Jobless Claims Spike As Government Shutdown Cripples Thousands Of Contractor Jobs

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Claims for unemployment benefits climbed to their highest level since March last week, in part because of jobs lost in the government shutdown. According to the Labor Department, about 15,000 jobless claims came from government contractors who were laid off after Congress shut down the government.

Initial estimates predicted around 304,000 to 340,000 jobless claims last week, but the jump to 374,000 surpassed even the most pessimistic predictions. Half of the 66,000 total new applicants came from California, which just cleared a backlog of claims. But there is no doubt the shutdown is adding to the equation. Besides the 800,000 furloughed federal workers who are not factored into jobless claim reports, private companies are struggling with the uncertainty in Congress. Top government contractor Lockheed Martin furloughed 2,400 employees, while U.S. intelligence and security divisions at BAE Systems furloughed 1,000. Sikorsky Aircraft Corp. in Connecticut planned to temporarily lay off 2,000 workers this week.

Defense contractors aren’t the only ones affected; low-wage service workers have also taken a hit. Food vendors and maintenance crews in federal buildings are cutting staff indefinitely.

Meanwhile, furloughed federal employees who are not counted in the overall jobless numbers are still taxing unemployment benefits. Already, an estimated 24,000 federal workers have filed for benefits in DC and Maryland, and more are certainly on their way.

Economists say as long as the shutdown lasts, claims will stay high. “Claims are likely to be distorted for some time,” Scott Brown, chief economist at Raymond James & Associates Inc. told Bloomberg. “Private firms are stepping back. Given all the uncertainty, they are unlikely to hire.”

Unfortunately, the jobs report that could provide some insight into how badly the shutdown hurts hiring is delayed due to Labor Department furloughs.