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More jobs carnage: 573,000 file for unemployment
2008-12-11
WASHINGTON - New claims for jobless benefits surged last week and came in worse than expectations that were already gloomy -- and economists say the figures would get even worse without an auto industry bailout. Initial applications for unemployment benefits rose to a seasonally adjusted 573,000, the Labor Department said Thursday. That was nearly 50,000 more than economists were expecting and up from a revised 515,000 the week before. The last time so many Americans filed new jobless claims in a single week was in 1982, although the labor force has grown by about half since then. Adding more damage to the already ravaged labor market, Bank of America said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch, which it agreed to buy in September. Separately, the U.S. trade deficit rose unexpectedly in October, partly because of dampened demand for American exports. The gap was $57.2 billion in October, up from $56.6 billion in September. Analysts had been expecting a decline because of falling oil prices. The numbers came as legislation to provide a $14 billion bailout to the auto industry ran into rising resistance from Senate Republicans. Both President-elect Barack Obama and a spokeswoman for President George W. Bush cited the jobless claims numbers in support of the bill. In unusually stark terms, White House spokeswoman Dana Perino said the economy is so weak right now it "cannot sustain" a collapse of the auto industry. And in Chicago, Obama said an industry shutdown would have a "devastating ripple effect" on the already staggering economy. The reports, along with investor concerns about the auto bailout bill's future, sent stock markets falling. The Dow Jones industrial average finished down almost 200 points, closing at 8,565. General Motors Corp. and Chrysler LLC executives have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for federal aid under the bill, has said it has enough cash to make it through 2009. Automakers and their extensive network of suppliers support about 3 million jobs, and many economists say the bankruptcy of one or more of the Detroit Three would make the unemployment numbers even worse. It "would have a significant impact at a very bad time," said Laurence Meyer, president of Macroeconomic Advisers and a former member of the Federal Reserve Board. Besides Bank of America's announcement, more layoffs in other industries were announced Thursday. Tool maker Stanley Works said it plans to cut 2,000 jobs and close three manufacturing facilities. Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, said it will cut 700 jobs as it outsources parts of its business. Still, food companies will likely fare better over the next few months than other employers because consumers will buy food and other staples even in a recession, said Madeline Schnapp, director of macroeconomic research at Trimtabs Investment Research. Most Americans expect the jobs situation to get even worse, according to a poll released Thursday by the Pew Research Center for the People & the Press. Sixty-three percent think unemployment will increase next year, and 73 percent plan to cut back on holiday gifts this year, according to the poll. The four-week average of new jobless claims, which smooths out fluctuations, is now a seasonally adjusted 540,500. That's the highest since December 1982, when the economy was emerging from a deep recession. The number of people continuing to claim jobless benefits also jumped much more than expected, increasing by 338,000 to 4.4 million, the department said. Economists had expected a small increase to 4.1 million. That figure also indicates that workers are having a harder time finding a job and leaving the unemployment rolls, economists said. As a proportion of the work force, the number of people continuing to receive benefits is the highest since August 1992, when the U.S. was recovering from a relatively mild recession. Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 337,000. The Labor Department said last week that employers cut a net total of 533,000 jobs in November, and the unemployment rate reached 6.7 percent, a 15-year high. And the latest jobless claims figures indicate that the December report could be just as bad or worse, Abiel Reinhart, an analyst at JPMorgan Chase Bank, wrote in a client note. Companies have eliminated a net total of 1.9 million jobs this year, and some economists project the total cuts could reach 3 million by the spring of 2010. Several 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. ___ AP Economics Writers Jeannine Aversa and Martin Crutsinger contributed to this report.
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