Economy

Unemployment claims drop below 400,000

by Vicki Needham - 11/10/11 2:09 PM ET

A drop in layoffs is a positive sign, but businesses need to pick up hiring, which would bolster much-needed consumer spending — 70 percent of economic activity relies on consumer purchases.

The 9 percent unemployment rate reported in October will remain stuck around that level if employers don’t add more workers. The Federal Reserve recently revised its forecast on the jobless rate, expecting at least anywhere between 8.5 percent and 8.7 percent through next year.

Initial unemployment claims also need to drop below 375,000 to reflect a healthy job market, economists say.

Applications fell to 375,000 in February and stayed below 400,000 for two months before hitting an eight-month high of 478,000 in April.

The number of people continuing to receive unemployment benefits dropped more than expected to 3.62 million, down 92,000 for the week ended Oct. 29.

Workers who have run through their 26 weeks of state benefits and are getting federal emergency and extended payments increased by about 43,500, to 3.53 million, in the week ended Oct. 22, the Labor Department said.

The economy added 80,000 jobs in October — a four-month low — but the Labor Department revised upward the figures for August and September that show more gains in jobs than initially expected, a positive sign for a sluggish economy.

A separate report on Tuesday showed that job openings reached a three-year high in September, still below pre-recession levels but a good sign for an economy that has been showing signs of life.

Private- and public-sector job openings were measured at 3.35 million, up from 3.1 million in August and the most since the height of the financial crisis in August 2008, the Labor Department said Tuesday.

Openings are well above the 2.75 million reported in September last year and have been trending upward since the recession ended in June 2009.

Another positive sign was economic growth in the third quarter — it hit an annual pace of 2.5 percent — the best in a year but still well below what is needed to knock down the persistently high unemployment rate.

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