Economic Report
May 5, 2011, 10:41 a.m. EDT
Claims climb to 474,000, the highest level since August
By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) — Weekly applications for unemployment compensation jumped to their highest level since August, largely because of special factors, but a recent upward trend suggests more slack in the U.S. labor market.

The number of people who filed initial requests for jobless benefits surged by 43,000 to a seasonally adjusted 474,000 in the week ended April 30, the Labor Department reported.

Economists surveyed by MarketWatch had expected claims to decline to 412,000. Claims in the prior week were revised up slightly to 431,000.

Jobs data weaker than forecast

A Labor Department official attributed much of the increase to temporary layoffs in the auto sector and in the state of New York, where workers in the educational field, such as bus drivers, are eligible for compensation during the week of spring break. He said seasonal adjustments did not take those factors into account last week.

Yet some economists cast doubt on the idea that special factors have accounted for the bulk of the increase in jobless claims since they touched a three-year low of 375,000 in mid-February. Other employment-related data have also shown recent weakening.

“They’ve had an excuse for every single number,” said Stephen Ricchiuto, chief economist of Mizuho Securities. “What the data is telling you is that there is more stress in the labor market than people think.”

John Ryding of RDQ Economics said claims should fall in the near future if the special factors cited by the Labor Department account for most of the recent increase.

“If initial claims don’t fall, then the Labor Department’s explanations for the rise in claims will look questionable,” he said.

Applications for unemployment benefits have topped the key 400,000 level in each of the past four weeks. Requests for jobless benefits usually fall well below 400,000 during a phase of strong economic growth.

The average of new claims over the past four weeks, meanwhile, rose by 22,250 to 431,250, the highest level since November. The four-week average is considered a more accurate gauge of employment trends because it lessens week-to-week volatility in the data.

Higher applications for benefits dovetail with other data showing that the U.S. labor market is not mending as fast it was a few months ago. Earlier this week, the payroll-handling firm ADP and TrimTabs Investment Research issued reports showing that the U.S. added fewer jobs in April than in March.

What’s more, the U.S. government’s official employment report for April is expected to show slower job growth when the data are released Friday. Economists surveyed by MarketWatch forecast net hiring of 175,000 in April, down from 216,000 in March.

Ricchiuto suggested that large layoffs in government, a sector that rarely shrinks, might explain why the economy is not adding jobs as fast as most economists have been expecting.

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