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Jobless benefits requests sink

By Staff | Jul 15, 2011

WASHINGTON – New applications for unemployment benefits fell last week to the lowest level in three months, suggesting fewer layoffs in early July than usual, according to government data.

Initial claims for state benefits dropped 22,000 to a seasonally adjusted 405,000 in the week ended July 9, the Labor Department said Thursday. That’s the smallest amount of new applications since mid-April.

Economists surveyed by MarketWatch has expected new requests for jobless benefits to total 420,000. Claims in the prior week were revised up to 427,000 from an original reading of 418,000.

The average of new claims over the past four weeks, meanwhile, dropped a much-smaller 3,750 to 423,250. The four-week average is seen as a more accurate a barometer of labor trends because it smooths out week-to-week volatility in the data.

The decline in last week’s claims would have been even steeper if not for a government shutdown in Minnesota triggered by a budget standoff. Minnesota said 11,500 state workers filed applications for jobless benefits last week.

In most years, jobless claims tend to rise in July as many manufacturers shutter plants to retool them for new products, such as the latest auto models. Yet a Labor official said claims did not increase as much as they usually do.

Many economists contend that auto manufacturers closed their plants earlier in the summer because of parts shortages that developed after the Japanese earthquake in March. If that’s the case, it would help explain a higher number of claims in June and a declining amount so far in July.

Still, jobless claims have hovered above 400,000 mark since hitting a three-year low of 375,000 in late February. When the U.S. economy creates lots of new jobs, new applications for unemployment benefits usually drop well below 400,000 for a prolonged period.

The higher number of people seeking unemployment benefits over the past few months has mirrored a slowdown in hiring. The U.S. government reported last week that companies hired a meager 18,000 workers in June, following a 25,000 gain in May. The unemployment rate rose to 9.2 percent.

The disappointing jobs report sparked fresh worries about a fragile U.S. economy and even the possibility of another recession. Yet many economists continue to believe job creation will improve gradually through the rest of 2011.

The drop in claims over the first two weeks of July appears to offer evidence, but economists say more positive data is needed. Michael Gapen of Barclays Capital said he’s “hesitant to read too much into the decline in initial claims given the uncertainty from the Minnesota state government shutdown and the timing of auto plant retooling.”

Also Thursday, the Labor Department said the number of Americans who continue to receive state unemployment checks increased by 15,000, to 3.73 million in the week ended July 2. Continuing claims are reported with a one-week lag.

In addition, 3.83 million people received extended federal benefits in the week ended June 25, down about 15,000 from the prior week. The U.S. government offers extended relief to most workers who have used up state benefits, which usually last six months.

Altogether, 7.48 million people received some kind of state or federal benefit in the week of June 25, up about 25,000 from the prior week. Total claims are reported with a two-week lag.

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