WASHINGTON (AP) — The number of people applying for unemployment benefits surged last week to the highest level in eight months, a sign that the job market continues to struggle to gain any momentum.
The Labor Department said Thursday that applications rose by 43,000 to 474,000 in the week ended April 30, the third increase in four weeks. The four-week average, a less volatile measure, rose for the fourth consecutive week to 431,250.
Applications near 375,000 are typically consistent with sustainable job growth. Weekly applications peaked during the recession at 659,000.
Rising unemployment applications and other weak economic data this week have prompted some analysts to worry that higher fuel prices may be causing employers to slow their pace of hiring.
The government will release its April jobs report on Friday. Economists are projecting that the economy probably added 185,000 jobs in April and the unemployment rate may remain 8.8 percent, but some are now saying the numbers of added jobs could be lower.
A department spokesman blamed much of the increase on an unexpected spike in applications from New York, where more school systems than usual closed for spring break last week. That resulted in 25,000 layoffs. The department did not anticipate the closures when making seasonal adjustments, the spokesman said.
Other factors also contributed to the increase, the spokesman said. Oregon started its own extended unemployment benefit program, which caused an increase in overall applications in the state for unemployment benefits. And auto-related layoffs rose, as some companies have shut down or slowed production because of parts shortages stemming from the earthquake in Japan.
Still, applications have risen sharply in recent weeks, raising concerns that high gasoline and food prices are cutting into consumer spending and slowing the economy. Businesses are also facing higher costs for raw materials, which reduce profit margins. They may be cutting back on hiring as a cost-saving measure.
Other recent data have also pointed to a weaker job market. A private trade group said Wednesday that a measure of employment growth in the service sector, which employs 90 percent of the work force, slowed for a second month. The report, by the Institute for Supply Management, still showed that employment rose, but at the slowest pace in seven months.
In a second report, American companies squeezed more work out of their staffs in the first three months, but the gain in productivity was much slower than the previous three months.
The Labor Department said productivity rose at an annual rate of 1.6 percent in the January-March period compared to a 2.9 percent increase in the previous quarter. Labor costs rose at a 1 percent annual rate in the quarter after falling 1 percent in the previous three months.
A slowdown in productivity growth is bad for the economy if it persists for a long period. But it can be good in the short term when unemployment is high, because it signals companies must hire more workers in order to make further gains.
Analysts expect productivity will slow to around 2 percent growth. They say companies are reaching the limits on how much they can get from their existing work forces.
Employment growth has picked up in recent months. Businesses added more than 200,000 workers in both February and March — the first time that has happened in five years. The unemployment rate fell to a two-year low of 8.8 percent in March.
During the recession, companies found ways to produce more goods and services with fewer workers. Greater productivity helped them bolster profits. But it also allowed them to hold back on hiring after companies slashed millions of jobs during the downturn.
Productivity is the amount of output per hour of work. The Federal Reserve watches this figure carefully. Increases in productivity allow companies to pay workers more without being forced to raise the prices of their products, which can cause inflation.
The cost of labor per unit of output is expected to return to positive territory this year after having falling in both 2009 and 2010. However, the increase is expected to be well below levels that would signal wage pressures, which could trigger inflation concerns.
Article source: http://feeds.nytimes.com/click.phdo?i=67b6d1f9f0dfba282872c39fac147e94