US unemployment rate touches 16-year high

That is also the highest level of claims since July 1992, the department said, when the economy was coming out of a recession.

The four-week average of claims, which smoothes out fluctuations, was even worse: it rose to 506,500, the highest in more than 25 years. In addition, the number of people continuing to claim unemployment insurance rose sharply for the third straight week to more than 4 million, the highest since December 1982, when the economy was in a painful recession.

Those figures partly reflect growth in the labor force, which has increased by about half since the early 1980s. The figures likely will cause some economists to increase their projections for the unemployment rate this year. Many already expect unemployment to reach 7 per cent by early next year and 8 per cent by the end of 2009.

The rate in October was 6.5 per cent, and last year the rate averaged 4.6 per cent.

The Federal Reserve on Wednesday released projections that the jobless rate will climb to between 7.1 per cent and 7.6 per cent next year, according to documents from the Fed’s October 29 closed-door deliberations on interest rate policy.

Initial claims have been driven higher in the past several months by a slowing economy hit by the financial crisis, and cutbacks in consumer and business spending. Economists consider jobless claims a timely indication of how rapidly companies are laying off workers. Employees who quit or are fired for cause are not eligible for benefits.

In another economic report, a private research group says the economy’s health declined further in October as stocks, building permits and consumer expectations all fell.