This possibly will cause initial filings for aid to overstate labor market weakness over the next several weeks.
The Labor Department reported on Thursday that new filings for state unemployment insurance shot up by 44,000 last week. However, government analysts and several economists were rather quick to blame the increase on unemployed workers who have never applied for benefits after they were informed about the new program.
President George W. Bush on June 30 signed into law, a program which allows up to
1.55 million unemployed workers who drain the 26 weeks of government checks they would usually receive to get an additional 13 weeks of facilitation as they hunt for new jobs.
Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, New York said, “We have no doubt that the trend in claims is upwards but this number overdoes the gloom," said. He also adds that, "As for the true trend, we'd guess it is just north of 400,000, so the headline number ought to head back there soon."
The department has since revealed that some applicants under the new emergency program were eligible to participate under the regular benefits program.
The department blames those applicants behind last week's spike in claims. According to the department, problems will assize because it’s not possible to quantify the impact.
According to senior economists, claims over 400,000 may be a sign of a labor market that is deteriorating fast enough to suggest recession.
"That was a jolt, no question about it,” said David Resler, chief economist for Nomura Securities International in New York.
A majority of economists hold the view that the economy is still very weak to create new jobs despite the latest data that might actually be slanted.
Source Reuters
