Jobless claims surge on California, U.S. federal shutdown

More Americans than projected filed applications for unemployment benefits last week as California worked through a backlog caused by a switch in computer systems and the partial federal shutdown forced some government contractors to pare staff.

Jobless claims surged by 66,000, the most since the aftermath of Superstorm Sandy in November, to 374,000 in the week ended Oct. 5, figures from the Labor Department showed today in Washington. The level exceeded all forecasts of 47 economists surveyed by Bloomberg.

The issues in California accounted for about half the jump in applications last week and the dismissal of non-federal employees after Congress failed to compromise on a budget accounted for about another 15,000, a Labor Department spokesman said as the data was released to the press. The effects of the gridlock in Washington may keep claims elevated as employers grow concerned about the economic outlook.

“Claims are likely to be distorted for some time,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “Private firms are stepping back. Given all the uncertainty, they are unlikely to hire.”

Stock-index futures held earlier gains after the report amid signs the nation’s lawmakers may agree on a compromise deal to avoid a debt default. The contract on the Standard & Poor’s 500 Index maturing in December rose 0.9 percent to 1,662.9 at 8:51 a.m. in New York.

Data Delayed

While the claims data will continue to be released, the lapse in appropriations has delayed the Labor Department’s September employment report and other government data releases. Payrolls were expected to climb by 180,000 last month, based on the median forecast in a Bloomberg survey, from 169,000 in August.

Any claims filed by furloughed federal workers will not show up in the figures in coming weeks, a Labor Department official said last week. They will be tallied in a separate category and will not influence the headline reading, though contractors’ furloughs will count.

The median forecast of economists surveyed projected 311,000. Estimates ranged from claims of 304,000 to 340,000. The jump pushed applications up to the highest level since March last week. The previous week’s figure was unrevised at 308,000.

Average Climbs

The jobless claims report showed the four-week moving average, a less volatile measure than the weekly figures, climbed to 325,000 last week from 305,000.

The number of people continuing to receive jobless benefits fell by 16,000 to 2.91 million in the week ended Sept. 28. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 27,500 to 1.44 million in the week ended Sept. 21.

The unemployment rate among people eligible for benefits held at 2.2 percent in the week ended Sept. 28.

Twenty-two states and territories reported an increase in claims, while 31 reported a decline. Those data are reported with a one-week lag.

Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate.

Private Data

Private employers added 166,000 workers in September following a revised 159,000 rise in August that was smaller than initially estimated, according to figures released last week by the ADP Research Institute. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 180,000.

While the number of federal workers who apply for jobless benefits will appear in a separate category, employees who are dismissed by government contractors as a result of the shutdown will show up.

Lockheed Martin Corp., the top federal contractor, had planned to furlough 3,000 people, though it reduced furloughs by about 20 percent after the Pentagon said Oct. 5 most civilian employees sent home in the partial federal shutdown will be put back to work. Of the Lockheed employees still being furloughed, only 300 work on military programs.

“The Department of Defense’s decision will not eliminate the impact of the government shutdown on the company’s employees and the business,” Lockheed said in its statement.

Business owners may also worry that Congress won’t reach a timely deal on raising the debt limit before U.S. borrowing authority lapses around Oct. 17.

The Obama administration, global leaders and economists have warned that breeching the debt ceiling would have catastrophic consequences for the economy that would ripple across the globe.

“The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the U.S. and abroad,” International Monetary Fund chief economist Olivier Blanchard said during a press conference this week.

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