U.S. jobless claims rise, tempering recent economic recovery
In the grand tradition of two steps forward, one step back, the U.S. economic recovery experienced a hiccup; new data on jobless claims indicated a jump to the highest levels since October. Reuters reports that at the same time, however, food and energy costs as well as export levels were up, which was an encouraging sign of fourth quarter 2010 growth.
Job market continues to struggle
What is most disturbing about the recent jobless claims data is the bump in first-time unemployment filings. From last week to this week, claims rose from 410,000 to 445,000, reports the U.S. Department of Labor. That’s the largest single-week jump in more than six months, and it stymied forecasters who had predicted a drop of 5,000 this week.
Omer Esiner, a market analyst at Commonwealth Foreign Exchange in Washington, D.C., told Reuters that recent jobless claims prove that the country’s economic recovery will not be smooth.
“The jobless number highlights the patchy recovery we’ve seen in the job market and reinforces that it will be a slow process bringing down the jobless rate,” Esiner said.
Blame it on the holiday backlog
Christmas and New Year’s may be to blame for the sudden surge in jobless claims. Not only were people not filing at the time, but federal workers weren’t there to process the paperwork. Benefits claims had been on a downward trend from April 2009 – when there were 650,000 claims – to Christmas 2010, when it dropped below 400,000 for the first time in two years.
A food and energy price spike
On the wholesale level, food and energy prices spiked despite a low level of inflation, which was a good thing for producers. Producer prices were up 1.1 percent in December after a more modest 0.8 raise in November, according to Labor Department data. Higher producer prices will likely lead to higher retail prices, which could hit consumers like a tax and slow the economic recovery. The demand for payday loans will also rise as prices for essentials place increased pressure on family budgets.
Robert Dye, a senior economist at PNC Financial Services in Pittsburgh, Pa., points to where this cycle would lead.
“Eventually, this means corporate profits could be squeezed,” said Dye.
Squeezed corporate profits, cost-cutting, layoffs and outsourcing don’t paint a rosy economic picture.
FOX Business coverage of jobless claims