Posted on Fri, May. 09, 2008

WASHINGTON -- The number of newly laid-off workers seeking unemployment benefits dropped far more than expected last week.

The Labor Department reported Thursday applications for unemployment benefits fell to 365,000, a decline of 18,000 from the previous week. Economists had been looking for a much smaller decrease, around 5,000.

Weekly jobless claims have been exceptionally volatile in recent weeks because of strike-related layoffs in the auto industry and an unusually early Easter, which played havoc with the government's seasonal adjustment measurements.

Many economists believe a prolonged housing slump and severe credit crisis have pushed the economy into a recession. For that reason, they think job layoffs will rise in coming months as the unemployment rate climbs.

Ian Shepherdson, chief U.S. economist for High Frequency Economics, said even with this week's improvement, claims are now at a level equal to where they were at the start of the last recession in March 2001. He predicted layoffs would increase in coming months.

However, many economists believe job losses will be less severe than in previous recessions because they are expecting this downturn to be relatively mild and brief. The Bush administration is counting on 130 million economic-stimulus payments to boost consumer spending and trigger a rebound in growth starting this summer.

Wall Street closed a quiet trading session with a moderate advance Thursday, pushing the Dow Jones industrial average up by 52.43 points to 12,866.78.