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U.S. Department of Labor/Fareeha Ali, Medill

The number of American workers filing for first-time  unemployment insurance benefits increased by 66,000, the biggest spike since last November.

Jobless claims surge in wake of California computer glitch

by Fareeha Ali
Oct 10, 2013

The number of Americans filing for first-time unemployment insurance benefits soared to the highest level in six months in the biggest one-month spike since the aftermath of Superstorm Sandy, according to the U.S. Department of Labor. 

Because the claims data is collected by each state, it was the only government economic report that could be released this week amidst the ongoing federal shutdown.

While the government shutdown had a modest impact on the weekly claims data, it was a computer-related glitch in California that was the main reason for the dramatic rise.

U.S. jobless claims leaped 66,000 to 374,000 for the week ended Oct. 5, a much bigger-than-expected increase. Economists surveyed by Bloomberg had predicted an increase to 311,000 from the previous week’s 308,000.  

The four-week moving average, a figure used to smooth out week-to-week volatility in unemployment claims, increased by 20,000 to 325,000.

Continuing claims, the running total number of people claiming unemployment benefits, fell 16,000 to 2,905,000 for the week ended Sept. 28.

California switched over to a new computer system in early September, which has resulted in delays in working through claims applications.

“Roughly half of the increase in claims, about 33,000, are attributed to the delayed claims in California due to the computer glitch,” Tom Stengle of the Department of Labor said in an interview.

Stengle said the Department of Labor estimates that about 15,000 claims reflected the furlough of non-federal employees affected by the government shutdown.

Though the economic report partially reflected the impact of the government shutdown on the private sector, the full impact of it is still to come.

“The impact of the government shutdown on economic data almost certainly will increase in the weeks ahead when monthly data for October are released,” Tony Crescenzi, executive vice president, market strategist and portfolio manager at PIMCO, said in an email exchange.

Crescenzi asserts that “contaminated” economic data will make it difficult for policymakers and investors to discern the underlying trend in economic activity.

“In time, these distortions will wash out, but it will take time,” Crescenzi said. “One notion to keep in mind is the idea that economic activity in some cases will be delayed rather than destroyed, with purchase decisions simply delayed because of delays in the receipt of income.”