WASHINGTON — New applications for unemployment benefits rose unexpectedly last week, largely due to Hurricane Gustav, the government said Thursday, adding further strain to the economy.
The Labor Department reported that initial jobless claims rose to a seasonally adjusted 455,000, up 10,000 from the prior week. Wall Street economists had expected claims to fall slightly to 440,000.
Layoffs can worsen the nation's economic woes as newly unemployed workers and those that fear for their jobs cut back on their spending and fall behind on their debts. Consumer spending accounts for about two-thirds of the economy.
Jim Chessen, chief economist for the American Bankers Association, said Thursday that banks have seen consumers increasingly falling behind on credit card balances, auto loans, and other credit.
"The key to consumers' ability to meet their obligations is whether they have a job," Chessen said.
Claims have now topped 400,000 for nine straight weeks, a level that economists consider a sign of a struggling economy. A year ago, the figure stood at about 320,000.
The bankers association's economic advisory committee now expects the U.S. economy to enter a "mild recession" in the second half of this year. The committee includes economists from banks such as Wachovia Corp. and PNC Financial Services Group Inc.
A Labor Department analyst said last week's number is the first to include claims stemming from job losses caused by Hurricane Gustav, which slammed into the Louisiana coast over the Labor Day weekend.
The department wouldn't give a precise estimate of the hurricane's impact, but said claims would have fallen without it.
The four-week average of new claims, which smooths out fluctuations, rose by 5,000 to 445,000. The number of people continuing to receive unemployment benefits dropped 55,000 to 3.48 million, while the four-week average increased to 3.46 million, the highest in almost five years.
The New York-based Conference Board, a business group, said in a separate report Thursday that its monthly forecast of future economic activity declined 0.5 percent in August, steeper than the 0.2 percent drop expected by Wall Street economists.
The drop was due to a fall in building permits and higher unemployment claims, the group said.
The ongoing financial crisis could worsen the employment picture. Thursday's jobless figures were compiled before Lehman Brothers Holdings Inc. filed for bankruptcy Monday and before Merrill Lynch & Co. Inc. agreed to be acquired by Bank of America Corp.
Those moves could put thousands of jobs at risk. Lehman has approximately 25,000 employees worldwide and Merrill Lynch has 60,000.
The Labor Department said earlier this month that the unemployment rate jumped to 6.1 percent in August, the highest level in five years.
Several companies have announced layoffs in the past week, including Hewlett-Packard Co., newspaper chain McClatchy Co. and software developer Corel Corp.