Jobless Claims Rise To A 4-Month High Amid Housing Woes

Even with new jobless claims rising last week to their highest level since April, many economists say housing-related job losses may be a lot worse than official data show.

First-time claims rose for a fifth straight week to 334,000, the Labor Department said Thursday, as the economy slows from its brisk pace in the second quarter.

The four-week average of continuing claims rose to 2.561 million, the most since January 2006.

"Jobless claims drifting up as they have is consistent with a slowdown" in GDP growth in the second half of the year, said John Silvia, chief economist at Wachovia.

The uptrend comes as mortgage-related firms slash tens of thousands of jobs amid a housing slump and credit crunch.

Housing starts have crashed 40% from their peak. But construction jobs have fallen just 1% from their cyclical high of 7.725 million reached last September.

Economists say the actual employment figure probably is much lower, partly because builders haven't reported layoffs of undocumented workers and other off-the-books personnel.

"There's a fair amount of labor in the construction industry that is not captured in the payroll survey," said Steve Cochrane, an economist at Moody's Economy.com.

Construction employment may be 160,000 below what current government data show, according to a study last month by Macroeconomic Advisers.

"There are less and less jobs every day," said Mario Lopez, lead organizer for the Cypress Park Community Job Center in Los Angeles. "It's a real problem for us."

If job losses are larger than official stats, consumer spending may face more pressure.

Consumer confidence dived in August to a one-year low. A slew of retailers, from Wal-Mart (NYSE: - ) to Tween Brands (NYSE: - ), have warned of a rough second half of the year.

Construction job losses would likely be worse if it weren't for strong investment in buildings, schools and other nonresidential construction, economists said. Other sectors of the economy also remain healthy.

"Almost all of the declines (in employment) have been in housing," said Steven Wieting, an economist at Citigroup Global Markets.

"It's very fortunate for us that we've been able to absorb housing's downturn when other industries have not been vulnerable," he said.

The U.S. economy grew at a 4% annual rate in the second quarter, the best in a year, the Commerce Department said Thursday, revising its initial 3.4% reading.

But growth has slowed amid signs that the slump in home construction is spreading.

Dozens of mortgage lenders have either gone bankrupt or announced layoffs this year, with job cuts especially heavy this month.

The Federal Reserve is widely expected to cut interest rates at its Sept. 18 meeting to try to prevent credit woes from derailing the overall economy. Chairman Ben Bernanke will discuss monetary policy in a speech Friday.