Record number receive jobless benefits
A sign that jobs likely will remain scarce through next year emerged Thursday in a report showing a record number of Americans receiving unemployment aid.
And plant shutdowns by Chrysler and General Motors could further harm the economy in coming months. Economists are just starting to assess the full impact of the auto industry’s woes, which affect thousands of suppliers and dealers.
The number of people who are continuing to receive jobless benefits rose to nearly 6.7 million from about 6.6 million, the Labor Department said. That’s the highest total on records dating to 1967 and the 16th straight weekly record.
New jobless claims fell to a seasonally adjusted 631,000 last week, down from a revised figure of 643,000 the previous week. First-time claims, which had dropped to 605,000 earlier this month, reflect the pace of layoffs.
Factory closings by Chrysler and GM, most of them temporary, probably will boost the number of claims into the summer, economists said. The closings also are likely to cause layoffs at the nation’s 5,000 auto suppliers, which employ about 3 million workers.
Even with the auto industry’s woes, many analysts expect the economy to recover and start growing slightly by the fall.
Abiel Reinhart, an economist at JPMorgan Chase & Co., said the auto sector "won’t be a big enough drag to really change the big picture," particularly since many of the layoffs are temporary personal health insurance.
But economists also acknowledged uncertainty about the impact.
Joel Naroff, president of Naroff Economic Advisors, said the most critical decisions will come after the temporary shutdowns.
Namely: Will GM and Chrysler ramp up production or hold back?
Overall, while the pace of layoffs may slow, hiring remains weak, and the unemployment rate will keep rising, economists said. Based on Thursday’s data, Reinhart predicts the jobless rate could hit 9.2 percent or higher this month, up from 8.9 percent last month.
But the economic news was not all bad. In a separate report, a private research’s group forecast of economic activity rose more than expected last month. It was the first gain in seven months.
And the Conference Board says its index of leading economic indicators rose 1 percent last month. Economists surveyed by Thomson Reuters had expected a 0.8 percent increase in the index, which is designed to forecast economic activity in the next three to six months.