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Rising number of jobless claims paints bleak picture for new year

WASHINGTON - The number of laid-off workers continuing to draw unemployment benefits bolted to 4.5 million in late December, and even more Americans are expected to join the ranks of the jobless in 2009.

While first-time applications for jobless benefits dropped last week, economists mostly attributed that to the Christmas holiday and cautioned that a more accurate picture of new layoff filings won't become clear until the holiday season is passed - around mid-January.

All in all, though, the picture that emerged Wednesday was largely grim and is not expected to improve any time soon.

'It wasn't a very merry Christmas for most of the labor force and it doesn't look like it will be a very happy New Year, either,' said Richard Yamarone, economist at Argus Research.

The Labor Department's report showed that people continuing to draw unemployment benefits jumped by 140,000 to 4.5 million for the week ending Dec. 20, the most recent period for which that information is available. The larger-than-expected increase underscored the difficulties the unemployed are having in finding new jobs.

That left continued claims at their highest since early December 1982, when the country was emerging from a deep recession, though the labor force has grown by about half since then.

A year ago, the number of people continuing to draw jobless benefits was 2.7 million.

The report also showed that the number of newly laid-off workers filing first-time applications for jobless benefits dropped by a seasonally adjusted 94,000 to 492,000 for the week ending Dec. 27.

That decline, however, didn't signal any improvement in labor conditions. The drop - while bigger than economists expected - was mostly related to seasonal adjustment difficulties and reflected some out-of-work people not making it to unemployment offices to file claims over the Christmas holiday, analysts said.

Even with the drop, new filings remained elevated. A year ago, claims stood at 339,000.

Similarly, the four-week moving average of first-time jobless claims, which smooths out week-to-week fluctuations, fell last week to 552,250, a decrease of 5,750 from the prior week. A year ago, this figure was 344,500.

Economists expected so-called 'continued' claims to rise to around 4.38 million, and that first-time applications for unemployment benefits would drop to around 550,000.

On Wall Street, investors took some comfort in the drop in first-time unemployment claims. The Dow Jones industrials were up about 150 points in late-afternoon trading.

Next week's jobless claims report also is likely to be distorted by another shortened holiday week because of New Year's Day, analysts said.

'The bottom line here is that it probably won't be until mid-January that we begin to get a clear picture of what claims are saying,' said Abiel Reinhart, economist at JPMorgan Chase Bank.

Economists predict the jobs situation will get worse before it gets better.

Brian Bethune, economist at IHS Global Insight, predicts first-time filings for jobless benefits will climb back up to 550,000 or higher in the middle of January and stay in that elevated range for some time.