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Unemployment Claims Spike; Shutdown Gets Some Of The Blame

First-time claims for unemployment insurance were up sharply to 374,000 from 308,000 the week before, the Employment and Training Administration reported Thursday.

The increase for the week ending Oct. 5 is a departure from a trend in recent weeks that was lower than at any time since the spring of 2007, before the onset of the recession.

Bloomberg reports that the surge was the partly the result of the government shutdown as well as a backlog of claims from California resulting from a switch in the state's computer systems.

Bloomberg says:

"The effects of the gridlock in Washington may keep claims elevated as employers grow concerned about the economic outlook.

" 'The longer the government shutdown continues, the bigger the effect on the private sector will be,' Ryan Sweet, senior economist at Moody's Analytics Inc. in West Chester, Pennsylvania, said before the report. He added that it will be hard to tell whether the layoffs are coming from contractors directly affected by the closings or by other companies with shaken confidence."

A government spokesman attributed about one-quarter of the increase to applications from employees of government contractors, but said that claims by federal workers furloughed by the shutdown wouldn't start showing up in the data until next week.

So, what happens if furloughed federal workers get back pay once the government reopens?

It likely depends on the state, but as Bloomberg reports, in Virginia, the unemployment benefits would be treated as an overpayment and the state would ask for a full reimbursement once workers return to the job.

Copyright 2013 NPR. To see more, visit www.npr.org.

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