Jobless Claims Rise Slightly Last Week

Washington, DC, February 9, 2007--The number of newly laid off workers filing for unemployment benefits edged up slightly last week but was at a level that signaled a solid labor market.

The Labor Department reported Thursday that 311,000 newly jobless workers applied for benefits last week, 3,000 more than the previous week.

That was in line with expectations as economists believe the labor market is holding up well. Even in the face of a six-month slowdown last year, layoffs did not increase in most industries although the troubled housing and auto sectors have suffered job losses.

In other economic news, many retailers reported better-than-expected sales in January because shoppers redeemed gift cards to buy winter and spring merchandise. The arrival of frigid weather in much of the country after an unusually mild December helped clear out the winter clothing.

The retail winners included Limited Brands Inc., Nordstrom Inc. and Federated Department Stores Inc. The world's largest retailer, Wal-Mart Stores Inc., also beat Wall Street estimates although its monthly increase was modest.

Economists said the small increase in unemployment claims last week supported their view that the volatility over the past month mainly reflected trouble the government has in adjusting the figures for normal seasonal variations at this time of year.

"Despite January's swings, the underlying pace of layoffs remains little changed," said Omair Sharif, an analyst at RBS Greenwich Capital.

The unemployment rate did creep up in January, from 4.5 percent to 4.6 percent. Analysts are forecasting further increases in the months ahead, looking for the jobless rate to hit 4.9 percent by the middle of this year. The 4.6 percent figure is low by historical standards.

A small rise in the jobless rate is what the Federal Reserve is expecting as a result of its two-year campaign to raise interest rates enough to slow the economy and reduce inflation. So far, the Fed appears to be achieving its goal of a soft landing in which growth slows enough to dampen inflation but not so much that it risks triggering a recession.

The 311,000 new jobless claims filed last week were the highest volume of applications since 327,000 unemployed workers went to claims office two weeks ago. Claims have been unusually volatile so far this year, in large part because the government has trouble seasonally adjusting the numbers at this time of year.

Two weeks ago, the seasonally adjusted claims number had plunged by 19,000 following a 40,000 surge the previous week.

For the week ending Jan. 27, 31 states and territories reported declines in claims while 22 had an increase.

The largest increase was in California, a rise of 5,514 which was attributed to higher layoffs in the construction and service industries, followed by Texas, up 3,022, and New Jersey, up 1,451.

The biggest decline in claims occurred in Michigan, a drop of 6,822, followed by Kentucky, a decline of 3,288 which was attributed to fewer layoffs in the auto industry, and Washington state, where claims fell by 2,009.

The individual state numbers are not adjusted for seasonal variations.