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News > Economy
Jobless claims jump
September 27, 2001: 11:22 a.m. ET

Claims surge after terrorist attack; durables orders fall, home sales gain
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NEW YORK (CNNfn) - New jobless claims in the United States surged last week to their highest level since 1992, the government said Thursday, an early sign of the economic aftershocks of the Sept. 11 terrorist attacks on New York and Washington.

Initial claims for state unemployment benefits jumped to 450,000 in the week ended Sept. 22 from a revised 392,000 the prior week, the Labor Department reported. According to Briefing.com, private economists had forecast an increase to 420,000 new claims.

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"Labor markets are weak and getting weaker," said Steven Wood, economist with FinancialOxygen.

The four-week moving average of new claims, which smoothes weekly fluctuations in the data and provides a clearer picture of the job market, rose to 422,000 for the week from a revised 410,250 the prior week.

Continuing claims by workers who have received benefits for at least a week rose to 3.3 million for the week ended Sept. 15, the latest data available, from a revised 3.23 million the prior week -- a sign unemployed workers are having a hard time finding new jobs.

Separately, the Commerce Department reported orders for durable goods -- items meant to last longer than three years, such as cars, computers and appliances -- fell 0.3 percent in August to $180.8 billion after falling a revised 1.1 percent in July. Economists surveyed by Briefing.com expected orders to fall only 0.2 percent.

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And Commerce reported new home sales rose 0.6 percent in August to a seasonally adjusted 898,000 annual pace, compared with a sharply downwardly revised 0.8 percent gain to 893,000 in July. Analysts surveyed by Briefing.com expected home sales to rise to a rate of 920,000.

U.S. stocks traded slightly lower, as traders worried about corporate profits. U.S. Treasury bond prices were slightly higher.

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The unemployment data are the first to reflect the impact of attacks that killed thousands, destroyed the World Trade Center in New York, damaged the Pentagon near Washington and caused the crash of an airliner in Pennsylvania.

Preliminary data showed 11,000 claims were made in New York, the state hardest hit by the attacks. Several days of grounded airline flights followed by substantial cutbacks in flights also contributed to increased jobless claims among auto workers in Michigan, whose companies were unable to have needed parts delivered from Canada.

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Since Sept. 11, airlines have cut about 100,000 jobs in response to a steep decline in ticket sales. Those and other job cuts could fuel consumer pessimism about the U.S. economy, which already was teetering on the edge of a recession after a year-long slowdown.

"On the [jobless] claims, you're now moving into a range that suggests a recession," said Carey Leahey, senior economist at Deutsche Banc Alex. Brown. "I don't even know if many of the airline layoffs have hit this number yet, so it's going to up big time."

The Labor Department is scheduled to report September unemployment on Oct. 5. Unemployment jumped to 4.9 percent in August, sparking a sell-off on Wall Street as investors worried the economy was weaker at the time than they thought.

The weakness in durable goods orders also indicates the economy was weak before the terrorist attacks, adding emphasis to Tuesday's report by the Conference Board that consumer confidence plunged in the weeks before the attacks, posting the biggest drop since October 1990.

Most economists think the U.S. economy will fall into a recession -- commonly defined as two consecutive quarters of negative gross domestic product (GDP) -- in the wake of the attacks, if it already isn't in one.

"One of the biggest economic uncertainties is whether the ongoing layoffs will mushroom and spread," said Sung Won Sohn, chief economist at Wells Fargo & Co.

To bolster confidence, the Federal Reserve has cut its target for short-term interest rates eight times this year and is largely expected to do so again when it meets Oct. 2 to discuss policy.

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The federal funds rate, an overnight bank lending rate, already is at 3.0 percent after the aggressive Fed cutting this year. Another cut will take the rate below 3.0 percent, a level not seen since 1963, leading some observers to worry that the Fed will run out of room for further cut rates.

Help is likely to come from Congress and President Bush, who are exploring ways to stimulate the economy with spending measures or tax cuts. Lawmakers, with Bush's approval, have already earmarked $40 billion for emergency relief and another $15 billion in contributions and loans to help the airline industry.

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The economic slowdown this year was mostly fueled by a steep decline in business spending on new equipment, especially technology, leading to production cutbacks, a manufacturing recession and hundreds of thousands of job cuts.

A hopeful sign in the Commerce Department's report was that orders for computers and electronics equipment jumped 1.6 percent following a 0.7 percent rise in July.

Dragging durable goods down were transportation equipment orders, which fell 2.1 percent in August, following a 1 percent jump in July. Without this volatile sector, durable-goods orders actually rose 0.4 percent in August, the first increase in three months.

But shipments, a gauge of current activity on the factory floor, softened for a third consecutive month, down 1.2 percent in August following declines of 0.2 percent in July and 2.4 percent in June.

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One of the last bastions of strength in the economy has been the housing market, held up by low mortgage rates and tight supply. Thursday's sharp downward revision in July new home sales -- from a 950,000 unit annual rate to 893,000 -- could raise concerns that the market is cooling off.

"This is slightly baffling, given that existing home sales have been strengthening," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. "It may be a reflection of caution on the part of builders, who have been reluctant to keep pace with sales because of fear the market strength will not last."

Still, Shepherdson said, "Supply remains tight; buyers may have been unable to find the homes they want where they want them. Housing will not fold." graphic


- from staff and wire reports

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  RELATED SITES

Jobless claims report

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