Initial Jobless Claims Drop, but Continuing Claims Rise

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The U.S. Labor Department's weekly jobless claims report is a mixed bag. Initial claims fell 6,000 to 462,000, but continuing claims rose 37,000 to 4.558 million. The initial claims are about as expected: A Bloomberg News economists survey pegged jobless claims coming in at 460,000. The Labor Department also reported that the four-week moving average, which smooths out anomalies for strikes, holidays or other idiosyncratic events, increased 5,500 to 475,500.

Looking at these statistics on a year-over-year basis provides some perspective: A year ago, initial jobless claims totaled 657,000, the four-week moving average was 646,750 and continuing claims totaled 5.253 million.

States reported 5.528 million people claiming Emergency Unemployment Compensation benefits for the week ending Feb. 20, the latest week for which data are available, a decrease of 159,649 from the prior week. The EUC program provides benefits for jobless workers who no longer get state unemployment benefits. A year ago, EUC had 2.068 million EUC claimants. Clearly, the long-term unemployment situation has deteriorated as the Great Recession plays out.

In addition to focusing on the less-volatile four-week moving average, economists also monitor the continuing claims stat because it provides a snapshot of how long it's going to take the typical person to find comparable employment once he/she has lost a job. In general, continuing claims above 3 million reflect a slack labor market and point to extended six- to nine-month (or longer) job searches.

Investors should interpret the latest data as a tread-water week: Initial claims did inch lower, but the rise in continuing claims was a disappointment. Given what appears to be the end of large scale layoffs, most economists expect initial jobless claims to decline considerably, moving forward. If they do, that would be a sign that the U.S. economic recovery is progressing.
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