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Ahead of the Bell: US Unemployment Benefits

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October 24, 2013 06:20 AM EST | AP

WASHINGTON (AP) — The Labor Department reports on the number of people who applied for U.S. unemployment benefits last week. Report to be released Thursday at 8:30 a.m. EDT.

FALL BACK: Economists forecast that applications dropped last week to a seasonally adjusted 340,000, according to a survey by FactSet. That would be down from 358,000 the previous week and the second straight drop after a huge spike three weeks ago.

DISTORTED FIGURES: The applications data have been artificially elevated this month because California and Michigan have been processing thousands of applications that were delayed by computer upgrades. The 16-day partial government shutdown has also pushed up benefit claims as government contractors and other businesses have furloughed workers.

In August, before all the distortions, applications had fallen to pre-recession levels. That is evidence that companies are cutting fewer workers.

HIRING SLUGGISH: Falling applications for unemployment benefits are typically followed by more hiring. But in recent months hiring has slowed, rather than accelerated.

Employers added only 148,000 jobs in September, the government said Tuesday, down from 193,000 in August. The September jobs report was delayed 2 ½ weeks because of the shutdown.

Hiring has slowed since the beginning of the year: Job gains averaged 207,000 from January through March, but fell to 182,000 from April through June and dropped further to 143,000 from July through September.

And hiring likely weakened further in October. In addition to government contractors, other companies also likely cut jobs during the shutdown, such as restaurants and hotels located near national parks, which were closed.

About 350,000 government workers were temporarily laid off during the shutdown, which ended on Oct. 16. Tuesday's report will likely be the last affected by the shutdown because it will cover the week ended Oct. 19.

Last week's report showed that about 70,000 federal workers sought unemployment benefit in the first week of October. Many will have to repay the benefits once they receive back pay, but that varies according to state law.

Many economists estimate the shutdown cut about $25 billion from the economy. Several have lowered their forecasts for growth in the October-December quarter by a half-point to an annual rate of 2 percent or less.