Jobless benefit rolls drop sharply to nearly 6.7M

[June 18, 2009]  WASHINGTON (AP) -- The total number of people on the unemployment insurance rolls dropped for the first time since early January, the government said Thursday, while new claims for benefits rose slightly.

The report shows that job losses are easing after companies made deep cuts earlier this year. But nearly half of recipients at the end of last month had exhausted the 26 weeks of benefits provided under the regular state program without finding work, according to Labor Department data. That's a record and compared with about 36 percent in December 2007, when the recession began.

"It is unlikely that new hiring has picked up in any meaningful fashion," Joshua Shapiro, chief economist with MFR Inc., a consulting firm, wrote in a note to clients.

The department said the total unemployment insurance rolls fell by 148,000 to 6.69 million in the week ending June 6, the largest drop in more than seven years.

The drop also breaks a string of 21 straight increases in continuing claims, the last 19 of which were records. A dip in continuing claims several weeks ago was later revised higher. Initial claims rose by 3,000 to a seasonally adjusted 608,000 in the week ending June 13, above analysts' expectations. The four-week average, which smooths fluctuations, fell by 7,000 to 615,750. Continuing claims data lags initial claims by one week.

The four-week average is at its lowest level since mid-February, further evidence that the pace of job cuts is slowing.

In another encouraging sign, the Conference Board on Tuesday said its index of leading economic indicators rose for the second consecutive month in May after seven straight declines. The index rose 1.2 percent last month and by the same in amount in the six-month period ending in May, the first time that measure has grown since April 2007.

Conference Board economist Ken Goldstein said if those trends continue, a "slow recovery" should start before the end of the year, but he cautioned that the job market will take longer to rebound.

The drop in continuing jobless claims likely reflects the decline in first-time claims, meaning that fewer people are joining the rolls.

"Continuing claims ... ought to be falling now given that initial claims peaked more than two months ago," Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a note to clients.

The drop could also signal a slowing in the rise of the unemployment rate, economists said, which reached a 25-year high of 9.4 percent in May. Many economists forecast the rate could reach 10 percent by the end of the year.

The financial markets were mixed in afternoon trading. The Dow Jones industrial average added about 70 points and the Standard & Poor's 500 index 500 index also edged up, while the tech-heavy Nasdaq composite index slipped.

Still, millions of Americans are receiving unemployment compensation under an emergency federal program authorized by Congress last summer and extended by the Obama administration's stimulus package.

About 2.4 million people received benefits under that program in the week ending May 30, an increase of more than 102,000 from the previous week. That's in addition to the 6.7 million people receiving benefits under the 26-week program typically provided by states.

Economists are closely watching the level of first-time claims for signs the economy will recover by mid-summer, as many analysts predict.

"If the labor market is indeed stabilizing, we should see a marked decline in new unemployment filings in the weeks ahead," economists at Wrightson ICAP wrote in a note to clients this week.

The four-week average of claims has dropped by about 40,000 from nearly 659,000 in early April, its peak for the current recession.

But many economists want to see it fall further. Bruce Kasman, chief economist at JPMorgan Chase & Co., said Tuesday that a drop in the four-week average to 580,000 by next month would be sufficient to declare the recession over.

Kasman is chairman of the American Bankers Association's economic advisory committee, a group of economists for large banks that this week predicted the economy will recover in the third quarter. The Federal Reserve also expects the economy to begin growing again this year.

First-time jobless claims are a measure of the pace of layoffs and are seen as a timely, if volatile, indicator of the economy's health. Initial claims stood at 390,000 a year ago.

Troubles in the automotive sector could cause unexpected fluctuations in the claims. General Motors Corp. filed for bankruptcy protection June 1, joining Chrysler LLC, which filed April 30.

Consumers and businesses have cut back on spending in response to the bursting of the housing bubble and the financial crisis, sending the economy into the longest recession since World War II. Companies have cut a net total of 6 million jobs since the downturn began in December 2007, in an effort to reduce costs.

Still, job cuts are slowing. The Labor Department said employers eliminated 345,000 positions in May, about half the monthly average of jobs lost in the first quarter.

More job cuts have been announced in the past week. MySpace, the social networking Web site owned by News Corp., said Tuesday it will cut nearly 30 percent of its work force, or about 420 jobs.

And Cessna Aircraft Co., the nation's largest builder of corporate jets, said Friday it will cut 1,300 jobs by August, on top of 6,900 layoffs that it previously announced.

Among the states, Pennsylvania reported the largest increase in initial claims for the week ending June 6. It attributed the increase of 6,861 claims to layoffs in the construction, service and transportation industries. The next largest increases were in Florida, Ohio, California and New York.

Arkansas had the largest decrease of 1,206, which it attributed to fewer layoffs in the auto industry. The next largest drops were in Puerto Rico, Wisconsin, Arizona and Nebraska.

[Associated Press; By CHRISTOPHER S. RUGABER]

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