Filed by KOSU News in Business.
November 25, 2009

Weekly claims for jobless benefits plunged to 466,000 last week, the lowest level in more than a year, the Labor Department said Wednesday. Separately, the Commerce Department said consumer spending rose a brisk 0.7 percent in October.

Consumers got back in the buying mood in October as their incomes grew modestly, an encouraging sign for the budding economic recovery. Last month’s spending increase followed a pullback in September, when spending plunged by 0.6 percent.

It was the best showing since a big 1.3 percent jump in August, when the government’s now-defunct Cash for Clunkers programs enticed people to buy cars.

Incomes, the fuel for future spending, rose 0.2 percent for the second straight month.

Factories See Orders Slide

Meanwhile, orders for big-ticket factory goods fell unexpectedly in October as the economy struggles to get back to full health. The Commerce Department said orders for costly manufactured goods dropped 0.6 percent last month, following a 2 percent gain in September. It marked the first decline since August.

But much of October’s weakness came from an 18.4 percent drop in orders for goods related to defense. Excluding those, orders for other types of manufactured goods rose 0.4 percent in October, following a 1.8 percent rise in September.

Still, the performance was weaker than economists expected. They were forecasting orders for durable goods to grow 0.5 percent.

Orders for electrical equipment, commercial airplanes and parts, primary metals — including steel — and fabricated metals all rose last month. Orders for cars, machinery, computers and communications equipment fell.

Unemployment Claims Drop More Than Expected

On the jobs front, the number of newly laid-off workers filing claims for unemployment benefits fell more than expected last week. The Labor Department said the number of people filing first-time claims for jobless benefits fell by 35,000 to 466,000. That was the lowest level for initial claims since the week of Sept. 13, 2008, and was far better than the 500,000 that economists had expected.

The number of workers receiving benefits also fell sharply, dropping 190,000, to 5.42 million, the lowest level for continuing claims since February.

Analysts cautioned against reading too much into the sharp drop in unemployment claims, noting that part of the improvement reflected large seasonal adjustment factors, which smooth out changes that normally occur at certain times of the year. Excluding seasonal adjustments, claims rose. That’s normal at this time of year when a large number of construction workers face layoffs because of worsening weather conditions.

The unemployment rate hit a 26-year high of 10.2 percent in October and many economists believe the recovery will remain so sluggish that the jobless rate will keep rising, possibly topping 10.5 percent by the middle of next summer.

Federal Reserve policymakers worried at their November meeting that the unemployment rate could remain elevated for several years, according to minutes of the discussions released Tuesday.

New claims last week dropped below 500,000 for the first time since the first week in January. Weekly claims peaked at 674,000 in March and have generally been trending lower since then.

However, many economists believe that claims must drop to around 425,000 to signal actual growth in employment. Economists expect 145,000 payroll job cuts for November, a slight improvement from the net job loss of 190,000 last month. Copyright 2009 National Public Radio