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Published by the Law Offices of Manbir S. Chowdhary, APC Newport Beach, CA - (949) 260-2025

Jobless Claims in U.S. Rose to Highest Since November

August 20, 2010

Source: Bloomberg News

Claims for U.S. jobless benefits jumped to the highest level since November and Philadelphia-area manufacturing shrank for the first time in a year, indicating the economy may be slowing faster than forecast.

The number of unemployment claims unexpectedly shot up by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index turned negative in August, signaling contraction.

“There’s a red flag being waved right now that says ‘Danger,’” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Growth is going to slow in the second half and we might face something a little more ominous than that.”

Stocks dropped, led by declines in the largest U.S. companies including 3M Co., General Electric Co. and Boeing Co. that would be hurt by a slowdown in the recovery from the worst recession since the 1930s. A lack of jobs raises the risk that consumer spending will weaken further, just as manufacturing, which led the rebound, shows signs of stumbling.

The Standard & Poor’s 500 Index fell 1.7 percent to 1,075.63 at the 4 p.m. close in New York. Treasury securities climbed, sending the yield on the benchmark 10-year note down to 2.57 percent at 4:07 p.m. from 2.63 percent late yesterday.

Unexpected Increase

Claims exceeded estimates of all 42 economists surveyed by Bloomberg News and compared with the median forecast of 478,000. Estimates ranged from 460,000 to 495,000. The government revised the prior week’s claims figure to 488,000 from a previously reported 484,000.

Another report showed the index of leading indicators increased 0.1 percent in July after dropping 0.3 percent the prior month. The New York-based Conference Board’s gauge, which measures the economic prospects over the next three to six months, has shown a see-saw pattern over the past four months that indicates slower growth through the end of the year.

Today’s reports may feed voter discontent with the state of the economy heading into the November elections that will determine which party controls congress. President Barack Obama today said the jump in unemployment claims shows the urgent need for congressional action on legislation to cut taxes and ease credit for small businesses. Obama once again called on Republicans to stop blocking the measure and said lawmakers should take up the bill when they reconvene in September.

Read the full story here.