US Economy: Jobless Claims Rise Amid Auto Closings

May.15.2009 Business news

May 14 (Bloomberg) — More Americans than forecast filed unemployment-insurance claims last week because of the Chrysler LLC bankruptcy that is likely to reverberate through the economy for months. Initial jobless claims rose by 32,000 to 637,000 in the week ended May 9, the Labor Department said today in Washington. A good part of the jump was from states reporting an increase in auto-related claims, a Labor official said without providing a more precise estimate. The department also said that wholesale prices rose in April, spurred by a gain in food costs.

The bankruptcy filing by Chrysler, and the potential for a similar step by General Motors Corp., is likely to cause further job losses as suppliers and communities are affected. The industry’s woes threaten to delay the economy’s recovery from the deepest recession in half a century and send the unemployment rate up from what’s already a 25-year high.

“This is definitely the first area where you’ll see the fallout from the GM and Chrysler shutdowns,” said Omair Sharif, an economist at RBS Securities Inc. in Greenwich, Connecticut, who forecast claims would rise to 640,000. Factory production and orders for durable goods will probably “also take a bit of a hit,” he said.

Stocks and Treasuries rose. The Standard & Poor’s 500 Stock Index rose 1 percent to close at 893.07 in New York. Benchmark 10-year notes yielded 3.09 percent at 4:26 p.m., compared with 3.12 percent late yesterday.