New jobless claims rise more than expected to 589,000

WASHINGTON The number of new unemployment claims jumped more than expected last week, as companies continue to cut jobs at a furious pace and more Americans turn to an extended benefits program.

The Labor Department reported Thursday that initial jobless benefit claims rose to a seasonally adjusted 589,000 in the week ending Jan. 17, from an upwardly revised figure of 527,000 the previous week. The latest tally was well above Wall Street economists' expectations of 540,000 new claims.

The total matches a 26-year high reached four weeks ago. The last time claims were higher was in November 1982, when the economy was emerging from a steep recession, though the work force has grown by about half since then.

The increase is partly due to a backlog of claims that piled up in recent weeks in several states that experienced computer crashes due to a crush of applications, a Labor Department analyst said. The four-week average of claims, which smooths out fluctuations, was 519,250, the same as the previous week.

But the layoffs continued Thursday. Microsoft Corp. said it will cut up to 5,000 jobs as profit tumbles amid weakness in the personal computer market, and chemical maker Huntsman Corp. will slash 1,175 jobs this year, representing more than 9 percent of its work force, to reduce costs as demand slows amid the global economic downturn. Salt Lake City-based Huntsman also plans to cut an additional 490 contractors.

Another sign of the deepening recession came in a Commerce Department report that showed new home construction plunged 15.5 percent to a record low last month. Construction of new homes and apartments fell to an annual rate of 550,000 in December, below analysts' expectations of 610,000.

The report capped a miserable year for new home construction. Builders broke ground on 904,000 units last year, also the lowest since records began in 1959.

The Labor Department report showed that the number of people continuing to seek jobless benefits rose by 97,000 to 4.6 million. That was above analysts' expectations of 4.55 million and up substantially from a year ago, when 2.7 million people were continuing to receive unemployment checks.

The Obama administration is proposing to extend jobless benefits, which typically last about six months, and overhaul the unemployment insurance system as part of an $825 billion stimulus package currently being considered in the House.