Jobless claims fall unexpectedly

The number of initial claims for unemployment insurance fell last week, with the number of people collecting benefits overall hitting a fresh record high of 6.27 million, according to a government report released Thursday.

In the week ended April 25, there were 631,000 initial jobless claims filed, down 14,000 from a revised-up 645,000 the previous week, the Labor Department said.

Economists expected 640,000 new claims, according to a consensus survey by Briefing.com.

The 4-week moving average of initial claims was 637,250, down 10,750 from the previous week.

"The past few weeks' claims data are beginning to look increasingly like a peak," wrote Ian Shepherdson, economist at High Frequency Economics, in a research note.

But it remains unclear whether that peak was a correction from the quick rise in claims after Lehman Brothers failed in September, or if it marks "a real cyclical turning point," Shepherdson wrote.

"We are inclined to think the former is more likely ... Still, flat or falling claims have to be better than rising claims," he wrote.

Continuing claims record: In a sign that more people are having trouble finding work, 6,271,000 people continued filing for unemployment insurance in the week ended April 18, the most recent data available. That's a record high, and an increase of 133,000 from the previous week.

The 4-week moving average for continuing claims was was 6,076,000, an increase of 131,500 from the week prior.

A separate report released Wednesday showed the economy shrank at an annual pace of 6.1% in the first quarter, almost as much as it did in the fourth quarter of 2008.

Earlier this month, the government reported two million jobs were lost through March 2009, bringing the nation's unemployment rate to the 25-year high of 8.5%. The nation has lost 5.1 million jobs since the beginning of 2008.

State highs and lows: The largest increases for the week ended April 18, the most recent data available, were in California, with 8,535; New York, at 6,959; Connecticut, with 3,086; Georgia, at 3,056; and North Carolina, 2,983. Those spikes were likely due to layoffs in the service and manufacturing industries, among others, the report said.
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By contrast, 14 states reported claims decreased by more than 1,000. Pennsylvania reported 7,799 fewer claims, which a state-supplied comment attributed to fewer layoffs in the construction, service and transportation industries.

Stock rally: Meet more roadblocks

A stock rally that hit some potholes last week is likely to face more substantial roadblocks in the week ahead.

Roughly one-third of the S&P 500 reports results next week. Major economic reports are due on gross domestic product growth and consumer spending. The Federal Reserve holds its next policy-setting meeting. Chrysler's fate hangs in the balance. And investors gear up for the release of the "stress tests" of the major U.S. banks, due out in the following week.

Last week, regulators released a few details on how the government is running its tests, but results won't be announced until May 4. Some early results could start to trickle in later in the week.

"I think there's going to be some hesitation ahead of May 4th, particularly after the move we've seen over the last few weeks," said Christopher Colarik, portfolio manager at Glendmede

The major stock gauges rose for six straight weeks, with the Nasdaq composite making it to seven, on bets that the economy is closer to stabilizing and corporate profits are near to bottoming. The S&P 500 index gained almost 29% during that time. But last week's trading was more choppy amid worries of too much, too fast.

"I think investors are breathing a sigh of relief that analysts' estimates may have been too low," said Fred Dickson, chief market strategist at D.A. Davidson & co. "But I think stocks will face a real test this quarter, because I don't think the economic data will show as much improvement as investors might like."

Results: More than one-third of the S&P 500 companies have reported results and profits are currently expected to have declined 35% versus a year ago, according to the latest from Thomson Reuters.

Standouts this week include Dow components Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), Pfizer (PFE, Fortune 500), Verizon Communications (VZ, Fortune 500) and Procter & Gamble (PG, Fortune 500). (See below for details.)
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Chrysler: The hard-hit company is facing a Thursday deadline to close deals with creditors, its labor union and Italian automaker Fiat, or face bankruptcy protection and possible liquidation. Chrysler has been operating on $4 billion in federal aid and needs more to stay afloat. The company is privately owned.

Last week, rival General Motors (GM, Fortune 500) said it is temporarily shutting down down 13 of 20 North American plants this summer to reduce inventory. The company is also planning to shutter its Pontiac brand, with an announcement expected Monday.

Healthier rival Ford Motor (F, Fortune 500) reported a steep quarterly loss Friday that was nonetheless not as steep as analysts had thought. The company said it won't need a federal loan like its rivals unless the slowdown gets significantly worse.

Over the last week, the woes of the industry have had a limited impact on Wall Street, but a Chrysler bankruptcy could be a very big deal.
Results

Nearly 30% of the S&P 500 reports results this week. Here are some of the highlights.

Monday: Telecom Verizon is expected to have earned 59 cents per share versus 61 cents a year ago, according to a consensus of analysts surveyed by Thomson Reuters.

Tuesday: Drugmaker Pfizer is expected to have earned 49 cents per share versus 61 cents a year earlier.

Thursday: Exxon Mobil is expected to have earned 94 cents per share, down from $2.03 per share a year ago.

