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The Honolulu Advertiser
Posted on: Thursday, November 22, 2001

New jobless claims dip for fourth week

By Jeannine Aversa
Associated Press

WASHINGTON — For four weeks in a row, fewer Americans filed new claims for state unemployment benefits, suggesting that the steep increase in layoffs after the terrorist attacks may be abating.

However, economists warn that the country is still in for a period of rising unemployment.

The Labor Department reported yesterday that for the work week ending Nov. 17, new jobless claims dipped by a seasonally adjusted 15,000 to 427,000. That followed a drop of 10,000, according to revised figures, an even bigger decline than the government previously estimated.

The report comes as a couple of other encouraging economic indicators have emerged out of the gloomy economic picture.

The Index of Leading Economic Indicators unexpectedly rose by 0.3 percent in October, after tumbling the month before, the Conference Board said Tuesday. And, last week, the government reported that retail sales in October soared by 7.1 percent, the biggest one-month gain ever recorded.

Economists viewed the string of declines in new jobless claims as a sign that layoffs may be stabilizing after rocketing to a nine-year high of 535,000 at the end of September.

"Even the most gloomy analysts will now have to concede that the post-Sept. 11 stream of layoffs is rapidly fading away," said Ian Shepherdson, chief economist for High Frequency Economics. "These data scream that the biggest job losses are now over."

Still, economists are forecasting a rise in the nation's unemployment rate to at least 5.5 percent in November and believe the jobless rate will continue to climb in the months ahead. Even if companies reduce the speed at which they lay off employees, the jobless rate will keep rising if companies are reluctant to hire workers back.

Some economists believe the unemployment rate will top out at around 6.3 percent in the first quarter of 2002.

"Companies may be cutting down on layoffs but they are not hiring. So people in the mix looking for a job are having a tough time of it," said economist Clifford Waldman of Waldman Associates. "I wouldn't expect the unemployment rate to stop climbing. It's not going to get better right away."

The unemployment rate soared from 4.9 percent in September to 5.4 percent in October and companies eliminated 415,000 jobs, the biggest one-month drop in 21 years.

Fallout from the more-than-yearlong economic slump, along with the terrorist attacks, caused the economy to contract at a rate of 0.4 percent in the July-September quarter. Many economists are predicting a bigger drop in the current quarter. That would meet one common definition of a recession: two consecutive quarters of declining economic output.

To cope with the sour economy, companies have cut production, trimmed hours and let workers go.

"Layoffs as a path to profitability have not been abandoned," said Paul Taylor, chief economist at the National Automobile Dealers Association.

The drop in new claims last week put them at the lowest level since the week ending Sept. 15. That earlier report did not capture layoffs resulting from the terrorist attacks because most affected workers were not able to file applications for jobless benefits that week. In the two weeks following that report, jobless claims soared.

The more stable four-week moving average of new claims, which smoothes out week-to-week fluctuations, declined last week to 454,250.

Even with the declines, both new claims and the moving average of new claims are still at a high enough level to suggest that the labor market remains weak.

A four-week average of the number of laid-off workers continuing to collect unemployment benefits rose to 3.73 million for the work week ending Nov. 10, the highest level since May 7, 1983. That indicated that jobless workers are having a difficult time finding employment, economists said.

In an effort to prevent the economy from sinking deeper into recession, the Federal Reserve has cut interest rates three times since Sept. 11, for a total of 10 cuts this year.

Economists and the Bush administration are counting on the Fed's aggressive reductions, along with new tax cuts and increased government spending being contemplated by Congress, to lead to a recovery in 2002.