U.S. Jobless Claims Exceed 600,000 for a Fifth Week

More than 600,000 Americans filed initial claims for jobless benefits last week as companies strived to cut the costs of workforces that are producing less as the recession deepens.

The Labor Department today reported 639,000 first-time unemployment applications, the fifth straight week above 600,000. The agency also said worker productivity, a measure of employee output per hour, fell at a 0.4 percent annual rate in the fourth quarter of 2008, with labor costs climbing 5.7 percent.

Today’s figures underscore the economy’s downward spiral, with companies from J.Crew Group Inc. to billionaire investor Warren Buffett’s Berkshire Hathaway Inc. eliminating jobs, and rising unemployment aggravating the slump in consumer spending. Stock-index futures slid and Treasuries climbed.

“The deterioration of the labor market certainly continues; this is a pretty bleak picture,” Harm Bandholz, a U.S. economist at UniCredit Global Research in New York, said in an interview with Bloomberg Television.

The Standard & Poor’s 500 Stock Index dropped 2.1 percent to 697.84 at 9:35 a.m. in New York. Benchmark 10-year note yields fell to 2.88 percent from 2.98 percent late yesterday.

Geithner Warning

The Obama administration is counting on a series of stimulus efforts to jolt the economy and create or save 3.5 million jobs. Treasury Secretary Timothy Geithner yesterday warned lawmakers in a Senate hearing that “this is still a deepening recession and a deepening credit crunch,” and said more money may be needed to address the financial crisis.

Economists forecast the Labor Department tomorrow will say U.S. payrolls fell by 650,000 in February, the most since 1949, according to a Bloomberg News survey. The unemployment rate probably surged to 7.9 percent.

Jobless claims for the week that ended Feb. 28 were projected to fall to 650,000, from an originally reported 667,000 a week earlier, according to the median of 43 estimates in a Bloomberg News survey.

The drop in productivity reported today compares with the Labor Department’s previous estimate of a 3.2 percent gain for the fourth quarter. The increase in labor costs was also more than first estimated, and the biggest gain in two years.

4-Week Average

The four-week moving average of initial claims, a less volatile measure, climbed to 641,750, the highest level since October 1982.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Feb. 21. Fifteen states and territories reported an increase in new claims for that same period, while 38 reported a decrease.

The total number of people receiving benefits decreased to 5.106 million in the week ended Feb. 21 from a record 5.12 million the prior week.

Initial claims reflect weekly firings and tend to rise as job growth slows.

A report from ADP Employer Services yesterday showed U.S. companies cut an estimated 667,000 jobs in February, up from 614,000 the month before. The ADP figures include only private employment and do not take into account hiring by government agencies.

Biggest Slump

Already the 3.6 million jobs lost since the U.S. recession began in December 2007 mark the biggest employment slump of any economic contraction in the postwar period.

The faltering labor market has caused consumer sentiment to plummet and crippled spending. Purchases dropped at a 4.3 percent rate in the fourth quarter, the most since 1980, according to Commerce Department figures.

The Reuters/University of Michigan’s sentiment index measuring Americans’ outlook over the next six months, which tends to track consumer spending, fell to 50.5 in February. The group’s measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it’s a good time to buy expensive items such as cars, fell to 65.5.

Federal Reserve Chairman Ben S. Bernanke this week told the Senate Budget Committee that policy makers may need to expand aid to the banking system and take other aggressive measures even at the cost of soaring fiscal deficits.

“Without a reasonable degree of financial stability, a sustainable recovery will not occur,” the Fed chairman said.