Weak economy pushes jobless claims to 7-year high

Thu Sep 25, 2008 10:04 AM EDT

politics, business, economy, wall-street, labor-department, main-street, conference-board, hurricanes-ike

Christopher S. Rugaber, AP Economics Writer

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New applications for unemployment benefits rose slightly last week to a seven-year high due to a weakening economy and the impact of Hurricanes Ike and Gustav, the Labor Department said Thursday.

The department reported that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000. That's significantly above analysts' estimate of 475,000. The total is the highest since just after the Sept. 11 terrorist attacks seven years ago.

U.S. stock futures declined on the report. Dow Jones industrial average futures dropped 102 to the 10,785 level, pointing to a lower opening for shares.

The hurricanes, which hit Texas and Louisiana earlier this month, added about 45,000 claims from the two states for the week ending Sept. 27, the department said.

The hurricanes have led to higher claims for several weeks. As a result, the four-week average of claims, which smooths out fluctuations, jumped to 474,000, up 11,500 from the previous week.

In the week ending Sept. 20, Texas reported a 22,235 jump in claims, while Louisiana said claims rose by 9,671.

The number of people continuing to receive benefits increased to 3.59 million, up 48,000 and higher than analysts' estimates. That's the highest total in five years.

Jobless claims are at elevated levels even excluding the hurricanes. Weekly claims have now topped 400,000 for 11 straight weeks, a level economists consider a sign of recession. A year ago, claims stood at 324,000.

The economy is struggling with the financial crisis and slowing consumer spending, leading to increased layoffs by the nation's employers.

Economists expect a separate Labor Department report Friday on payrolls to reflect further weakness in the labor market. They predict the report will show that the nation's employers cut 100,000 jobs last month. That's on top of 605,000 jobs that were eliminated in the first eight months of this year.

The report is expected to show that the jobless rate remains at 6.1 percent. The rate jumped above 6 percent for the first time in five years in August.

The financial crisis will likely cause greater job cuts in the coming months. Several large, troubled banks have been bought by competitors and layoffs are likely.

Citigroup Inc. on Monday purchased Wachovia Corp., which had about 120,000 employees. JPMorgan Chase & Co. last week bought Seattle-based Washington Mutual, which employed roughly 43,000.

Several companies have announced layoffs in the past week, including aluminum company Alcoa Inc., auto retailer CarMax, Inc. and chicken producer Pilgrim's Pride Corp.

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2.1

{"commentId":3111580,"authorDomain":"blerten"}

Barney Lerten

If the experts say the bailout is needed to stop the slide in real estate, how can we afford not to?

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#1 - Thu Sep 25, 2008 11:13 AM EDT

{"commentId":3113194,"authorDomain":"gregziglar"}

Greg-281912

So what if real estate values slide? It's about time! What goes up must come down. I believe the average family in America makes 50K or so. Banks will tradiionally loan 3 times what you make, after a 20% down payment. Therefore, banks will loan the average American with good credit 150K for a 30 year loan. This means that with a 20% down, the price paid for the house would be 180K. I believe that once the median selling price drops from today's 221K to 180K, then that will be the bottom of the market, and not until.

And that's okay. No bailout of anyone is needed.

{"commentId":3113194,"threadId":"367893","contentId":"1910861","authorDomain":"gregziglar"}

1 vote

#1.1 - Thu Sep 25, 2008 11:57 AM EDT

{"commentId":3113242,"authorDomain":"gregziglar"}

Greg-281912

okay, so my math isn't perfect.

Still, the median price for a house needs to drop another 40K to 50K, I think.

{"commentId":3113242,"threadId":"367893","contentId":"1910861","authorDomain":"gregziglar"}

#1.2 - Thu Sep 25, 2008 11:58 AM EDT

{"commentId":3144737,"authorDomain":"blerten"}

Barney Lerten

I'm sorry, Greg, but the home is the biggest piece of assets most folks have, and if the one they are paying for suffers a big drop in value, that is NOT a good thing for them or the economy. Granted, some 'correction' from the bubble is needed, but I can tell you this, folks who took out 2nd mortgages to pay bills etc. are going to get hosed. And that's not a good thing, no matter what.

{"commentId":3144737,"threadId":"367893","contentId":"1910861","authorDomain":"blerten"}

#1.3 - Fri Sep 26, 2008 12:46 PM EDT

{"commentId":3225130,"authorDomain":"Sem0lina"}

Sem0l1na

That is a risk you take. Risk means the possibility of loss. Where there is possibility of gain, there is also possibility of loss.

I have heard that there are futures contracts that investors can buy on real estate to bet that prices will go down, and then they can make money off the collapse of the real estate market.

How many billions do you all suppose have been inbested in these by the 'smart money' who will then make a killing (again) on this crash?

{"commentId":3225130,"threadId":"367893","contentId":"1910861","authorDomain":"Sem0lina"}

#1.4 - Tue Sep 30, 2008 12:39 PM EDT

{"commentId":3115021,"authorDomain":"jameseg"}

jameseg

Builders, lenders, and buyers cooperated to ensure that houses were built too large, too expensively, and in excessive quantity. I agree with Greg-281912 that the prices need to drop to an affordable level. Otherwise, they can sit unsold until the demand catches up to the supply.

People in the United States are too materialistic and too susceptible to false and misleading advertising aimed to get them to spend more money than they can afford. Personally, I'm very happy and contented in my studio efficiency apartment that saves me money and helps preserve the greenspace by reducing the amount of land needed for housing.

{"commentId":3115021,"threadId":"367893","contentId":"1910861","authorDomain":"jameseg"}

1 vote

#2 - Thu Sep 25, 2008 12:49 PM EDT

{"commentId":3144797,"authorDomain":"blerten"}

Barney Lerten

Congrats on your wise, simple living james. But... what do we do about all of the Americans who are living, not ostentatiously, but above that level? Tell them "sorry, you're screwed"?

{"commentId":3144797,"threadId":"367893","contentId":"1910861","authorDomain":"blerten"}

#2.1 - Fri Sep 26, 2008 12:49 PM EDT

{"commentId":3145150,"authorDomain":"jameseg"}

jameseg

Barney Lerten,

Where possible, these Americans need to reduce expenses and/or increase income. Each individual's budget and needs are different, and obviously there are no simple solutions.

{"commentId":3145150,"threadId":"367893","contentId":"1910861","authorDomain":"jameseg"}

#2.2 - Fri Sep 26, 2008 1:00 PM EDT

{"commentId":3225362,"authorDomain":"Sem0lina"}

Sem0l1na

More like, you screwed yourself. You can:

Find a way to increase your income (second job, learn new $kills, etc)

Find ways to decrease your expenses (boycott everything, that will help immensely)

Sit tight and wait for natural population increases to consume the excess in the housing market, and with increased demand, and inflation over time, the value of the properties should go back up.

{"commentId":3225362,"threadId":"367893","contentId":"1910861","authorDomain":"Sem0lina"}

2 votes

#2.3 - Tue Sep 30, 2008 12:50 PM EDT

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Jobless claims pushed to 7-year high	Associated Press	Wed Sep 24	0
Stocks end lower amid worries over rescue plan	Associated Press	Fri Sep 26	0
US home sales, prices fall in August	Associated Press	Wed Sep 24	0
Stocks mixed on bailout clash; tech slides	Associated Press	Fri Sep 19	4

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