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Unemployment claims surge; federal shutdown a factor

October 10, 2013|By Don Lee
(Evan Vucci / Associated…)

WASHINGTON -- New unemployment claims surged last week. Blame it partly on the federal government shutdown.

The Labor Department said Thursday that 374,000 people filed first-time unemployment claims last week. That seasonally adjusted figure was up a whopping 66,000 from the previous week -- far above analysts' estimates -- and it was the highest count since last November after Superstorm Sandy struck the East Coast.

About half of the jump in initial claims was the result of California working through a backlog after a computer system upgrade, said Tom Stengle, a Labor Department spokesman. Technical issues in California and some other states, which officials previously said had been resolved, have probably held down jobless claims counts in recent weeks, making what is already a volatile data set even more difficult to read.

Still, Stengle said about 15,000 of the new claims last week stemmed from layoffs by government contractors affected by the partial shutdown. He didn't have further details, but the list of private companies reacting to the closure of government offices and operations is growing. On Thursday, San Francisco-based URS Corp., an engineering services firm, said that it had furloughed about 3,000 workers as of Monday because of the government shutdown.

As for federal employees who are on furlough, they are eligible for jobless benefits. But Labor Department officials are tracking those applications separately, and there is a two-week delay in the reporting of that data. That means a tally of the claims filed in the first week of furlough won't come out until next Thursday.

Because the government shutdown has choked off the flow of economic reports, the weekly jobless claims statistics are more important than ever and are being closely analyzed for signs of changes in the labor market. But the week-to-week numbers are normally volatile and the latest computer glitches have made them even less reliable.

"Well, there are not a lot of facts here," said Chris Rupkey, senior financial economist at the Bank of Tokyo-Mitsubishi in New York, referring to Thursday's jobless claims report. "But we take it the federal shutdown is slowing the economy," he wrote. "It's just common sense. People are losing their jobs, unemployment the key indicator of how bad an economic downturn is always."

Cooper Howes, an analyst at Barclays Bank, didn't see enough in the latest data to change his view that the "underlying trends of improvement in jobless claims remain in place." The latest four-week moving average of weekly initial claims was 325,000, down from 366,500 a year ago. But Howes was cautious, noting that lingering computer issues and the government shutdown are complicating the picture.

"This is particularly inconvenient given the current lack of government data releases," he said in a note to clients.

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