Initial jobless claims reached their highest levels in over 25 years last week

Initial jobless claims reached their highest levels in over 25 years last week, while a record 5.7 million Americans continue to receive unemployment benefits. On Thursday, the U.S. Labor Department reported a staggering 669,000 Americans filed for unemployment insurance for the first time last week. The figure, now at a 26-year high, is well ahead of the 657,000 recorded in the previous week, and greater than the 650,000 Wall Street had expected. Though labor data are considered lagging economic figures, they're closely examined for their insight into consumer behavior. Thursday's report indicates the U.S. labor market is still extremely frail and a recovery is far off. The results from the coming weeks may prove useful as they come in the wake of the first quarter at a time when businesses will be reassessing their health. The Labor Department also reported on Thursday that the total number of Americans claiming unemployment rose by 161,000, to 5.7 million, the highest reading on record. Despite the weak labor data, stocks rallied Thursday due to an accounting change to give banks more wiggle room in valuing assets, and news that the G-20 will boost financial support to create jobs and restore economic growth. (See "Accounting Change Fuels Rally" and "The G-20 Summit.") The yield on the benchmark 10-year U.S. Treasury note rose to 2.76%, from 2.66% Wednesday, as demand for treasuries waned in light of optimism in the equity markets. Thursday's labor report from the government comes a day after the ADP report said private-sector employers cut 742,000 jobs in March, greater than the 706,000 revised cut in February. (See "Economic Reports Paint Bleak Picture.") The reading was well ahead of Wall Street's expected forecast of 655,000. The labor market's weakness was distributed across all major components tracked by ADP, indicating the recession has gone above and beyond the housing crisis that propelled it. (See "The Fuel That Fed The Subprime Meltdown.") The government's labor report for the month of March is due Friday, and the Street expects the unemployment rate to reach 8.5%, with 658,000 jobs shed. In early March, the U.S. Labor Department reported the unemployment rate in February reached 8.1%, with 651,000 cuts. (See "The Depressing Truth About America's Economy.") "I can't imagine Friday's report is going to be anything but bad," said Bill Stone, chief investment strategist at PNC Wealth Management. Stone's expectations are essentially in line with the Street, forecasting the March report to record a drop of 630,000, with an unemployment rate of 8.5%. Regardless of exact figures, the job loss will be enormous, said David Wyss, chief economist at Standard & Poor's. "Whether it's 650,000 or 700,000 is a minor detail, frankly," Wyss said. Joel Prakken, chairman of Macroeconomic Advisers, expects the unemployment rate to reach 9.5% by the middle of 2010, while possibly reaching 9.0% by the end of this year. Later in the day, the Commerce Department reported that in February, new factory orders jumped 1.8%, the largest increase since June, and the first increase of any kind in seven months. The increase was higher than the 1.1% Wall Street had expected. Thursday's report was bittersweet though, as January's reading was revised downward to a drop of 3.5%, from the initial 1.9% contraction the government reported.

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