Published: Friday, August 20, 2010
Spike in layoffs feeds fear of faltering economic recovery
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Associated Press
Unemployed mechanic Jaime Rivas calls to request an extension of his unemployment benefits at the Glendale Workforce Services Center on Thursday in Glendale, Calif. Employers appear to be laying off workers again as the economic recovery weakens. The number of people applying for unemployment benefits reached the half-million mark last week, the highest level since November.
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Associated Press
Blanca Alvarez, left, and Carmen Plascencia takes a basic computer course Thursday at the Chicago Workforce Center in Chicago. The center offers employment assistance for job seekers.
WASHINGTON -- Layoffs are back, and that's bad news for the fragile economic recovery.
New applications for unemployment benefits hit a nine-month high last week -- a spike that suggests private employers may shed jobs this month for the first time this year. Workers are losing construction jobs in Georgia and manufacturing jobs in Indiana. Some of the layoffs are coming as stimulus money dries up and public works projects come to a halt. Government employees are being let go, too, as states and cities grapple with budget crises.
Without more jobs, consumers will not feel secure enough to spend much money, further slowing the economy. The grim outlook has economists lowering their estimates for growth in the second half of the year. And on Thursday it led to a sell-off on Wall Street led by investors worried that the United States could tumble back into recession.
"Today's news on the economy has been nothing but awful," Paul Ashworth, an economist at Capital Economics, wrote in a note to clients. "The recovery is clearly slowing."
The Labor Department announced Thursday that initial claims for jobless benefits rose by 12,000 last week to 500,000 -- the highest level since November and the third straight increase.
As the economy recovered from the worst downturn since the 1930s, jobless claims declined steadily from a peak of 651,000 in March 2009 to a low of 427,000 in July before rising steadily over the past six weeks. In a healthy economy, jobless claims usually drop below 400,000.
"This is obviously a disappointing number that shows ongoing weakness in the job market," said Robert Dye, senior economist at the PNC Financial Services Group.
Mortgage rates have fallen to the lowest level in decades over the past two months and could dip below 4 percent if the economy worsens. The average rate for 30-year fixed loans fell this week to 4.42 percent, mortgage buyer Freddie Mac said Thursday. It was the eighth time in nine weeks that rates have fallen to the lowest level since Freddie Mac began tracking rates in 1971.
Investors fear the recovery is slowing. Mortgage rates are following the economic jitters. Rates track the yields on U.S. Treasurys. Those yields have lowered in recent months as more investors put their money into safer Treasurys.
Rates could fall to 4 percent sometime next year if the economy slips back into a recession, said Michael Moskowitz, chief executive of Equity Now, a New York-based mortgage lender with operations in six states.
"The economy is going nowhere for a very long time," he said.
The average rate on 15-year fixed loans dropped to 3.9 percent. That was down from 3.92 percent last week and the lowest on records dating back to 1991.
Low rates have not helped the struggling housing market. It is hampered by tight credit and a weak economy that is producing few jobs. The current elevated level of unemployment claims is a sign that employers are reluctant to hire until the rebound is well under way. That's what happened after the 1991 and 2001 recessions, which were dubbed "jobless recoveries."
Economists caution that more than 350,000 temporary census jobs ended in recent months, and those workers could be applying for benefits. Congress also recently restored an extended unemployment benefits program, which can sometimes spike claims.
The jobless report and a separate report showing that manufacturing activity in the mid-Atlantic declined in August sent stock markets tumbling. The Dow Jones industrial average closed down 144 points for the day. Interest rates dropped sharply as investors flocked to the safety of Treasury bonds.
New applications for unemployment benefits hit a nine-month high last week -- a spike that suggests private employers may shed jobs this month for the first time this year. Workers are losing construction jobs in Georgia and manufacturing jobs in Indiana. Some of the layoffs are coming as stimulus money dries up and public works projects come to a halt. Government employees are being let go, too, as states and cities grapple with budget crises.
Without more jobs, consumers will not feel secure enough to spend much money, further slowing the economy. The grim outlook has economists lowering their estimates for growth in the second half of the year. And on Thursday it led to a sell-off on Wall Street led by investors worried that the United States could tumble back into recession.
"Today's news on the economy has been nothing but awful," Paul Ashworth, an economist at Capital Economics, wrote in a note to clients. "The recovery is clearly slowing."
The Labor Department announced Thursday that initial claims for jobless benefits rose by 12,000 last week to 500,000 -- the highest level since November and the third straight increase.
As the economy recovered from the worst downturn since the 1930s, jobless claims declined steadily from a peak of 651,000 in March 2009 to a low of 427,000 in July before rising steadily over the past six weeks. In a healthy economy, jobless claims usually drop below 400,000.
"This is obviously a disappointing number that shows ongoing weakness in the job market," said Robert Dye, senior economist at the PNC Financial Services Group.
Mortgage rates have fallen to the lowest level in decades over the past two months and could dip below 4 percent if the economy worsens. The average rate for 30-year fixed loans fell this week to 4.42 percent, mortgage buyer Freddie Mac said Thursday. It was the eighth time in nine weeks that rates have fallen to the lowest level since Freddie Mac began tracking rates in 1971.
Investors fear the recovery is slowing. Mortgage rates are following the economic jitters. Rates track the yields on U.S. Treasurys. Those yields have lowered in recent months as more investors put their money into safer Treasurys.
Rates could fall to 4 percent sometime next year if the economy slips back into a recession, said Michael Moskowitz, chief executive of Equity Now, a New York-based mortgage lender with operations in six states.
"The economy is going nowhere for a very long time," he said.
The average rate on 15-year fixed loans dropped to 3.9 percent. That was down from 3.92 percent last week and the lowest on records dating back to 1991.
Low rates have not helped the struggling housing market. It is hampered by tight credit and a weak economy that is producing few jobs. The current elevated level of unemployment claims is a sign that employers are reluctant to hire until the rebound is well under way. That's what happened after the 1991 and 2001 recessions, which were dubbed "jobless recoveries."
Economists caution that more than 350,000 temporary census jobs ended in recent months, and those workers could be applying for benefits. Congress also recently restored an extended unemployment benefits program, which can sometimes spike claims.
The jobless report and a separate report showing that manufacturing activity in the mid-Atlantic declined in August sent stock markets tumbling. The Dow Jones industrial average closed down 144 points for the day. Interest rates dropped sharply as investors flocked to the safety of Treasury bonds.
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