Jobless Claims Spike to 7-Year High

As the result of a faltering economy, the number of unemployed workers filing first-time claims has spiked to a 7-year high. The labor department reported on Thursday that new unemployment claims last week reached a seasonally adjusted 516,000 - which was higher than the 480,000 expected by Wall Street economists. These are the highest levels since the Sept. 11, 2001 terrorist attacks.

Today's new jobless claims report will likely push the total rate of unemployed up to around 7 per cent by January of 2009 (it now stands at around 6.5 per cent).

The new numbers indicate that the country is on the brink - if not already in - a recession (jobless claims exceeding 400,000 are considered a sign of recession). As well, unemployed individuals filing continuing claims jumped to an unexpected 3.9 million, which indicates in no uncertain terms that laid-off workers are taking longer to find a new job.

Economists note that the latest figures indicate an acceleration in the rate of layoffs, which lends further credence to the argument that a recession has descended upon the nation - and that it is quickly spreading. And, of course, this will be exacerbated if the pace of gross hirings is reduced.

Earlier in the week, Circuit City, which is the nation's second largest electronics retailer, filed for Chapter 11 bankruptcy protection. The chain noted that, but for the bankruptcy, it would have been forced to lay off a fifth of its workforce by the end of the year. The store's management has conceded that it was "upended" by the speed of the recession.

The latest unemployment news will surely impact how congress chooses to respond to the problem, particularly with respect to whether or not it enacts another stimulus package, and what it will include. Democrats are pushing for an extension of unemployment benefits, which lasts 26 weeks.