Unemployment Claims Rise Due to Shutdown & Glitches

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The unemployment weekly claims report released by the US Department of Labor indicates that initial unemployment claims rose to 374,000 this week, up 66,000 from the 308,000 total last week.

The shutdown of the United States government was bound to impact the labor market, but the impact on these reported claims is perhaps less than one thinks. While 500,000 government employees are available to sign-up for unemployment benefits due to having been furloughed by the shutdown, these claims are filed under a different category. Thus, their numbers have not been added into this latest report from the Department of Labor.

That being said, approximately 15,000 of the new claims can be directly related to private sector positions affected by the shutdown. Employees hired by government contractors or those who work in businesses near federal landmarks are among those private sector members who have seen the most drastic layoffs. URS Corp., a San Francisco-based engineering services firm, had to layoff around 3,000 workers due to the decreased workload from the government shutdown.

About one-half of the increase in unemployment claims can be linked to glitches in California's unemployment system. Last week, the state upgraded their computer systems. The glitch delayed new claims from being processed, meaning the backlog of new filings was just pushed through this week.

The 66,000 new claim increase is the largest increase in jobless claims since superstorm Sandy hit in November of last year. That being said, the adjusted new claims, once all the anomalies are accounted for, is around 326,000. This number is almost directly in-line with the 4-week average of 325,000, therefore economists believe there is no real reason to worry about this particular surge.

Chief US economist for Capital Economics, Paul Ashworth, stated that "The broader picture is still that labor market conditions are improving, albeit not quite as much as we previously thought."

Ashworth's statements are corroborated by the fact that the continued, insured unemployment rate decreased by 16,000 from the previous week, meaning that people who were unemployed are finding work somewhere. Unfortunately, though, the extended unemployment rate continues to increase.

The simple fact is that unemployment rates will continue to climb as long as the shutdown persists. While headway has been made with news of the Republicans willing to negotiate raising the debt ceiling, a positive economic turnaround still seems to be a long-ways down the road.

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