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Weekly jobless claims explode

The first wave of displaced workers stemming from the Sept. 11 terrorist attacks hits the unemployment offices.

©Associated Press

© St. Petersburg Times,
published September 28, 2001

WASHINGTON -- New claims for unemployment benefits rocketed to a nine-year high last week as the terror attacks started showing up in national economic statistics.

The claims are certain to go higher yet, analysts say, as the effects of layoffs and lost business spread.

In Washington, the Labor Department reported that for the work week ended Sept. 22, new jobless claims jumped by a seasonally adjusted 58,000, to 450,000, the highest level since July 25, 1992.

Economists believe the increase shows only the first wave of layoffs stemming from the Sept. 11 attacks against the World Trade Center and the Pentagon. For the work week ended Sept. 15, claims actually fell because stunned workers, trying to get their bearings, didn't get around to filing for jobless benefits, analysts said.

"We will soon see the second wave of layoffs coming from the severely impacted travel and tourism industries," said Lynn Reaser, chief economist for Banc of America Capital Management Inc.

Since the attacks, more than 100,000 layoffs have been announced in the airlines and related industries. Stan Shipley, economist at Merrill Lynch, predicted that jobless claims will soar to more than 500,000 in the next few months.

The four-week moving average of jobless claims, which smoothes out week-to-week fluctuations, rose last week by 11,750, to 422,000.

Investors generally disregarded the day's economic reports, which they found either unsurprising or virtually meaningless after the attacks against the United States. Instead, they mostly expressed confusion about what the United States might do with its military, about what might be done to the country and about how it all would play out in dollars and cents.

After being solidly down until mid-afternoon, the Dow Jones Industrial average turned around and rose 114.03 points, or 1.33 percent, to close at 8,681.42. Still, analysts had doubts that the blue-chip rally reflected any broad turnabout in the stock market.

"There's not going to be any instant gratification," said David Henwood, chief investment officer for Raymond James & Associates. "There's really nothing to sustain it."

The broader Standard & Poor's 500-stock index gained 11.57 points, or 1.15 percent, to 1,018.61.

The Nasdaq Composite Index slipped 3.33 points, or 0.23 percent, to 1,460.71, although it recovered from steeper losses. Separately, the Nasdaq Stock Market temporarily suspended certain trading requirements to help companies remain listed on the exchange. The move exempts companies from meeting minimum share price and public float requirements to stay listed on the exchange. Float refers to the number of outstanding shares available for trading by the public.

"It gives those companies that were on the cusp of delisting a chance to weather the uncertain times a little more," said Nasdaq spokesman Michael DeMeo. The Nasdaq does not release the number of companies that face delisting, he said.

With new uncertainties raised by the attacks and growing prospects the U.S. economy could fall into recession, businesses will be reluctant to hire new workers in the months ahead, economists said.

The nation's unemployment rate shot up to 4.9 percent in August from 4.5 percent, the biggest one-month jump in more than six years. Economists predict the jobless rate will climb to 6 percent by year's end.

"Continued deterioration in the labor market is very likely over the next few months," said Ken Goldstein, an economist with the Conference Board, a private research group.

With consumer confidence being dealt a blow by the attacks, people may feel less inclined to spend on big-ticket items, economists said. That would add to the woes of manufacturers, which have been hardest hit by the more than yearlong economic slowdown, and is likely to slow home sales, one of the economy's few bright spots.

New orders to American factories for big-ticket manufactured goods edged down in August by just 0.3 percent, after even bigger drops of 2.5 percent and 1.1 percent in June and July, respectively, the Commerce Department said.

Jerry Jasinowski, president of the National Association of Manufacturers, said the report "hints that a turnaround may have been forming before the attacks. . . . But the terrorist attacks are likely to soften consumer confidence in the short term, postponing a recovery in manufacturing until early 2002."

Another government report Thursday showed new-home sales rose by 0.6 percent in August to a seasonally adjusted annual rate of 898,000. Gains in the West and South offset losses in the Northeast and Midwest. In July, new-homes sales grew by a revised 0.8 percent in July, much weaker than the 4.9 percent advance previously estimated.

"In the weekend after the attacks, buyer traffic was down roughly 10 to 20 percent, depending on the company," said David Seiders, chief economist for the National Association of Home Builders. "We attributed that to the CNN effect: People were glued to their TVs."

The National Association of Realtors lowered its forecast for new home sales since the attacks. Sales will probably total a record 898,000 homes this year, compared with an earlier sales forecast of 912,000. A record 886,000 new homes were sold in 1998.

In another report, the Conference Board said Thursday that newspaper want ads, a key barometer of the job market and the economy, sunk to an 18-year low in August, even before the attacks.

-- Information from Bloomberg News and the New York Times files was used in this report.

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