Data quirk blamed for U.S. jobless claims spike

WASHINGTON (Reuters) - A new law extending the number of weeks unemployed U.S. workers can collect jobless benefits may cause initial filings for aid to overstate labor market weakness over the next several weeks.

The Labor Department on Thursday said new filings for state unemployment insurance shot up by 44,000 last week, but economists and government analysts alike pinned some of the gain on unemployed workers who had never applied for benefits stepping forward after they heard about the new program.

The jump took first-time claims to 448,000, the highest in more than five years.

"We have no doubt that the trend in claims is upwards but this number overdoes the gloom," said Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, New York. "As for the true trend, we'd guess it is just north of 400,000, so the headline number ought to head back there soon."

Under a program President George W. Bush signed into law on June 30, about 1.55 million unemployed workers who exhaust the 26 weeks of government checks they would normally receive will get an additional 13 weeks of help as they search for a job.

Some applicants for that emergency program were deemed eligible under the regular benefits program. Those applicants were a factor behind last week's spike in claims, the department said, adding that it was not able to quantify the impact.

Claims under the regular program will likely be higher than otherwise for several weeks due to applications under the new program, it said.

Economists generally view claims over 400,000 as a sign of a labor market that is deteriorating fast enough to suggest recession. The initial weekly claims figure has breached the 400,000 mark four times this year.

"That was a jolt, no question about it," David Resler, chief economist for Nomura Securities International in New York, said of Thursday's data.

Even though the latest data may have been skewed, economists said it still suggested the economy was too weak to create new jobs.

So-called continued claims, the number of unemployed who continued to draw benefits after an initial week of aid, shot up by 185,000 to 3.28 million in the week ended July 19. It was the biggest weekly increase in 10 years.

The surge in continued claims, which are not yet being distorted by the new law, validated "the notion that even absent the legal changes, today's report signaled a very weak labor market," said Michael Feroli, an economist for JPMorgan Economics.

(Reporting by Nancy Waitz; Editing by Leslie Adler)