Initial jobless claims climbed to 374,000 last week from 308,000 the prior week, Labor Department data showed today. The surge was the most since in the aftermath of Superstorm Sandy in November 2012.
The jump came as California worked through a claims backlog caused by a computer system switch and as non-federal employees were forced to take time off because the shutdown, a Labor Department spokesman said.
Federal Reserve policy makers said after their Sept. 17-18 meeting that they will wait to taper $85 billion in monthly asset purchases until they see more evidence of steady growth to reduce the 7.3% unemployment rate. Minutes from the meeting, released this week, show Fed officials who favored maintaining the pace of purchases cited concerns partly from “considerable risks surrounding fiscal policy.”
“Their concerns about a new fiscal shock have materialized and this will probably delay the start of tapering further into” the first quarter, Societe Generale SA economists led by Michel Martinez and Michala Marcussen, wrote in a note to clients today.
Another fiscal battle is playing out: the U.S. Treasury has said its ability to borrow will end on about Oct. 17 unless Congress increases the $16.7 trillion debt ceiling. Treasury Secretary Jacob J. Lew told Congress today that failing to raise the limit would risk putting the U.S. into default and cause “irrevocable damage” to the economy and financial markets.
President Barack Obama said this week that he would accept a short-term debt limit increase and an agreement to end the partial government shutdown and then enter broader fiscal negotiations with Republicans.
“Failing to raise the debt ceiling will impact everyday Americans beyond its impact on financial markets,” Lew told the Senate Finance Committee today. Between Oct. 17 and Nov. 1, the U.S. has “large payments to Medicare providers, Social Security beneficiaries, and veterans, as well as salaries for active-duty members of the military. A failure to raise the debt limit could put timely payment of all of these at risk.”
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