New unemployment claims skyrocketed last week to an eight-month high, government data showed on May 5 in a report that sank recovery hopes on the eve of the key April employment report.
New claims for unemployment insurance benefits leaped to a whopping 474,000 in the week ending April 30, a 10% increase from the prior week, the Labor Department reported.
The seasonally adjusted weekly indicator has increased in three of the four weeks in April. It was the highest claims number since mid-August 2010's 488,000.
The rise surprised most analysts who had forecast a decline, to 400,000 claims, and sent a shudder through the U.S. equity and oil markets as investors fretted about a slowdown in the world's largest economy.
Growth fell to an annual rate 1.8% in the first quarter from 3.1%in the 2010 fourth quarter, well below the pace needed to spur job creation amid recovery from the Great Recession.
The jobless claims report is "a disaster" and foreshadows gloomy unemployment data on Friday, Jon Ogg at 24/7WallSt.com warned. "This is markedly heading the wrong way."
Most analysts expect the Labor Department will report 185,000 nonfarm jobs were created, a drop of 14% from March, and that unemployment held at March's 8.8% rate, after four months of decline.
The jobless claims report came on the heels of another weaker-than-expected jobs number. Payrolls firm ADP said on May 4 that the U.S. private sector added a modest 179,000 jobs in April, well below expert expectations.
The Labor Department also reported its four-week moving average of initial jobless claims, which helps to smooth volatility, increased by 22,250 to 431,250 claims.
A Labor Department official said three factors not taken into account by seasonal adjustment could explain the sharp rise in claims. A spring break for schools in New York knocked about 25,000 bus drivers and others temporarily out of work, the official said. In addition, Oregon launched a new unemployment benefits program and the auto industry laid off workers amid parts-supply disruptions after Japan's earthquake in March.
Some analysts cautioned against reading too much into the latest claims numbers. "For the past four weeks, extraneous circumstances have caused the initial claims level to rise steadily," Briefing.com analysts said in a research note. The spike "is not the result, however, of a weaker labor market" but of poor seasonal adjustment factors, including a later-than-normal Easter holiday, they said.
Barclays Capital's Michael Gapen also warned about seasonal-related factors in play. "Since the growth in the initial claims level is isolated to seasonal problems, we do not believe this month's increase will have a detrimental effect on the April payroll numbers that will be released tomorrow," he said.
Copyright Agence France-Presse, 2011
