U.S. Jobless Claims Climb

United States- initial jobless claims unexpectedly rose last week, a sign that the labor market is struggling to gain traction.

Jobless claims increased by 1,000 to 427,000 in the week ended June 4, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 419,000, according to the median forecast. The number of people on unemployment benefit rolls and those receiving extended payments decreased.

Some employers are cutting staff as demand slows because of elevated energy prices, falling house prices and tight credit. The economy generated the fewest jobs in May in eight months and the unemployment rate rose, a report showed last week.

“Claims continue to disappoint and suggest there won’t be a quick rebound in employment,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who correctly forecast the gain. “We are still in a soft patch and progress will be tediously slow.

This really begins to raise some questions of whether there are more long-term issues in the economy than people are letting on," said Vitner. "I've been in the camp of no double-dip recession, no huge slowing in growth, but now I'm a little worried about 2012 -- the economy just doesn't have a whole lot of momentum right now."

The stubbornly high jobless claims data follows a recent string of other disappointing reports on the labor market. The government's most closely watched jobs report, released last Friday, showed that the economy gained only 54,000 jobs in May, down from 232,000 in April.

With less than 3 million job openings in the country today, there are currently 4.6 unemployed Americans for every job opening, said Vitner.

"Companies are beating revenue targets and saying that they're cutting expenses, but they aren't hiring," he said. "Uncertainty makes it much harder for businesses to expand, and right now we have three big issues making employers cautious: the winding down of QE2 (the Federal Reserve's economic stimulus plan), the European sovereign debt issue and the U.S. debt ceiling vote.

General Motors

General Motors Co. (GM) and Ford Motor Co. may enter contract talks with the United Auto Workers this year seeking to close as many as six assembly plants to boost profit while the union tries to save jobs amid an industry recovery.

Kim Carpenter, a GM spokeswoman, said last month the company hasn’t decided how many plants it may close and what savings might result. Ford, which intends to close a plant in Minnesota late this year, also may choose to shutter Michigan and Ohio plants making slow-selling vehicles, industry researchers said.