Initial jobless claims fall to lowest level since January

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More progress for the U.S. labor market: initial jobless claims fell 47,000 to 522,000 – the metric's lowest level since January, the U.S. Labor Department announced Thursday.

What's more, continuing claims also fell 642,000 to 6.273 million from last week's revised record of 6.915 million. However, labor statisticians caution that the large 642,000 drop in continuing claims may be due to idiosyncratic events, and not indicative of a trend. The 4-week continuing claims average fell 110,250 to 6.667 million.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 535,000. Meanwhile, the 4-week moving average for initial jobless claims decreased 22,500 to 584,500.

A ray of light: lessening job losses

Michael Gregory, a senior economist for BMO Capital Markets in Toronto, said he likes what he sees so far regarding the jobless claims trend.

"The trend seems to be toward lessening job losses even if we allow for the fact there may be distortions because in July you typically get layoffs in the auto sector," Gregory told Bloomberg News Thursday. "While fewer people are losing their jobs, it is still as hard as it's been to find a job."

The U.S. economy has shed more than 6.5 million jobs since the recession started, with the U.S. unemployment rate rising to 9.5 percent. Further, economists take pains to point out that the official unemployment rate does not reflect the depth of the job market problem in the United States. For example, a broader measure of unemployment, which includes discouraged workers and those working part-time who want full-time work, is much higher, above15 percent in many states.

Economic Analysis: A sharp decline in jobless claims, which, if it continues, would represent another sign that the recession is bottoming, if not a sign of an outright economic recovery. However, investors should ignore the large drop in the continuing claims total to 6.273 million as any number of one-time events, or the timing of lay-offs, can distort the weekly continuing claims stat. This is why economists emphasize the 4-week moving average.

That said, if jobless claims have peaked and repeatedly fall month after month, that would be the best news for the U.S economy since the recession started. It would not signal net job growth, but jobless claims declines point to a day when demand starts to rise -- something that would be good news for corporate revenue and earnings, and by extension, for the U.S. stock market.
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