Initial Jobless Claims Tumble to Lowest Level Since July

America's bedraggled labor market got a boost today with the latest weekly initial jobless claims unexpectedly plunging 21,000 to 434,000 -- their lowest level since July. A Bloomberg survey had expected the report to show a total of 455,000 new claims. Last week's total was revised 3,000 higher to 455,000.

Perhaps even better, the four-week moving average declined 5,500 to 453,250. Economists emphasize this measure because it smooths out anomalies due to holidays, strikes, weather-related layoffs and other temporary factors.

Continuing claims also plummeted, by 122,000 to 4.36 million. Some of that decline reflects Americans whose benefits have been exhausted, but some of it also those who have found work.

Going in the Right Direction

Initial claims need to drop below 400,000 during the next two quarters to give economists and investors confidence that commercial activity is increasing at a pace that prompts most companies to curtail layoffs and resume hiring. A year ago, new claims totaled 528,000, the four-week moving average was 528,750 and continuing claims totaled 5.80 million.

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States also reported 3.78 million people claiming Emergency Unemployment Compensation (EUC) benefits for the week ending Oct. 9, the latest week for which data are available, a decrease of 258,102 from the prior week. A year ago, 3.41 million people claimed EUC benefits.

Also, the pattern of states reporting "lower highs" for weekly increases in jobless claims resumed last week, after a one-week pause. Only one state reported a large increase, down from five last week, and even that one was minor: Puerto Rico had an increase of just 1,115 claims.

The highest insured unemployment rates for the week ending Oct. 9, the latest week for which data are available, were in Puerto Rico, 6.9%; Alaska, 4.9%: Oregon, 4.1%; Pennsylvania, 4.1%; Nevada, 4%; and California, 3.9%.

This week's jobless claims represent unqualified good news. Of course, the 21,000 claims drop only one week's data, hence investors shouldn't read too much into it. But if claims decline in the weeks ahead at anywhere near this pace, it would be a sign that layoffs are finally subsiding in a big way. That would be the best news on the labor front in 2010.