Unemployment Claims Portend Shutdown’s Lingering Toll

Published on: October 10, 2013 at 1:41 PM

Unemployment claims jumped this week as the government shutdown dragged into its tenth day, and experts say that the impact of the gridlock in Washington could be long-lasting.

A rise in unemployment claims were one unpleasant result tied to the shutdown, which has persisted since the stroke of midnight a week ago Tuesday — or late Monday night.

First-time unemployment claims rose to a massive 374,000, up a giant 66,000 from the week before. The number far outstripped estimates, and has only recently been matched by labor market disruptions resulting from Hurricane Sandy in early November of last year.

The Los Angeles Times reports that Tom Stengle, a Labor Department spokesman, cited computer errors as partly to blame over the newly high figures. But, Stengle concedes, a “difficult to read” and “volatile” set of data is marked by other factors — including the shutdown .

The paper explains:

“… Stengle said about 15,000 of the new claims last week stemmed from layoffs by government contractors affected by the partial shutdown. He didn’t have further details, but the list of private companies reacting to the closure of government offices and operations is growing. On Thursday, San Francisco-based URS Corp., an engineering services firm, said that it had furloughed about 3,000 workers as of Monday because of the government shutdown.”

Ryan Sweet, senior economist at Moody’s, predicts that the reverberations of a government shutdown are possibly even longer lasting than we anticipate, and a temporary spike in unemployment claims is the tip of the iceberg.

Sweet explained that so long as the gridlock persists, economic pain will be felt:

“The economic costs of a shutdown are going to increase the longer the shutdown occurs… If this drags along for the next couple of weeks, the economic toll will be even more significant.”

New York economist Chris Rupkey wrote:

“Well, there are not a lot of facts here… But we take it the federal shutdown is slowing the economy. It’s just common sense. People are losing their jobs, unemployment the key indicator of how bad an economic downturn is always.”

Rupkey alludes to the fact that the unemployment claims resultant directly from the government shutdown are being tallied separately from the standard weekly jobs figures. While furloughed government workers are eligible for jobless benefits, the numbers are not added to the standard figures.

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