Jobless Claims Rise for 2nd Straight Week

WASHINGTON — The number of Americans filing claims for unemployment benefits increased for a second straight week, the government said Thursday in a report economists viewed as a reminder that the recovery is still fragile.

The Labor Department said 424,000 newly laid off workers applied for benefits during the week ended May 2, up 10,000 from the previous week and the highest level in a month.

The government said the figure would have been higher, but the riots in Los Angeles kept an estimated 2,600 people from filing.

North Carolina posted the biggest increase in jobless claims during the week ended May 2, a rise of 5,578 that was blamed on layoffs in the textile, apparel and furniture industries.

Jobless claims were up 4,954 in New York and 3,475 in California.

Economists said the fact that there have been two straight weeks of higher unemployment claims could be a sign of renewed labor market weakness, although they cautioned that it would take several more weeks to detect a clear trend.

Various economic barometers have been flashing recovery signals of late, but analysts have stressed that the rebound is likely to be so anemic that it could falter, as a similar recovery did last year.

Analysts said the rise in jobless claims and weak growth in the money supply may prompt Federal Reserve officials at a meeting next week to cut interest rates further.

The Bush Administration, worried about a weak economy during an election year, has stepped up pressure on the Fed to reduce the rates.

But Fed board member Lawrence Lindsey said that he believes that recent weakness was caused by seasonal factors such as income tax payments.

In other economic news, the Commerce Department reported that business inventories rose 0.4% in March, which analysts said may reflect a buildup of unwanted stockpiles that will force businesses to cut back on production.

Robert Brusca, an economist with Nikko Securities in New York, said both the rise in jobless claims and the increase in inventories were worrisome but not definitive signals of where the economy is headed.

“If business firms misgauged demand and wound up with inventories they didn’t really want, then this is going to force cutbacks in production and either push us back into recession or keep the recovery very weak,” he said.

However, he and other economists said the effect of the rise in inventories will be determined in the months ahead. It will hinge on whether consumer spending keeps the increase in stockpiles from getting out of hand, he said.

Analysts also said that the March rise in inventories means that there will likely be an upward revision of the government’s initial estimate that the gross domestic product rose at a 2% annual rate from January through March.

Some said they believed figure would rise to around 2.5%, based on the new inventory figures.

Samuel Kahan, an economist at Fuji Securities in Chicago, said the back-to-back increases in jobless claims were the type that get “people nervous about potential deterioration in the labor market.”

“The U.S. economy is entering a period of moderate recovery, but whether it builds on this strength or falters is not yet known,” he said.