Drop in unemployment claims fails to lift U.S. jobs gloom

The second straight positive surprise concerning U.S. unemployment claims on Thursday failed to dent the growing pessimism as economy watchers await Friday's jobless figures.

For the second week in a row, the number of Americans filing for unemployment benefits dropped sharply, in this case, reaching a two-month low, according to the U.S. Department of Labor.

Initial insurance claims for the week ended Jan. 3 slipped to 467,000, the smallest number since Oct. 11, and represented a far better reading than the 550,000 economists were expecting.

Accentuating the negative

That gleam of positive news, however, did little to ease the negative sentiment regarding the U.S. unemployment figures for December, set to be released Friday.

"We anticipate the worst recession in the post-war era," said Sherry Cooper, chief economist at BMO Capital Markets, in a U.S. commentary.

The consensus concerning Friday had been that the sputtering American economy would chew up 500,000 jobs in December.

Not anymore.

One survey released earlier in the week set the number of layoffs at 630,000 for the month.

High Frequency Economics, a prominent U.S. economic forecaster, thinks job losses could reach 586,000 in a best-case scenario.

RDQ Economics, another economics company, raised its expectations to 600,000 job losses from its earlier projection of 500,000.

American pollster Gallup Inc. said the national unemployment rate for December will cross the seven per cent threshold in Friday's report. If correct, the jobless rate would have increased one full percentage point compared to September's 6.1 per cent.

Macroeconomic Advisers estimates that U.S. economy shrank 5.5 per cent in the fourth quarter and will grow by a negative 3.5 per cent in the first quarter of this year.

Even president-elect Barack Obama is hinting at a downward surprise on the jobless figures, indicating Thursday that the December figures could show that the U.S. economy has lost the greatest number of jobs "since the Great Depression."