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Unemployment claims spike due to Sandy

by Camille Izlar
Nov 15, 2012

The number of people filing for first-time unemployment benefits –- driven by the impact of Hurricane Sandy and seasonal construction layoffs -- surged to an 18-month high in the week ended Nov. 10, the Labor Department reported Thursday.

Initial claims, which totaled 361,000 in the previous week, climbed by 78,000 to 439,000, the highest reading since April, 2011.

“After a storm, the data is distorted to some extent, depending on the magnitude and geography of the disaster,” said Nathaniel Karp, chief economist for BBVA Compass. “Given what happened with Sandy,” he predicted, “we will see higher volatility in many indicators for a couple of months until everything begins to normalize.”

The four-week moving average of initial claims, a measure that many economists favor because it smoothes out short-term fluctuations, increased 17,750 to 383,750 from the previous week’s revised average of 372,000. That’s a slightly worse reading than the year-ago moving average, which was 393,750.

The report indicated that the economy is still growing below trend and attempting to recover some of its lost momentum. While the government recently reported that 171,000 jobs were created last month, Karp said, such positive developments must happen at a faster pace in order to make a difference.

“It can be somewhat frustrating, as we would like to see a stronger recovery, but at least we are moving forward,” said Karp.

The number of people continuing to collect unemployment benefits rose in the week ended Nov. 3 to 3.3 million, the highest level since July of 2008, and 171,000 more than the week prior.

Sandy’s damage hasn’t yet been fully reflected in the jobs data, the Labor Department said: Power outages from the storm have delayed processing of initial and emergency claims in hard-hit areas.

The states with the highest unemployment filings were Pennsylvania, Ohio, New Jersey and Michigan. Pennsylvania and Ohio processed more claims than states hit by Sandy, due to construction layoffs.

“The construction industry is still under a severe recession,” said Tom Owens, director of communications at America’s Building Trade Unions.

“With government projects finishing up and the winter season coming on, we usually have a spike in unemployment,” said Owens.

In the unadjusted data, the labor department reported 4.9 million claims for the week ended Oct. 27, a 2 percent decrease from the week before. The total number is also a 26 percent decrease from those claiming unemployment in the week of 2011.

The report, combined with the government’s fiscal-deficit situation, may increase pressure on policy-makers to create a sustainable U.S. fiscal strategy.