Increase in Jobless Claims May Signal Weak Recovery

New applications for unemployment benefits rose an unexpectedly sharp 47,000 in early June, the Labor Department said Thursday, ending four straight weeks of declines and suggesting that the emerging recovery will be weak.

California, one of the last states to enter the recession, was hardest hit, with a 23% jump in new claims--or 13,103 applicants. A department analyst said layoffs were widespread in construction, aerospace, finance, business services and schools.

The department said claims from newly out-of-work Americans reached 448,000 in the week ended June 8, the highest level since 454,000 new claims in the week of May 11.

“It’s not good news. It may indicate that the economy has not bottomed or that a recovery had begun and then got short-circuited,” said Jack Albertine, who heads an economic forecasting firm in Washington.

Economists had forecast only a modest rise in new claims, to 419,000 from 401,000 the previous week.

Other recent economic data has shown rebounds in factory orders, retail sales and hiring practices. Two weeks ago, the government said the unemployment rate shot up to 6.9%, while a separate survey showed businesses adding workers.

“It’s another sign that confusion reigns, relative to the start of this recovery,” Albertine said.

It was easier to tell when past recessions were over, noted Allen Sinai, chief economist at Boston Co.

“It was much easier with earlier episodes, when we came barreling out, firing on all pistons, with explosive jobs growth. That’s not happening this time,” Sinai said.

Many analysts expect this recovery to be anemic, with various sectors of the economy slow to turn around.

In May, jobless claims had fallen for four straight weeks, something that had not happened since 1982, when the economy was pulling out of the last recession.

That stretch of improvements, coupled with other encouraging economic data, had prompted many analysts to predict that the recession might be ending.

Part of the sharp rise in jobless claims in early June could have been because the previous week included the Memorial Day holiday, giving workers fewer days to file claims and prompting them to wait until the first week of June to visit the unemployment office, analysts speculated.

Still, early June’s big increase in jobless claims raises doubts about a recovery, analysts said.

The numbers “call into question the improvement of the labor market we saw in May,” said Robert Brusca, chief financial economist at Nikko Securities.

“I’m skeptical about this idea that we’re getting a bounce back in the economy,” Brusca said.

Much of May’s good news had to do with warm weather, he said. Consumers bought summer merchandise a month early.

“I don’t think we really improved,” Brusca said.

At the end of May, jobless claims had fallen by 38,000 to around 400,000--just the level analysts said was needed to indicate that the economy was turning around.

May’s numbers were a drastic improvement over the levels of March, when claims topped the half-million mark for three consecutive weeks.

Another sign of weakness in Thursday’s report was the fact that the number of people receiving unemployment benefits during the week ending June 1 rose by 136,000 to 3.6 million.

That pushed the percentage of the labor force receiving unemployment aid to 3.4% from 3.3%. That means half the nation’s jobless are receiving benefits.

Illinois endured a 9,000-person increase in jobless claims, which it blamed on layoffs in services, manufacturing and wholesale and retail trade.

Pennsylvania reported a 4,000-person increase due to layoffs in construction, apparel, transportation, services and manufacturing.