Reports: High Unemployment, Low Manufacturing
The Labor Department said initial claims for unemployment benefits rose by 1,000 last week to a seasonally adjusted 497,000, while the Commerce Department said orders to U.S. factories plunged by the largest amount in nearly two years.
The unemployment figures reflect about 45,000 claims from Texas and Louisiana following the landfalls last month of hurricanes Ike and Gustav, but the increase nonetheless unnerved investors
“The underlying claims reflect an upward trend in unemployment,” economist Dana Saporta told Reuters, adding, “Our view is the unemployment rate will peak about 6.7 percent next year.”
The number of people continuing to receive benefits increased to 3.59 million, up 48,000 — higher than analysts’ estimates and the highest total in five years.
Weekly claims have now topped 400,000 for 11 consecutive weeks. A year ago, claims stood at 324,000.
Investors are also uneasy ahead of a possible second vote Friday in the U.S. House vote on the government’s proposed $700 billion financial sector rescue package. The House rejected an earlier version on Monday, and the Senate approved the latest version by a wide margin late Wednesday.
A day ahead of the House vote, Bush called business leaders to the White House on to make his case for the $700 billion package.
“The president will note how important it is to pass the financial rescue legislation to help to free up credit in our economy,” said White House spokesman Tony Fratto. “These business owners know the consequences if the situation gets worse, so the crisis is urgent for these businesses.”
Analysts had been expecting unemployment claims would fall to 475,000; instead, the level of jobless claims is the highest seen since the immediate aftermath of the Sept. 11, 2001, terrorist attacks.
The manufacturing report showed a much worse performance than the 2.5 percent decline that economists had expected. It was the biggest setback since a 4.8 percent drop in October 2006.
The plunge was led by big declines in orders for aircraft, down 38.1 percent, and autos, which fell by 10.6 percent, the worst performance in nearly six years.
On Thursday morning, the Dow Jones industrials were down 184 at the 10,646 level. The dollar was higher against other major currencies, particularly the euro, even after the European Central Bank left interest rates unchanged.