WASHINGTON – The number of newly laid off workers filing claims for unemployment benefits shot up last week by the biggest amount in four months.
The Labor Department reported a total of 317,000 applications for unemployment benefits last week, an increase of 16,000 from the previous week. It was the biggest gain since jobless claims rose by 18,000 during the week of May 9.
The rise was bigger than analysts had been expecting and could be a further sign that the labor market is slowing under the impact of the worst slump in housing in 16 years and a severe credit crunch that roiled global markets in August.
Labor Department analysts said that the two-day auto strike involving General Motors Corp. (GM) did not appear to have a significant impact on the claims figures last week, according to preliminary information from the states.
The increase in claims last week followed two weeks of declines. The four-week average for claims totaled 312,750, up only slightly from the previous week.
Analysts believe the unemployment rate probably rose in September to 4.7 percent, up from 4.6 percent in August, although they are expecting that businesses added 100,000 jobs to their payrolls.
That would be an improvement from the net loss of 4,000 jobs in August, which had been the first monthly job loss in four years. The employment data for September will be released on Friday.
The unemployment report is being closely followed by Wall Street, where investors believe it will provide the key piece of data the Federal Reserve will need to decide whether to cut interest rates further.
After the surprisingly bad August jobs report was released, the Fed decided to cut a key interest rate for the first time in four years, reducing it by a larger-than-expected half-point.
Many economists believe aggressive Fed action is needed to keep the economy from sliding into a recession. Overall economic growth is expected to have slowed to around 2.5 percent in the July-September quarter with a further decrease to 2 percent or less expected in the current quarter.
Former Federal Reserve Chairman Alan Greenspan, who put the risks of a recession at about 30 percent at the beginning of the year, has said more recently that the steep housing slump and financial market turmoil in August have pushed that chance up although he said the risk still remain below 50 percent.