on  Friday and is projected to show job growth that’s a step down from the average so far this year.

According to Bloomberg the number of people continuing to receive jobless benefits increased by 17,000 to 2.16 million in the week ended Oct. 24.

True Unemployment Far Above Government Reports

A report from a Wall Street analyst says that the government’s unemployment numbers are grossly underestimating the percentage of Americans who want work but can’t find it.

David John Marrotta said in a memo obtained by the Washington Examiner hat the true unemployment rate in the U.S. is 37.2%, almost five and a half times the 6.7% rate that has been touted by the Federal Reserve and Treasury Department.

“Unemployment in its truest definition, meaning the portion of people who do not have any job, is 37.2 percent. This number obviously includes some people who are not or never plan to seek employment. But it does describe how many people are not able to, do not want to or cannot find a way to work. Policies that remove the barriers to employment, thus decreasing this number, are obviously beneficial,” Marrotta wrote.

The major factor in the government’s number is that they remove anyone from the index who says they have stopped looking for work because they’ve been frustrated at their inability to find a job.

The memo also said that the Misery Index, which is calculated based on inflation and unemployment, is much higher than government reports.  The official government statistics put the misery index at 7.54 while the true numbers have the number at close to 14.7, higher than during the Ford administration.

U.S. Job Growth Falls Sharply

The U.S. unemployment rate fell to 6.7% but the number off set some darker information regarding job creation and employment levels.

The economy only generated 74,000 jobs in December with a significant number of Americans deciding to give up looking for work.  Those who say they are giving up looking for work are removed from the rolls for unemployment and can cause a drop in the overall number.

The labor force participation rate fell to 62.8% which is close to a 35 year low.

The report showed the leisure, manufacturing and services sectors added jobs but construction fell 16,000, the biggest drop in 20 months.

A economic expert with the BBC says the weakness of the report throws into question other reports that said the American economy was growing.

Germany Sees Surprising Rise In Unemployment

Germany saw a surprise rise in unemployment as the total out of work went up over 25,000. Analysts had been expecting a drop of about 5,000 after August’s rise of over 9,000.

The Federal Labor Office attributed the increase to a drop in the number of government job schemes. The total unemployment rate climbed to 6.9%.

Henrich Alt of the Labor Office said they were changing to longer-term policies designed to train the unemployed for new jobs.

The overall unemployment rate for the Eurozone dropped slightly to 12%. Total unemployment was 19.2 million in August and analysts say there is signs of the total of unemployed stabilizing.

Austria has the lowest unemployment rate at 4.9% while Greece is still highest at 27.9%.

Eurostat reported that compared to a year ago 16 members had climbing unemployment, 11 fell and only Poland stayed stable.

Spain’s Unemployment Rate Falls For First Time In Two Years

Spain’s record unemployment rate finally fell in the second quarter of the year although one in four Spaniards are still without a job.

The unemployment rate of 26.3% is almost a percentage point below the record high of 27.2% The rate fell amid news of an increase in tourism in the second quarter. Tourism accounts for about 10% of the Spanish GDP. Continue reading →