WASHINGTON – Wall Street expects the government to report that new claims for unemployment benefits increased last week as companies ramped-up layoffs amid the recession.
The jobless claims report comes a day after the federal government said the monthly budget deficit reached a record in November, in part because of increased spending on programs such as unemployment insurance and food stamps.
The number of new claims for jobless benefits is projected to increase to a seasonally adjusted 525,000, up from 509,000 the previous week, according to Wall Street economists surveyed by Thomson Reuters.
Claims late last month reached 543,000, their highest level in 16 years. Economists said the drop to 509,000 was partly due to volatility from the Thanksgiving holiday week.
Last week's report showed the number of people continuing to claim unemployment benefits reached nearly 4.09 million, the highest level since December 1982. Economists expect that number rose to 4.1 million.
Even when the larger work force is factored in, the proportion of workers who are continuing to receive jobless benefits matches a level last reached in September 1992, when the economy was recovering from a recession.
"The underlying trend in claims is still strongly upwards," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note.
A number of large U.S. employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.
The layoffs come as the federal budget deficit continues to spiral.
In just the first two months of the budget year that started Oct. 1, the deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top $1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps.
Then there's the $700 billion bank rescue program. The Treasury report showed that the government spent $76.5 billion from the program in November and $191.5 billion over the past two months.
The department said the gap between the government's revenue collections and what it paid out last month totaled $164.4 billion, the largest deficit ever recorded for the month of November. The deficit was $98.2 billion in November 2007.
An annual deficit of $1 trillion would equal 6.7 percent of the gross domestic product, the economy's total output in a single year. That would surpass the previous postwar record in GDP terms of 6 percent sent in 1983 when Ronald Reagan was president.
And some economists think the annual deficit will be even higher. David Rosenberg, North American economist at Merrill Lynch, projected that it could reach $1.5 trillion, depending on how large an economic stimulus package is approved next year.
The Treasury Department plans to use $250 billion of the $700 billion program to make direct purchases of bank stock, providing the nation's financial institutions with an infusion of cash in the hopes that they will resume more normal lending practices.
Some analysts argue that the deficit is effectively lower than Treasury's figures because the government has received stakes in the banks in return for the capital. The government could get some or all of the money back when it sells those ownership stakes in the future.
The Congressional Budget Office said last week that accounting for the value of those stakes would reduce the combined deficit for October and November to $267 billion, rather than the $401.6 billion reported by Treasury.