Rise in U.S. jobless claims spurs labor market worries

Thu Jan 21, 2016 11:28am EST
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By Lucia Mutikani

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits rose to a six-month high last week, suggesting some loss of momentum in the labor market amid a sharp economic slowdown and major stock market selloff.

Another report on Thursday showed factory activity in the mid-Atlantic region improved in January as shipments rebounded, but still contracted for a fifth straight month. That indicates national manufacturing activity remained in the doldrums at the start of this year.

Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 293,000 for the week ended Jan. 16, the highest reading since early July, the Labor Department said. It was the second straight week of gains and confounded economists' expectations for a drop to 278,000.

"The picture does not look great. Unemployment claims need to come back down in a hurry to make us sure that the jobs market has not lost its edge," said Chris Rupkey, chief economist at MUFG Union Bank.

While layoffs appear to have picked up a bit in recent weeks, the increases might not suggest a material weakening in labor market conditions as claims data is difficult to adjust around this time of the year.

Claims have now been below the 300,000 mark, which is associated with strong labor market conditions, for 46 straight weeks. That is the longest streak since the early 1970s.

The jump in claims came against the backdrop of a stock market rout that has seen the Standard & Poor's 500 index .SPX drop 8.4 percent since Dec. 31.

At the same time, data on retail sales, exports, inventories and industrial production have suggested economic growth slowed abruptly at the end of 2015. The economy has been buffeted by the headwinds of a strong dollar, slowing global demand and relentless spending cuts in the energy sector.   Continued...

Leaflets lie on a table at a booth at a military veterans' job fair in Carson, California October 3, 2014.  REUTERS/Lucy Nicholson