Continuing jobless claims rise more than expected

WASHINGTON — The number of people continuing to seek unemployment benefits has risen sharply, according to government data released Thursday, indicating that laid-off workers are having a harder time finding new jobs as the recession enters its second year.

The Labor Department also reported that initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending Jan. 3. Wall Street economists expected initial claims to increase, but the new figure partly reflects the shortened New Year's holiday week.

The four-week average of initial claims, which smooths out fluctuations but also includes the shortened holiday weeks, fell by 27,000 to 525,750.

The number of people continuing to claim jobless benefits jumped unexpectedly by 101,000 to 4.61 million. That was above analysts' expectations of 4.5 million and the highest level since November 1982, when the nation was emerging from a steep recession, though the labor force has grown by about half since then.

Unemployment figures due out Friday are expected to show that the U.S. lost a net total of 500,000 jobs in December. If accurate, that would bring total job losses last year to 2.4 million, the first annual job loss since 2001 and the highest since 1945, though the number of jobs has more than tripled since then.

The job cuts are expected to send the unemployment rate to 7 percent in December, up from 6.7 percent the previous month. That would be the highest level since June 1993. The unemployment rate also will be released Friday.

Last week was the second in a row that initial claims have come in below 500,000, after seven weeks above that level. A Labor Department analyst said the dip could be a result of companies laying off workers earlier this winter than in previous years. Initial claims reached a 26-year high of 589,000 two weeks ago.

Still, the improvement could be temporary with the tight job market limiting options for laid-off workers. Companies have resumed mass layoffs after a brief respite over the holidays. This week alone, insurance provider Cigna Corp., aluminum producer Alcoa Inc., data-storage company EMC Corp. and computer products maker Logitech International have announced large job cuts.

Meanwhile, three states said earlier this week that their online and phone filing systems for unemployment benefits crashed due to the heavy volume of first-time filers. The impact of that volume won't be seen until next week's data.

Analysts say increasing unemployment is adding to consumer anxiety and further reduce their spending, which drives about 70 percent of the economy. Retailers reported dismal December sales figures Thursday, confirming fears that the holiday shopping season was the worst in four decades.

President-elect Barack Obama, who takes over Jan. 20, is proposing a mammoth $775 billion package of tax cuts and government spending over two years to revive the moribund economy. With add-ons by lawmakers, the package could swell to $850 billion, his advisers say.

Even with a big government stimulus, economists still believe the unemployment rate will keep climbing, hitting 8 to 10 percent by the end of this year. Obama's economic advisers estimate that a $850 billion recovery package would lower the jobless rate to about 7.4 percent and create 3.2 million jobs by the first quarter of 2011.

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