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Jobless claims, energy prices both soar
A total of 68,000 Americans lost their jobs due to Hurricane Katrina and filed for unemployment benefits last week, pushing these applications up by the largest amount in nearly a decade. The Labor Department reported that claims for benefits rose by 71,000 last week, with 68,000 of that total attributed to layoffs due to Katrina, which devastated New Orleans and other areas along the Gulf Coast. That figure exceeded the claims filed in the weeks following the Sept. 11, 2001 terror attacks, and analysts predicted that it would be revised even higher once states catch up with processing a flood of claims. Meanwhile, consumer inflation surged by 0.5 percent in August as energy prices shot up by the largest amount in more than two years, even before Katrina hit at the end of the month. The hurricane caused a further spike in energy prices due to widespread shutdowns of oil and natural gas facilities in the Gulf Coast region. Analysts have predicted that Katrina, the country's worst natural disaster, will trim economic growth by as much as a full percentage point in the second half of this year and cost around 400,000 jobs. While they do not believe that storm-related disruptions will be enough to push the country into a recession, they caution that this forecast could be proven wrong if energy prices keep soaring, triggering significant cutbacks in spending by consumers in other areas. Phil Hopkins, managing director of U.S. regional services for Global Insight, estimates that the seasonally adjusted unemployment rate in the area of New Orleans, Metairie and Kenner was 4.9 percent in July. He said that based on his calculations, the jobless rate there could easily climb to 25 percent. The economy was expanding at a solid pace before Katrina hit and it is this momentum that analysts believe will help keep the economy from being pushed into a full-fledged downturn. The report on jobless claims showed that the increase of 71,000 applications last week was the biggest one-week increase since a rise of 82,000 claims the week ending Jan. 20, 1996, a period when claims soared after a severe winter storm along the East Coast. The increase pushed total jobless claims to 398,000 last week, the highest weekly total in two years. The 0.5 percent rise in consumer prices followed a similar 0.5 percent increase in July with inflation in both months being pushed higher by rising energy prices. Over 80 percent of the jump in inflation in August was attributed to a 5 percent surge in energy prices, the biggest one-month gain since March 2003. The 71,000 gain in claims last week exceeded the one-week increases in layoffs seen after the Sept. 11 attacks although in the final two weeks of September, claims posted back-to-back increases of 59,000 and 64,000. Analysts said the estimate of 68,000 jobless claims attributed to Katrina would certainly rise in coming weeks as state unemployment offices caught up with processing a flood of applications, many of them being taken from mobile units dispatched to evacuation centers such as the Astrodome in Houston. The Labor Department, which initially estimated that 10,000 hurricane-related claims had been filed for the week ending Sept. 3, now estimates that figure to be between 15,000 and 16,000. The 5 percent jump in energy prices was led by an 8.3 percent rise in gasoline prices, the biggest one-month gain since February 2003. Analysts said energy prices will likely show another surge in September, reflecting the fact that after Katrina caused shutdowns of Gulf Coast production, the price of a gallon of gasoline soared to a nationwide average of more than $3 per gallon. Outside of the volatile energy and food categories, so-called core inflation rose a modest 0.1 percent, the fourth straight month of small gains at this level. However, economists have begun to worry that the surge in energy prices may soon start to spill over into other areas as many businesses are forced to add on fuel surcharges to reflect higher delivery costs for their products. Over the last 12 months, overall consumer prices have risen by 3.6 percent, the biggest 12-month increase in inflation since a similar rise in the 12 months ending May 2001. The big jump in inflation last month added to pressure on Americans' paychecks. Weekly earnings after adjusting for inflation fell by 0.5 percent in August following a decline of 0.1 percent in July. Clothing prices, which had been falling, rose a sharp 1 percent in July but food prices continued to show moderation, edging up just 0.1 percent last month, reflecting prices declines for beef, pork, fruits and vegetables.
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