By CHRISTOPHER S. RUGABER, AP Business Writer 2 hours, 18 minutes ago
WASHINGTON - New applications for unemployment benefits dropped last week from a seven-year high, the Labor Department said Thursday, though they remain at elevated levels that indicate recession.
Initial claims for jobless benefits dropped 20,000 to a seasonally adjusted 478,000, the department said, the same level that Wall Street economists expected.
The department said Hurricanes Ike and Gustav were responsible for adding about 20,000 claims on a seasonally adjusted basis. That's down from approximately 45,000 the previous week.
The four-week average, which smooths out fluctuations, rose to 482,500, the highest since October 2001. The number of Americans continuing to claim unemployment benefits rose to 3.66 million, above analysts' estimates of 3.6 million. That's the highest total in more than five years.
Meanwhile, the financial markets are expected to rise in early trading in response to comments by Treasury Secretary Henry Paulson and other administration officials indicating the government is considering taking ownership stakes in troubled U.S. banks.
The move would be intended to unclog the credit markets that have made all kinds of loans, from interbank lending to consumer loans, harder to get.
Some economists have argued for such a step as a way to more directly provide capital to ailing banks, as opposed to the administration's initial bailout plan of buying bad mortgage-related assets from the banks.
The housing slump and resulting credit crisis has hit the economy hard, causing consumers to cut spending and businesses to eliminate jobs.
In response to what has become a global credit crisis, the Federal Reserve and six other central banks on Wednesday announced a coordinated interest rate cut. The Fed reduced its target interest rate to 1.5 percent from 2 percent.
The Fed's cut means borrowing money becomes cheaper. Home equity loans, credit cards and other...