Published: February 12, 2009 11:34 am      

New jobless claims drop slightly to 623K

WASHINGTON — Nearly 5 million Americans continued to draw jobless benefits late last month, and new requests again exceeded 600,000 as companies lay off scores of workers amid a deepening recession.

In slightly better economic news, retail sales rose unexpectedly in January, reversing six months of decline and following a dismal holiday season. But analysts said the jump was unlikely to last, partly because of the weak job market.

The Labor Department said Thursday that the number of initial jobless benefit claims dropped to a seasonally-adjusted 623,000, from an upwardly revised figure of 631,000 the previous week. The latest tally still was above analysts’ expectations of 610,000 claims.

And in a sign that laid-off workers are having difficulty finding new work, the number of people claiming benefits for more than one week rose to 4.81 million from 4.78 million, the highest total since records began in 1967. The continuing claims data lag new claims by a week.

An additional 1.5 million people are receiving benefits under an extended unemployment compensation program approved by Congress last year, bringing the total number of recipients to 6.3 million.

Continuing claims are up sharply from a year ago, when the figure was 2.7 million.

“The smaller-than-expected decline suggests that the recent spike in claims reflects a fundamental deterioration in labor market conditions rather than statistical noise,” David Resler, chief economist at Nomura Securities, wrote in a research note.

Meanwhile, the Commerce Department reported Thursday that retail sales jumped 1 percent in January, defying expectations of a 0.8 percent drop. The rise in sales follows a 3 percent plunge in December, which marked the weakest holiday selling season since at least 1969.

But higher gasoline prices and sales, and buyers snapping up other items on post-holiday discounts appeared to aid last month’s results.

“This is a big surprise, though the net rise in sales is less impressive than it looks because (December and November) were revised down by 0.3 percent each,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a research note. “The headline relief today is welcome but it is unlikely to last.”

Business inventories, meanwhile, plummeted in December by the largest amount in seven years as companies sought to cut stockpiles in response to the dismal holiday season. The Commerce Department said inventories dropped by 1.3 percent, far worse than the 0.9 percent analysts expected.

The financial markets fell on the news. The Dow Jones industrial average dropped more than 170 points in midday trading, and broader indices also declined.

The 631,000 new jobless claims filed two weeks ago was the highest tally since October 1982, when the economy was emerging from a steep recession, though the labor force has grown by about half since then.

The four-week average of claims, which smooths out fluctuations, rose by 24,000 to 607,500, the first time that figure has topped 600,000 in the current recession.

Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 339,000.

Companies from a range of sectors are hemorrhaging jobs as the recession worsens. Consumers have cut back on their spending in response to declining home values and plummeting stock portfolios, and businesses also are tightening their belts.

On Wednesday, Boston-based money manager Putnam Investments said it would cut 260 jobs, or about 10 percent of its work force.

A day earlier, General Motors said it would cut 10,000 salaried jobs, or 14 percent of its white-collar employees. FedEx Corp. said Monday it is eliminating 900 positions.

Among the states, California saw the biggest increase in jobless claims, a jump of 20,000 that it attributed to layoffs in construction and service industries. The next largest increases were in: North Carolina, with 8,663; Ohio, with 4,738; Georgia’s 4,392; and Kansas, with 3,232.

Virginia saw the largest drop in claims, a decline of 1,937, which it attributed to fewer layoffs in manufacturing. Drops of 1,000 or more also were reported in New Jersey, Missouri, Oklahoma and Connecticut.