New jobless claims fall

WASHINGTON -- New claims for unemployment benefits fell last week by the largest number in more than a year, indicating that layoffs may be easing even as economic uncertainties-- including a possible war with Iraq -- make businesses wary of hiring a lot of people.

For the work week ending Dec. 21, jobless claims plunged by a seasonally adjusted 60,000 to 378,000, the Labor Department reported Thursday. That followed a drop in claims of 6,000 in the previous week and marked the second week in a row that claims declined.

Last week's decline represented the biggest decrease in claims since Oct. 6, 2001.

Economists would rather see claims go down instead of up, but they said that difficulties adjusting for seasonal factors during the holiday season can distort weekly claims figures. As a result, claims can swing widely -- in either direction -- this time of year and should be taken with a grain of salt, they said.

The four-week moving average of new jobless claims, which smooths out weekly fluctuations, edged up last week to 404,500, the highest level since the week ending Oct. 19.

Still, some economists believe the pace of layoffs over the course of this year is stabilizing or even slowing a bit, providing some comfort to people who have jobs but have been worried about keeping them during these trying economic times.

"The ray of hope is at least businesses aren't reducing payrolls. They are holding the line and seeing which way the economic winds blow," said Mark Zandi, chief economist at Economy.com. "I don't get the sense that businesses are ready to step up hiring in any significant way anytime soon."

On Wall Street, the Dow Jones industrial average lost 15.50 points to close at 8,432.61 in light, post-Christmas trading.

Even if companies reduce the speed at which they fire workers, they aren't in a rush to beef up hiring, meaning people out of work will continue to have a tough time finding a job, economists said.

The nation's unemployment rate jumped to 6 percent in November, matching an eight-year high set in April. Some economists believe the jobless rate could move to 6.3 percent or 6.5 percent by the spring of 2003.

Cautious companies

Companies are wary of making big commitments in capital investment and in hiring people, forces that are putting the biggest strain on the economic recovery, which has been advancing this year, but in fits and starts.

They are reluctant to make such investments because profits, which took a hit during last year's recession, are still hurting and economic uncertainties, including a possible war with Iraq, complicate planning and business decisions.

"Capital investment will be most dependent on the outlook for profits and the resolution of the uncertainties surrounding the business outlook and the geopolitical situation," Federal Reserve Chairman Alan Greenspan said in a speech last week.

"These considerations at present impose a rather formidable barrier to new investment," he added.

Against this backdrop, companies are likely to keep work forces relatively lean, economists said.

"The worst has probably passed in terms of firings, but we don't know when hiring is really going to pick up," said economist Clifford Waldman, president of Waldman Associates. "In corporate boardrooms the situation in Iraq and tensions in North Korea are holding back investment," he said.

The Federal Reserve earlier this month decided to keep a key interest rate at a 41-year low of 1.25 percent. Fed policy-makers hope low rates will motivate businesses to boost investment and keep consumers spending, forces that would boost economic growth.

President Bush has urged Congress to extend unemployment benefits soon after convening next month. But he has not said if he favors a more extensive plan offered by the Senate or a House version that would cover fewer jobless workers.

"Call backs for people who have been laid off will be slow," predicted Paul Taylor, chief economist at the National Automobile Dealers Association. "Corporations are trying to claw their way back to profitability. When more of them get there, you'll see a lot more hiring. But that won't be seriously under way until the second half of 2003."

On Saturday, more than 750,000 jobless workers are estimated to lose their federal unemployment insurance benefits, according to the Center on Budget and Policy Priorities, a liberal-leaning think tank.

Those people had exhausted 26 weeks of state benefits and were receiving up to 13 extra weeks from the federal government. But Congress failed to extend the program before adjourning for the year.

Also, an additional 95,000 unemployed workers each week will start running out of state benefits as of Saturday and won't get any extension from the federal government, the center said Thursday. Another 1 million jobless workers have already exhausted their benefits and still haven't found work.

The center urged Congress to pass a comprehensive package that would help all three groups of unemployed. Such a plan, however, could cost more than $2 billion.