New claims for unemployment pay drop to lowest since October 2000

U.S. calls total misleading because fewer carmakers shut down for retooling

July 09, 2004|By BLOOMBERG NEWS

WASHINGTON - The number of U.S. workers filing new claims for unemployment benefits dropped to 310,000 last week, the lowest since October 2000. The government said the total was likely skewed too low because fewer auto factories than it predicted shut to retool.

The decline of 39,000 was the biggest since December 2001, the Labor Department said. The four-week moving average of claims, a less volatile indicator, declined to 336,000, the lowest since the week that ended May 22.

Unemployment claims numbers are hard to interpret in July because automakers idle plants to prepare for new models and autoworkers not eligible for vacation pay can apply for unemployment benefits, the department said. Economists said they expect continued job growth after a smaller-than-expected gain of 112,000 jobs in June.

"Every summer, we have the distortion from the auto shutdowns," said Michael Englund, chief economist at Action Economics LLC in Boulder, Colo. "When the dust settles, payrolls will be at 150,000 to 175,000 a month on average, and that's enough to keep the recovery alive." Action Economics had predicted that claims would drop to 310,000.

Statisticians had adjusted the numbers for an expected increase of 76,000 claims because of the shutdowns. The unadjusted number rose by only 33,000 instead, contributing to the large decline in the report, a Labor Department spokesman said.

"This has everything to do with the seasonals and nothing to do with the economy," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y. Claims will probably return to 350,000 once the shutdowns are correctly accounted for, he said.

Economists had expected claims to fall last week to 341,000 from 351,000 initially reported for the previous week.

2.8 million on rolls

The number of people continuing to collect state unemployment benefits fell by 85,000 to 2.872 million in the week that ended June 26, from a revised 2.957 million a week earlier. The statistics are reported with a one-week lag to initial claims.

The four-week moving average for continuing claims rose to 2.918 million from 2.916 million.

The insured unemployment rate, which tends to move with the jobless rate, held at 2.3 percent in the week that ended June 26. Thirty-five states and territories reported a decrease in new claims, while 18 had an increase. The nation's jobless rate has held at 5.6 percent since April, Labor Department data show. In June of last year, it stood at 6.3 percent.

Car producers kept more plants operating and produced about four times the number of vehicles than they did in the corresponding week a year earlier, according to Ward's Automotive.

Automakers scheduling shutdowns last week included Ford Motor Co., which said it would close a Chicago plant to change over production of its Ford 500, Ford Freestyle and Mercury Montego models. The plant has 2,213 workers.

More hiring planned

The U.S. economy has created 1.3 million jobs so far this year, the biggest six-month gain since December 1999-May 2000, and further gains are expected. The National Association of Business Economics said Wednesday that its quarterly survey showed 41 percent of the 104 companies responding said they plan to increase hiring in the next six months, up from 34 percent in April.

U.S. employers announced plans in June to cut 64,343 jobs, a 7.8 percent increase from the year-earlier month, according to a survey compiled by Chicago-based placement firm Challenger, Gray & Christmas Inc.

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