Jobless claims up sharply
WASHINGTON — Claims for U.S. jobless benefits jumped last week to the highest level in six months, providing the first statistical warning that the damage from the partial federal shutdown is starting to ripple through the economy.
While half the increase came from California as the state worked through a backlog following a switch in computer systems, another 15,000 reflected the furlough of non-federal workers from employers losing government business, a Labor Department spokesman said as the data was released to the press. Applications for unemployment insurance benefits surged by 66,000 in the week that ended Oct. 5 to 374,000, the most since late March, figures from the Labor Department showed Thursday in Washington.
"The economic costs of a shutdown are going to increase the longer the shutdown occurs," said Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Penn., and the second-best claims forecaster over the past two years, according to data compiled by Bloomberg. "If this drags along for the next couple of weeks, the economic toll will be even more significant."
Shares surged Thursday amid signs lawmakers were moving to reach agreement on increasing the nation's debt ceiling to avoid a government default. Absent a deal, the possibility that federal agencies will need to slash spending once the borrowing limit is reached probably means hiring plans will be put on hold as business leaders prepare for an economic slump.
President Obama said he would accept a short-term increase in the debt limit without policy conditions and that he would negotiate on broader fiscal and health-care policy after the ceiling is raised and the shutdown ends.
A partial U.S. federal government shutdown lasting through the end of the week could cost the economy 0.2 percentage point in growth, according to an estimate in a Bloomberg survey of economists issued Thursday. The damage escalates to a 0.5-point loss if the shutdown carries through Oct. 25.
Last week's surge in the number of jobless claims was the biggest since the aftermath of Hurricane Sandy in November. The median forecast of 47 economists surveyed projected an increase to 311,000 from the prior week's 308,000. Estimates ranged from claims of 304,000 to 340,000.
While the claims data will continue to be released, the lapse in appropriations has delayed the Labor Department's September employment report and other government data releases. Payrolls were expected to climb by 180,000 last month, based on the median forecast in a Bloomberg survey, from 169,000 in August. Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate.
Private employers added 166,000 workers in September following a revised 159,000 rise in August that was smaller than initially estimated, according to figures released last week by the ADP Research Institute. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 180,000.
"Claims are likely to be distorted for some time," said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla. "Private firms are stepping back. Given all the uncertainty, they are unlikely to hire."
The Labor Department's claims reports in coming weeks won't reflect furloughed federal workers.
Those will be tallied in a separate category and will not influence the headline reading, though contractors' dismissals will count.
Lockheed Martin Corp., the top federal contractor, had planned to furlough 3,000 people, though it reduced furloughs by about 20 percent after the Pentagon said Oct. 5 most civilian employees sent home in the partial federal shutdown will be put back to work. Of the Lockheed employees still being furloughed, only 300 work on military programs.
"The Department of Defense's decision will not eliminate the impact of the government shutdown on the company's employees and the business," Lockheed said in its statement.
Business owners may also worry that Congress won't reach a timely deal on raising the debt limit before U.S. borrowing authority lapses around Oct. 17.
The Obama administration, global leaders and economists have warned that breaching the debt ceiling would have catastrophic consequences for the economy that would ripple across the globe.
"The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the U.S. and abroad," International Monetary Fund chief economist Olivier Blanchard said this week.
http://www.capecodonline.com/apps/pbcs.dll/article?AID=/20131011/BIZ/310110313/-1/NEWSLETTER100
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