Initial Jobless Claims Fall Further Than Expected

Initial Jobless Claims Fall Farther Than Expected
Initial Jobless Claims Fall Farther Than Expected

Finally, some qualified good news on the labor front: Initial jobless claims fell by a better than expected 31,000 last week to 473,000, the Labor Department announced Thursday.

Still, the statistic remains at a level that Federal Reserve officials and other policymakers consider unacceptably high. Initial claims hit a recent low of 395,000 in June, then trended higher this summer. The consensus of economists surveyed by Bloomberg had been that initial jobless claims would dip to 495,000.

The four-week moving average rose by 3,250 to 486,750, but continuing claims decreased by 62,000 to 4.46 million.

A Long Journey Ahead

Jobless claims will have to drop below 400,000 during the next two quarters before economists and investors can have confidence that commercial activity is increasing at a pace that will prompt most companies to curtail layoffs and resume hiring. And during an adequate expansion, initial jobless claims can fall much lower than that. For example, during the 2002-2007 expansion, they fell below 370,000 for more than two years, and during the Roaring '90s, initial jobless claims remained below 350,000 for more than five years.

A year ago, initial jobless claims totaled 567,000, the four-week moving average was at 564,500, and continuing claims totaled 6.05 million.

States also reported 4.9 million persons claiming Emergency Unemployment Compensation benefits for the week ending Aug. 7, the latest week for which data is available, up 199,493 from the prior week. A year ago, there were 2.99 million persons claiming Emergency Unemployment Compensation benefits.

The highest insured unemployment rates for the week ending Aug. 7 were in Puerto Rico, 7%, Pennsylvania, 4.7%; New Jersey, 4.6%; Oregon, 4.6%, and California, 4.5%.

The latest jobless claims report represents a tentative ray of light for the economy. To be sure, it's only one week's data, but it provides hope that the disturbing summer rise in initial claims is subsiding. Due to seasonal auto and industrial shutdowns for re-tooling, summer jobless claims reports are inherently more volatile than those during the rest of the year. Economists are hoping that much of this summer's rise in claims was due to those factors, and not decisions by companies to increase layoffs.