New US claims for unemployment benefits unexpectedly climbed to a nine-month high last week, government figures showed this afternoon. The numbers are another setback to the fragile economic recovery.
There was further bad news from a survey of the key mid-Atlantic region, which showed a fall in factory activity.
Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended August 14, the highest since mid-November, the Labor Department said. Analysts had expected claims to drop to 476,000.
The data covered the survey week for the government's closely watched employment report for August, scheduled for release early next month.
The four-week average of new jobless claims, considered a better measure of underlying labour market trends as it irons out week-to-week volatility, rose 8,000 to 482,500, the highest since early December.
Claims for unemployment benefits have been stuck at high levels for much of this year, which many economists say points to unemployment staying uncomfortably high for some time.
The number of people still receiving benefits after an initial week of aid fell 13,000 to 4.48 million in the week ended August 7 from an upwardly revised 4.49 million the previous week.
Factory activity in the US Mid-Atlantic region unexpectedly shrank in August to its lowest level in more than a year, a survey also showed today.
The Philadelphia Federal Reserve Bank said its business activity index fell to minus 7.7 in August from July's plus 5.1. Any reading below zero indicates a shrinking in the region's manufacturing.
The August reading was the lowest and also the first contraction since July 2009, when the economy was recovering from the credit crisis.
Warning on deficit's growth effect
Meanwhile, estimates by Congress showed that the US budget deficit is expected to shrink this year but projected shortfalls over the next decade may jump by $6 trillion.
The Congressional Budget Office estimated a federal budget deficit of $1.342 trillion for the financial year to the end of September - $71 billion below last year's total of $1.413 trillion. This was also lower than the latest White House estimate of a $1.471 trillion shortfall.
But projected deficits totalling $6.2 trillion for 10 years starting in 2011 will raise federal debt held by the public to more than 69% of gross domestic product by 2020, the CBO warned in a report. This is almost double the 36% of GDP at the end of 2007, it said.
'Continued large deficits and the resulting increases in federal debt over time would reduce long-term economic growth,' warned CBO director Douglas Elmendorf.
As was the case last year, this year's deficit was attributed mostly to a combination of weak revenue and high spending linked to hauling the economy out of a brutal recession. The CBO estimated that the 2011 deficit would fall to $1 trillion and taper off yearly to 2020.