Friday: Fellow oil behemoth Chevron is expected to have earned 81 cents per share versus $2.48 a year ago.
Economy

Tuesday: The April consumer confidence index from the Conference Board is expected to have rise to 28.8 from 26 in March. The S&P/CaseShiller Home Price index is expected to have fallen 18.8% from 18.97%.

The Federal Reserve Board holds its two-day policy setting meeting, with a decision on interest rates expected at the conclusion of the meeting Wednesday afternoon. The Fed is widely expected to hold a key bank lending rate steady near 0%.

Wednesday: First-quarter gross domestic product growth (GDP) is expected to have contracted at a 4.9% annualized rate, not as sharply as the 6.3% in the fourth quarter.

Thursday: A heavy day for economic news includes reports on weekly jobless claims, the first-quarter employment cost index and manufacturing in the Midwest.

The standout is the government's personal income and spending report for March. Income is expected to have fallen 0.2% in the month, as it did in February. Spending is expected to have fallen 0.1% after it rose 0.2% in March.

Friday: Reports are due on consumer sentiment, factory orders, and auto and truck sales. The biggest potential market mover will be the Institute for Supply Management's manufacturing index. The index is expected to have inched up to 38 from 36.3 -- still territory considered recessionary.

Where the jobs are: location, location, location

The latest news on unemployment was as grim as expected: More than 5 million people have lost their jobs since the beginning of 2008 and the unemployment rate surged to 8.5% in March, the highest in 25 years, the Bureau of Labor Statistics reported Friday.

It may seem as if no place in the U.S. is untouched by job losses. But another report the BLS released last week reveals that the jobs market, like housing, is local. Every month, the BLS examines unemployment trends in 372 metropolitan regions (known as Metropolitan Statistical Areas or MSAs). The report lags the more well-known Employment Situation report by one month, so the data is from February. But it clearly shows that some places are weathering this recession better than others when it comes to jobs. According to the report, 14 areas posted jobless rates of at least 13%, including Detroit, Michigan and Fresno, California while 20 areas registered rates below 5% in February, including Ames, Iowa, Manhattan, Kansas, Lincoln, Nebraska , Lubbock, Texas and Lafayette, Louisiana.

Harvard economics professor Edward Glaeser says the disparity in unemployment in regions around the U.S. may seem random but it isn’t. According to Glaeser, some places are able to weather an economic downturn better because of specific characteristics of their local area. Not surprisingly, Glaeser’s research finds a strong correlation between a skilled workforce and lower unemployment. Currently, 15.1% of high school dropouts are unemployed while just 4.2% of college graduates are out of work. For people with a high school diploma, unemployment is around 9%. The higher the educational level of a metropolitan area, the lower the unemployment rate.

As in past recessions, there’s also a clear link between unemployment and manufacturing. Industries that have been declining for decades like textile, paper and car manufacturing are more likely to layoff masses of workers during a downturn. You can see that relationship at work in the MSA unemployment report, where old industrial cities like Detroit, Waterbury, Ct. and Youngstown, Ohio have double digit jobless rates.

Most interestingly, Glaeser finds that unemployment also is closely correlated with “job sprawl”. In MSAs where jobs are spread out and people have long commutes to work outside a city core, like Los Angeles and Detroit, unemployment is higher. Meanwhile, unemployment is lowest in areas where jobs are centralized. According to a Brookings Institute report released today more than 30% of jobs in utilities, finance, insurance and education are located within three miles of downtowns, while at least half of the jobs in manufacturing, construction, and retail are more than 10 miles away from central business districts.

Of course, you can’t always pick where you work. Family ties or a home purchase often keeps you in a particular geographic area. But if you are looking for work and have any flexibility to move, keep a close eye on the monthly MSA report if you want to know where the jobs are.

2 million jobs lost so far in '09

Job losses continued to mount in March and unemployment hit a 25-year high, according to the government's latest reading on the battered labor market Friday.

Employers trimmed 663,000 jobs from their payrolls last month, roughly in line with forecasts of a loss of 658,000 jobs, according to economists surveyed by Briefing.com.

For the first three months of the year, 2 million jobs have been lost, and 5.1 million jobs have been lost since the start of 2008.

To put the three-month loss in context, if no more jobs are lost over the next nine months, 2009 would still be the fourth worst year for job losses since the government started tracking the number of workers in 1939.

March's monthly loss is up slightly from the loss of 651,000 jobs in February, although it's less than the number of jobs lost in January. That figure was revised up to a loss of 741,000 jobs -- which now stands as the biggest monthly drop in 59 years.
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More big job losses likely lie ahead, said Tig Gilliam, chief executive of Adecco Group North America, a unit of the world's largest employment staffing firm. He said many of the layoffs announced in recent months have yet to be implemented.

He predicted that between 600,000 and 700,000 more jobs will be lost in April, and that the best people can hope for is that the pace of job losses starts to slow down heading into summer.

