Jobless Claims Remain Elevated

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Jobless Claims Remain Elevated
Washington, D.C., April 20, 2006--The number of people applying for state unemployment benefits fell by 4,000 to 339,000 in the week ending April 14, the Labor Department reported Thursday.
The four-week average of new claims -- which smoothes out distortions caused by one-time events such as holidays and weather -- rose by 5,250 to 328,750. It's the highest in five weeks.
Many economists expected claims to fall after the previous week's sharp increase.
"The failure of the claims figure to revert to trend is a little disturbing, but it is premature to conclude that the underlying pace of layoffs has deteriorated given the strong likelihood of seasonal distortions stemming from the Passover and Easter holidays, as well as the timing of school spring breaks," wrote Omair Sharif, an economist for RBS Greenwich Capital.
Initial jobless claims have swung wildly this winter and spring, driven by seasonal layoffs, severe weather and the timing of holidays.
There were no special factors affecting the data this past week, a Labor Department spokesman said.
The initial claims data coincide with the survey week for the monthly employment report.
After the report, Lehman Bros. economists lowered their forecasts for April payrolls to 150,000 from 175,000.
Initial claims were up 21,000 compared with the survey week in March, when nonfarm payrolls increased by 180,000. The four-week average is up about 5,000 compared with mid-March. 
Meanwhile, the number of people collecting unemployment checks rose by 6,000 to 2.531 million in the week ending April 7, the most in five weeks. The four-week average rose by 9,000 to 2.516 million.
The insured unemployment rate - the portion of all workers covered by unemployment insurance who are collecting benefits - stayed at 1.9%.
Jobless claims can be very volatile in the winter and early spring months. Storms, holidays and the timing of mass layoffs of seasonal workers can play havoc with the seasonally adjusted figures.
Some economists have been watching the recent rise in jobless claims with some concern. However, slower growth has not yet had much impact on unemployment; the jobless rate dropped back to a cyclical low of 4.4% in March.
The claims figures surged in February, and then retreated. Investors should not be lulled into complacency by the February head fake, wrote Tony Crescenzi, chief bond market strategist for Miller Tabak & Co.
"If claims stay high it could well indicate a change in employment conditions that many would miss," Crescenzi said in an email.
Economists say initial claims in the range of about 300,000 to 325,000 are consistent with healthy job growth of about 150,000 per month. Consistent levels over 350,000 would signal some weakening in the labor market.
Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.
Compared with the same time last year, initial claims are up about 8% while continuing claims are up about 3%.
In the week ending April 7, 20 states reported initial claims rose by more than 1,000, with layoffs in manufacturing, services and construction mentioned most frequently.
Long-term unemployment has been stubbornly high during this expansion, despite the decrease in the unemployment rate to 4.4%. In March, about 33% of the 6.7 million officially unemployed people had been out of work longer than 15 weeks, while 18%, or 1.2 million, had been out of work longer than 27 weeks.
Typically, unemployment benefits run out after 26 weeks for those who are eligible. Benefits are available for those who lose their job through no fault of their own. Those who exhaust their unemployment benefits are still counted as unemployed if they are looking for work.