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Last updated: November 15, 2012 4:58 pm
The number of people claiming unemployment insurance for the first time leapt last week – a sign that “superstorm” Sandy was taking its toll on the US economy.
Consumer prices, meanwhile, rose at the slowest pace for three months in October.
First-time claims for jobless benefits jumped 78,000 to 439,000 in the week ending November 10 – the highest number since April 2011, the labour department reported.
The figures were well above the previous week’s upwardly revised figure of 361,000 and ahead of consensus forecasts of 376,000.
Several states linked the increase in new claims to the superstorm that battered the US east coast in late October, according to a labour department official.
Extreme weather can hold down filings initially as those affected are hampered by damage to their homes, power and water outages and transport problems. Government officials and economists said it might take three to four weeks for the storm’s impact to be fully realised in the weekly claims data.
The four-week average of new claims, which smooths out the volatility of the weekly data and is seen as a more accurate barometer of labour market trends, rose to 383,750 – an increase of 11,750 from the previous week’s upwardly revised average of 372,000.
“We knew there would be a hurricane impact on claims – last week it didn’t happen but this week it most certainly did. It is going to be a problem for the next several weeks and the monthly payroll report will also be distorted for November,” said Dwight Johnston, senior economist for the California and Nevada Credit Union Leagues. “But scraping away all the noise, average payroll growth is very steady.”
Initial jobless claims reflect weekly firings and tend to fall as jobs growth – measured by the monthly non-farm payrolls report – accelerates.
Going into the storm, the labour market was showing signs of improvement. Economists say readings of fewer than 400,000 point to an increase in employment, with hiring outpacing lay-offs.
Continuing claims for jobless benefits climbed by 171,000 to 3.33m in the week ending November 3 – the highest figure for more than four years.
The number of people collecting emergency and extended payments decreased by about 33,300 to 2.12m in the week ending October 27.
Superstorm Sandy and its aftermath disrupted factory activity in the mid-Atlantic region of the US by a much greater-than-expected level. The Philadelphia Federal Reserve Bank reported that its business activity index fell sharply to minus 10.7 from 5.7 the month before. Analysts had expected a level of 4.5.
“Firms reported declines in overall activity, new orders, shipments, and employment. But the influence of the recent storm in terms of lost production in the short run and reduced activity for longer periods was evident in firms’ responses to questions about the storm’s impact on business activity,” said the report.
The storm had a muted impact, however, on the Federal Reserve Bank of New York’s Empire State manufacturing index, which covers production in New York, northern New Jersey and southern Connecticut.
The index posted a negative reading of minus 5.22 in November, compared with minus 6.16 in October. Economists had expected a level of minus 5. Readings of less than zero indicate contraction.
The headline consumer price index posted a 0.1 per cent increase, following a 0.6 per cent gain in September, a repeat of August which was the largest rise since June 2009. The data came in line with expectations.
The Federal Reserve has said it is not concerned about the inflation rise and is more focused on the other half of its dual mandate: maximum employment.
Core CPI, which excludes the volatile food and energy components, increased 0.2 per cent, as expected, following a 0.1 per cent rise in September.
Among key components, energy dipped 0.2 per cent last month after posting a 4.5 per cent surge in September. This reflected a 0.6 per cent decline in petrol prices in October after a 7 per cent jump the previous month.
Food prices rose 0.2 per cent, following a 0.1 per cent gain in September.
“The effect of the summer drought on food prices is starting to make its way into consumer prices,” said Leslie Levesque, senior economist at IHS Global Insight.
The cost of shelter, which includes rents, rose 0.3 per cent – the biggest increase for more than four years.
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