The nation's jobs market sent a fresh cry of distress as the number of newly laid off people unexpectedly hit the highest level in more than six years, a Labor Department report showed Thursday.
The faltering economy and tight credit have forced companies to cut back, and as the job market shrinks, consumer spending may dwindle, too.
All that spells potentially more trouble for the country later this year as the bracing tonic of the government's tax rebates disappears. “Consumers will be very tightfisted in the coming months,” predicted Richard Yamarone, economist at Argus Research. “Nothing shuts down the consumer – and the economy – like the loss of a job.”
Companies are laying off workers as they struggle with slowing customer demand, harder-to-get credit and high costs for fuel and other raw materials.
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New applications filed for unemployment benefits rose last week by a seasonally adjusted 7,000 to 455,000, the department said in its weekly report. That was the most since late March 2002, when the job market was struggling mightily to get back on its feet after the 2001 recession.
A program to locate people eligible for jobless benefits played a role in last week's increase, a department analyst said.
The latest snapshot of layoff filings was worse than economists expected. They were forecasting new claims to drop to around 430,000.
The data disappointed Wall Street and the White House. The Dow Jones industrials fell nearly 225 points, or almost 2 percent.
“The job market isn't strong right now as we work through the downturn in housing and high energy prices. We would like to see more job creation,” said White House spokesman Tony Fratto. He credited the government's stimulus program as a helpful cushion.
The number of people continuing to collect unemployment benefits went up by 31,000 to 3.3 million for the week ending July 26. That was the highest since early December 2003.
Among the companies announcing job cuts in late July or early August were General Motors Corp., Weyerhaeuser Co., and Starbucks Corp. Bennigan's restaurants, owned by privately held Metromedia Restaurant Group, are closing, driving more people to unemployment lines.