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Plant closures prompt jobless claims increase

Christopher S. Rugaber
AP Economics Writer

Washington — The number of newly laid-off workers seeking jobless benefits rose last week, though the government reported the figures are distorted by the timing of auto plant shutdowns.

Unemployment insurance claims have declined steadily since spring, but most private economists and the Federal Reserve expect jobs to remain scarce and the unemployment rate to top 10 percent by the end of the year.

Elsewhere, the housing market showed more signs of life as sales of previously occupied homes rose for the third straight month in June, according to the National Association of Realtors.

The Labor Department reported Thursday its tally of initial claims for unemployment insurance rose by 30,000 to a seasonally adjusted 554,000. That was above analysts’ estimates of 550,000.

The increase follows two straight weeks of sharp drops largely because automakers did not lay off as many workers as expected in early July. General Motors and Chrysler temporarily shut down many of their plants earlier than usual this year, in May and June, after filing for bankruptcy protection and restructuring their companies.

A department analyst said the government’s seasonal adjustment process expected claims to drop sharply last week, after the normal pattern of auto layoffs was complete. But that didn’t happen, causing seasonally adjusted claims to rise.

Still, some economists saw positive signs in the report. The four-week average of claims, which smoothes out fluctuations, dropped to 566,000, its lowest level since January.

“The trend in jobless claims is still downward,” Joseph Lavornga, chief U.S. economist at Deutsche Bank, wrote in a note to clients.

But Lavornga also said the unemployment rate likely will keep rising as long as initial claims remain above 400,000. He said he expects the jobless rate to increase to 9.6 percent this month, from a 26-year high of 9.5 percent in June.

Weekly claims remain far above the 300,000 to 350,000 that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007. The lowest level this year was 488,000 for the week ended Jan. 3.

On the housing front, home sales rose more than expected to a seasonally adjusted annual rate of 4.89 million last month, from a downwardly revised pace of 4.72 million in May. Home sales last rose for three straight months in early 2004 during the housing boom.

But prices are expected to keep falling well into next year because of a backlog of foreclosures that have yet to enter the market. The median sales price was $181,800 last month, down 15 percent from last year but up from $174,700 in May.

The recession, which started in December 2007 and is the longest since World War II, has eliminated a net total of 6.5 million jobs.

Among the states, New York reported the largest increase in initial claims, with 12,504, which it attributed to higher layoffs in the construction and transportation industries. The next largest increases were reported by North Carolina, Florida, Missouri and Tennessee. The state data lags initial claims by one week.

Michigan reported the largest decrease, with 6,648, which it attributed to fewer layoffs in most industries. Massachusetts, New Jersey, Indiana and California reported the next largest drops.

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