U.S. Economy: Jobless Claims Rise in Fifth Week After Attacks
By Carlos Torres
Washington, Oct. 18 (Bloomberg) -- The number of U.S. workers filing new claims for unemployment benefits approached a nine-year high last week as the terrorist attacks Sept. 11 compounded the economic damage from a factory slump.
First-time jobless claims increased by 6,000 in the week that ended Saturday to 490,000, the Labor Department reported. Initial applications had soared in the last week of September to 535,000. Both weeks are the highest since a strike at General Motors Corp. in July 1992.
Workers are staying unemployed longer, today's report shows. The number of people continuing to draw benefits rose to an 18- year high in the first week of October. With manufacturers such as United Technologies Corp. and service providers such as Unisys Corp. announcing job cuts this week, analysts expect the U.S. unemployment rate to rise.
``The job picture is getting worse,'' said Geoffrey Somes, an economist at Fleet Bank in Boston. ``Joblessness will continue to increase over the next few months.''
The U.S. economy lost 199,000 jobs last month, the biggest decline in more than 10 years, the Labor Department reported two weeks ago. Those numbers are based on surveys that don't reflect the job cuts after Sept. 11. Industrial production fell for a 12th consecutive month in September, suggesting factories were still a drag on the economy.
The number of people continuing to draw unemployment benefits jumped in the week that ended Oct. 6 to 3.65 million. That's the most since 3.70 million in May 1983 when the U.S. was climbing out of an earlier recession. Statistics on continuing claims are reported with a one-week lag to new claims.
Insured Rate Rises
The insured unemployment rate rose to 2.8 percent, a nine- year high in the first week of October. While that counts only workers eligible for benefits and doesn't reflect all the people out of work, it helps predict changes in the broad jobless rate.
The U.S. unemployment rate rose to a four-year-high of 4.9 percent in August and September. Analysts say it may climb as high as 6.5 percent in 2002. It was last that high in March 1994.
Economists had expected jobless claims to rise last week to 480,000 from the prior week's initially reported 468,000, based on the median of 26 forecasts in a Bloomberg News survey.
Forty states and territories reported an increase in new claims during the week ended Oct. 6, the most recent for which state-by-state details are available. One reason for the increase that week was that it coincided with a new quarter. Workers sometime wait until to file to improve their chances to qualify for benefits.
California alone reported an increase of 5,157 in claims, reflecting layoffs in a variety of industries. Arkansas, Pennsylvania, North Carolina and Illinois all reported increases of more than 3,000. These included job cuts in air transportation and the manufacture of metals, furniture, clothing and electronic goods.
Previous weeks' reports included layoffs in New York and Virginia stemming from the destruction of the World Trade Center towers and the shutdown of the national airport outside Washington, D.C.
United Technologies, the maker of Pratt & Whitney jet engines, said this week it will cut as many as 5,000 jobs, or about 3 percent of its workforce.
Service companies are eliminating workers as well. Unisys plans to cut 3,000 jobs, about 8 percent of its workforce, after customers such as airlines, financial services and communications companies delayed investments in computers and servers.
Financial Services Cut
Merrill Lynch & Co., the largest U.S. securities firm, may cut as many as 10,000 jobs, or 15 percent of its workforce, as it reviews whether to reduce or exit brokerage operations in countries such as Japan, Canada, Australia and India, the Wall Street Journal reported, citing unidentified executives.
Bear Stearns Cos., the sixth-largest securities firm said it will eliminate 830 jobs, or 7.5 percent of its workforce, in the largest cuts since the company was founded in 1923.
Merrill Lynch and Bear Stearns, which had eliminated 450 jobs this year, are following Credit Suisse First Boston, Goldman Sachs Group Inc. and Morgan Stanley Dean Witter & Co. in extending staff cuts as revenue sinks from trading and investment banking.
Claims numbers are likely to remain elevated for several more months as some job reductions announced earlier this year start to take effect. At Delphi Automotive Systems Corp., 8,500 of the 11,500 job cuts announced in March were carried out by the third quarter. The remaining 3,000, half of those in the U.S., will take place over the next six months, the company said.
Not All Gloomy
``We've done most of the heavy lifting, but there still is some work to be done,'' said Alan S. Dawes, chief financial officer at Delphi, in an interview with Bloomberg Television this week.
The news on jobs isn't all gloomy in the aftermath of the attacks. While TRW Inc. announced plans this week to cut 3,500 automotive and aerospace jobs, the company is hiring workers at divisions where business has increased as a result of the violence.
The company's surveillance and space technology groups are having trouble keeping up with demand. ``We're having to add thousands of people just to support all of the requests that we're getting,'' said David Cote, TRW's chief executive officer, in an interview with Bloomberg Television last week.
Congress is considering measures to cushion the financial blow to those recently unemployed. A $100 billion economic stimulus bill being debated in the House of Representatives includes provisions to let unemployed workers withdraw without penalty from retirement plans, provide health care assistance and distribute $9 billion in surplus federal unemployment funds to states to pay for regular or extended unemployment insurance benefits.