Striking workers at Verizon Communications pushed up new U.S. jobless claims last week, but there was little evidence the recent stock market turmoil had spooked businesses enough for them to cut workers.
Initial claims for state unemployment benefits rose 5,000 to 417,000, the Labor Department said on Thursday. While the level suggests the job market is still struggling to gain momentum, it falls well short of a recession signal.
The encouraging news is that despite all the negative news we have had in August, the pace of layoffs has held steady, said Omair Sharif, an economist at RBS in Stamford, Connecticut. The data flow really isn't consistent with a recessionary environment.
Striking Verizon workers filed 8,500 claims for jobless benefits last week, after submitting 12,500 applications the previous week, which covered the survey period for the government's monthly employment count.
Striking workers, however, are not eligible for jobless benefits and their applications will most likely be rejected.
But the 45,000 striking workers would not have been on Verizon's payroll during the week ended August 13 and could put a dent on the August jobs count to be released on September 2.
The Labor Department will provide a more definitive view of the strike's impact in its monthly strike report on Friday.
The relatively reassuring jobless claims data was released as central bankers from around the globe gathered for a conference in Jackson Hole, Wyoming.
Federal Reserve Chairman Ben Bernanke will deliver the keynote address on Friday, which will be monitored for any sign that a further easing of U.S. monetary policy is on the way.
Bernanke used a speech at Jackson Hole last year to lay groundwork for a $600 billion bond buying program the U.S. central bank launched in November.
Last year at Jackson Hole, the economy was looking a little on the soft side with unemployment claims climbing about 50,000 to 500,000, said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
This year, Bernanke is unlikely to suggest the Fed is about to embark on a new bout of bond buying, but he could hint at other more gradualist measures policymakers could take to shore up the flagging recovery.
DATA AT ODDS WITH RECESSION FEARS
Investors viewed the rise in claims as another negative for the ailing economy and bought U.S. government debt. Stocks on Wall Street fell as investors also worried about a sharp drop in German shares. The dollar rose broadly on safe-haven bids.
Fears the U.S. economy is on the brink of slipping back into recession have rattled stock markets, helping to dampen business and consumer confidence.
Regional manufacturing surveys so far for August have pointed to a contraction. But a gauge of factory activity in Kansas and surrounding states showed modest growth.
In contrast to the weak regional factory surveys, so-called hard data ranging from industrial production to durable goods orders and retail sales indicate an economy that continues to expand, although at a very tepid pace.
Kansas City Fed President Thomas Hoenig said on Thursday he did not believe the U.S. economy would fall into recession and saw growth of 2 to 2.5 percent over the rest of 2011.
I don't see a double-dip recession, Hoenig told Reuters Insider television.
While the labor market regained some ground in July, a new wave of layoffs centered in the financial sector, coupled with the deterioration in business sentiment, could reverse the trend in the months ahead.
JPMorgan economist Daniel Silver said that excluding the Verizon workers claims would have increased about 10,000 to 409,000 between the weeks ending August 13 and August 20, showing improvement relative to the July labor market survey week.
U.S. employers added 117,000 new jobs in July after increasing payrolls by only 99,000 in May and June combined.
Nonfarm employers are expected to have increased payrolls by anything up to 100,000 jobs this month, but economists at Nomura, citing the Verizon strike and weak business surveys, believe the government survey will show employment contracted.
The claims report showed that the number of people still receiving benefits under regular state programs after an initial week of aid was the lowest since September 2008 during the week ended August 13.
Data for so-called continuing claims covered the survey period for the household survey from which the unemployment rate is derived. The unemployment rate fell to 9.1 percent from 9.2 percent in June.