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By Siobhan Hughes
Washington, Aug. 22 (Bloomberg) -- More people than expected filed new claims for unemployment benefits in the U.S. last week, evidence that companies aren't confident enough about the recovery to increase payrolls.
States received 389,000 initial applications, down from 391,000 the previous week, the Labor Department said. Economists had expected claims to fall to 385,000.
New claims have averaged less than 400,000 since the start of June, indicating that layoffs may have passed their peak during a recession that started in March 2001. While companies such as Cingular Wireless are still reducing payrolls, some of those cuts are being made by not replacing workers who leave.
``The good news is that it looks like the pace of layoffs has stabilized and that things are not getting worse,'' said Carol Stone, an economist at Nomura Securities International Inc. in New York. ``The bad news is that they're not getting better either.''
The U.S. jobless rate rose in July to 5.9 percent, pushed up by an increase in mass layoffs. Some 2,041 companies reported dismissals of at least 50 workers last month, up from 1,580 companies in June, a separate report showed. Layoffs totaled 245,457 workers, compared with 161,928 in June and 273,807 a year earlier.
Waiting for Stronger Recovery
The U.S. unemployment rate will probably average 6 percent for the rest of the year, according to a survey of 35 economists by the Federal Reserve Bank of Philadelphia. The Blue Chip Economic Indicators, a monthly compilation of forecasts, calls for a 6 percent rate, which is an eight-year high. That helps explain why economists expect the central bank to delay raising interest rates.
``We need to get to the point where firms are consistently adding over 100,000 jobs a month in order to see real improvement in the labor market,'' said Anthony Santomero, president of the Fed Bank of Philadelphia, in a speech yesterday. ``We need more than that to reduce the unemployment rate.''
Santomero says companies will add jobs ``once they are convinced the recovery is sustainable.'' His own prediction is that the economy will be growing at its potential in 2003.
This year, the economy will expand 2.3 percent, compared with last year's 0.3 percent rise, according to the survey. The estimate is lower than the 2.7 percent forecast in the previous survey.
Continuing Claims
The economy will probably grow 3 percent next year, less than the prior 3.4 percent forecast, the Philadelphia Fed survey showed. The economy grew at a 1.1 percent annual rate in the second quarter, the Commerce Department has estimated. That's down from 5 percent in the first three months of the year.
The number of people continuing to collect state jobless benefits totaled 3.52 million in the week that ended Aug. 10, the Labor Department said.
``A lot of times you get depressed,'' said Joseph Scarpati, a 33-year-old graphic designer who lost his job in January and has been unable to find another one. ``You start to self-doubt and question whether you were that good at what you did.''
Workers in the telecommunications and travel industries have been hit especially hard. Cingular Wireless on Tuesday said that it plans to cut as many as 3,000 jobs. More than a third of the cuts would come through eliminating temporary positions and normal attrition.
American Airlines, owned by AMR Corp., earlier this month said it would eliminate 7,000 jobs. Its reductions are a response to U.S. airlines' worst slump since World War II. A sluggish economy has reduced demand, especially among business travelers, and pushed down fares.
Four-Week Average
The four-week-average of initial claims rose last week to 388,250, the highest since 392,000 in the week that ended July 13. Claims have averaged 405,000 so far this year, compared with 406,000 last year. Claims averaged 448,000 in 1991, when the U.S. was recovering from the previous recession. The labor force has expanded by more than 10 percent since then, which explains why unemployment remains below the peak of 7.8 percent seen after that recession.
The insured unemployment rate, which tends to track the U.S. jobless rate, held at 2.8 percent in the week that ended Aug. 10. It was 2.7 percent before that.
The Labor Department also said that 29 states and territories reported an increase in new claims during the week that ended Aug. 10, while 23 states and territories reported a decrease.
Weekly initial claims had climbed as high as 492,000 at the end of March, as a federal program that allowed unemployed workers to extend benefits for 13 weeks went into effect. To qualify for the U.S. government aid, Americans had to re-submit jobless applications. The number of people collecting those benefits rose to 1.5 million in the week that ended Aug. 10 from 1.3 million the prior week.
Continuing claims, the insured unemployment rate and state detail are reported with a one-week lag to initial claims.