Jobless claims hit 9-year high

With a recession expected this year and uncertainties caused by the terrorist attacks, businesses will be reluctant to hire new workers, experts say.

©Associated Press

© St. Petersburg Times,
published October 5, 2001

WASHINGTON -- Fallout from the terror attacks is rippling through the economy, catapulting new claims for unemployment benefits to a nine-year high.

For the work week ended Sept. 29, new jobless claims soared by a seasonally adjusted 71,000 to 528,000, the Labor Department reported Thursday. That came on top of a 64,000 increase the week before, which many analysts believe represented the first wave of layoffs coming from the Sept. 11 disaster.

Layoffs mounted for workers in travel and tourism last week, and economists believe the jobless picture will get worse in coming months.

"We'll see continued high levels of layoffs for a while," predicted Gary Thayer, chief economist for A.G. Edwards & Sons. "We are headed into a period of economic weakness that is going to be more severe than it's been up to now."

Even before the attacks, the nation's unemployment rate had risen 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.

The government today will release its first monthly employment report since the Sept. 11 attacks. Many economists are expecting the report will show that the jobless rate climbed to 5 percent in September and businesses slashed payrolls by at least 100,000.

Mark Zandi, chief economist at Economy.com, estimated that over the next six months a net 500,000 more jobs are likely to be lost, after taking into account jobs created during the period.

The unemployment rate could rise to 6 percent by year's end.

On Wall Street, blue-chip stocks had a modest retreat. The Dow Jones industrial average closed down 62.90 points at 9,060.88.

The last two sharp increases in jobless claims reflect the toll the attacks in New York and Washington are having on a labor market that was already suffering because of the country's more than yearlong economic slump.

New claims are at the highest point since July 25, 1992.

The four-week moving average, which smoothes out week-to-week fluctuations, rose last week to 453,500, the highest level since Dec. 28, 1991.

In another report, companies announced plans to cut 248,332 jobs in September, a record monthly high, according to outplacement firm Challenger, Gray & Christmas. Of that total, 200,807 layoffs were announced after the attacks.

With new uncertainties raised by the attacks and many economists saying a recession this year is unavoidable, businesses will be reluctant to hire new workers, analysts said.

Manufacturing has been hardest hit by the slowdown and had cut roughly 1-million jobs before the attacks.

In the aftermath, the industrial sector probably will continue to post weak sales and shed workers, analysts said.

The number of people collecting unemployment benefits rose by 133,000 to 3.41-million during the week ended Sept. 22 from 3.27-million in the prior week.

That's the largest number of workers collecting benefits since the week ended Aug. 8, 1992, which probably also reflected the General Motors shutdown that year.

For the work week ended Sept. 22, 39 states and territories reported an increase in new unemployment claims and 14 reported a decrease. The state information lags a week behind the national figures and is not seasonally adjusted.

In Florida, about 15,700 people filed new unemployment claims last week, a jump of nearly 7,600 new claims from the week before and nearly three times the number filed over the same week last year. It was the highest weekly total since 1992.

As part of a plan to jump-start the economy, President Bush wants to accelerate income tax cuts currently set to take effect in 2004 and give tax rebates to millions of lower-income workers who didn't qualify for this summer's rebate checks.

The president also is pushing a 13-week extension of unemployment benefits, which now run out after 26 weeks.

The Federal Reserve has cut interest rates nine times this year -- including a half-point reduction Tuesday -- to help bolster the economy. The moves have brought the federal funds rate to the lowest level since 1962.

In another report, orders to American factories were virtually flat in August, decreasing to $332.6-billion, after dipping by 0.1 percent in July, the Commerce Department said.

-- Information from Bloomberg News was used in this report.

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