"What we have to hope is as we get to May and June, the losses can be limited to only 300,000 or 400,000 range," Gilliam said.

The unemployment rate climbed to 8.5% from 8.1% in February, in line with economists' forecasts. It was the highest since November, 1983.

Labor Secretary Hilda Solis issued a statement citing steps that the Obama administration has taken to address the problems in job market, including the economic stimulus bill passed earlier this year, as well as steps taken to get credit flowing to small businesses.

"Today's numbers show that we have more work to do," she said.

The job losses were felt throughout all areas of the economy, with the manufacturing and construction sectors as well as business and professional services industries all cutting more than 100,000 jobs each in March.

Retailers and leisure and hospitality companies also trimmed jobs, as did the government. The only industry to post a gain in jobs during the month was the education and health care services group -- and that sector only added a modest 8,000 jobs in the month.

John Silvia, chief economist with Wachovia, said that the widespread nature of the job losses may only make the recession worse. Rising unemployment could batter consumer confidence and spending, which could lead to businesses cutting more down the road.

Silvia also expressed concern that the typical length of time people are out of work continued to climb and now stands at an average of 20.1 weeks.

"Such increases suggest that the impact on those losing jobs will be longer and more severe. Therefore we expect greater financial stress, credit delinquencies and foreclosures," he said.

Employers cut back the number of hours for their workers as well. The average hourly work week fell to 33.2 hours, the lowest level on record going back to 1964.

There also was an increase in the number of people working part-time jobs who want to get a full-time job. A record 9 million Americans were "underemployed" in March.

Including those people along with discouraged job seekers no longer counted in the main unemployment rate, the government's so-called underemployment rate stood at 15.6% in March.

Employers also cut the number of temporary workers by 72,000 in the month, taking the percentage of temporary workers in the overall work force down to the lowest level since 1994. Employers have cut 20% of temporary workers in the last six months.

Gilliam said the fact that employers are cutting temporary workers and hours are signs that some are trying to find creative ways to cut labor costs without laying people off.

He added that when the length of the average work week and the number of temporary workers start to rise once again, it will be an indication that the labor market is getting ready to turn around.

Counting to $700 billion

The mystery is solved: The Treasury Department has clarified its accounting of the $700 billion allocated for the financial-sector bailout, known as the Troubled Asset Relief Program, or TARP.

Assessing how much has been spent -- and how much is left for emergencies -- hasn't been easy. Some of the numbers are straightforward; some are based on estimates of how certain bailout programs will play out.

Last Wednesday, Treasury Secretary Tim Geithner would speak only in general terms: "Very, very reasonable amounts of money -- significant enough money," Geithner said in a public appearance in New York.

Then on Sunday, Geithner got more specific, saying on ABC's "This Week" that there was "roughly $135 billion left of uncommitted resources."

Turns out it's $134.5 billion, and $565.5 billion is spoken for.

In response to questions from CNNMoney.com, a Treasury spokesman has offered more specifics on how Treasury arrived at that number.

For instance, Treasury originally said it would spend $250 billion on investments in banks. But with heightened scrutiny over bailed-out companies, fewer banks have been applying for TARP funds lately. Some banks have even expressed interest in returning those funds back to the government. As a result, Treasury has lowered to $218 billion its estimate for funding the bank investment program.

Similarly, Treasury had initially estimated that it could lose $100 billion on its TALF program, an initiative to boost consumer loans. It has reduced that estimate to $35 billion, citing investor "demand for assets."

Finally, Geithner on Sunday for the first time gave an estimate of how much the Treasury expects to get back from banks, saying that $25 billion represented "a very conservative judgment about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession."

Why does it even matter how much is left?

The government's rescue programs are still incomplete, and the amount of money that Treasury has to work with is crucial. For instance, Treasury on Monday, as part of its automaker bailout, said it would allocate an unspecified amount from TARP to a vehicle warrantee guarantee program.
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If Treasury needs more money for TARP, Geithner would have to ask Congress for additional funding. He told the Senate Budget Committee on Feb. 11 that a request for more money -- if needed -- will be done "with as much care and consultation and design as possible."

President Obama, in his budget proposal in February, put $250 billion as a "placeholder" for net costs of additional funds needed to stabilize the financial system.

"The reality is that Treasury doesn't have enough money left to give to banks if they need it," said Dan Clifton, head of policy research at Strategas Research Partners. "They're going to have to go to Congress for more money."

Despite some sentiment that the Treasury's coordinated rescue effort will help the economy and financial markets rebound, policy experts believe that Geithner would face a difficult challenge if he asks for more money. Last month, he was blamed by some lawmakers for failing to react swiftly enough to bonuses paid out by bailed out insurer AIG.

"If they had a real substantive emergency that was evident, Treasury could get an emergency appropriation form Congress," Clifton said. "But [otherwise], they're not going to get the votes."