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Jobless claims increased 32,000 to 493,000 in the week ended Sept. 20, reaching its highest level since September 2001. Excepting that month and an anomalous spike that occurred in July 1992, claims are now at their highest since March 1991. Hurricane Gustav was blamed for the latest rise, with the Department of Labor saying that claims would have been 430,000 if not for hurricane-related claims.

Still, through it all, jobless claims have trended up in ways that suggest monthly payroll losses will accelerate from the 75,000 pace seen in the first eight months of this year. Claims had trended around 370,000 per week until the end of July, which means that recent levels of about 450,000 per week represent a marked change. If the Oct. 3 jobs report is weak enough, the


could use the report as justification for an inter-meeting interest rate cut.

Continuing claims increased 63,000 to 3.542 million, reaching its highest level since the week ended Oct. 3, 2003.

As I've said for weeks, the spike in jobless claims suggests that the U.S. economy has entered a dark period that is likely to be marked by increased joblessness. The data reinforce the idea that the U.S. economy might contract in the fourth quarter.

The claims figure, among many other factors, will help investors come to terms with the idea that bad news is on the way, and after between one and three plunges in the monthly payroll statistic, investors could become numb to the notion of much weaker economic activity. In past recessions, investors eventually ignored bad employment data, having been numbed to the data by previous data and plentiful evidence of impending doom. This means that the bottoming process is closer than before because in the weeks and months to come we will be able to more confidently say that much worse economic conditions are already factored into the financial markets.

That said, in assessing whether the worst news has been discounted, investors will have to grapple with whether the downturn could deepen or become more protracted than normal as a result of the credit crisis, therefore requiring more patience than usual in proclaiming that the worst is already discounted.

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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic,

The Money Market

, first published in 1978 by Marcia Stigum, and

The Strategic Bond Investor

. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback;

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