Unemployment claims lower than expected

Initial jobless claims were lower than expected, falling 21,000 to 456,000 in the week ending July 3rd. The four-week average of claims slipped 1,250 to 466,000.

BOTTOM LINE

Initial jobless claims fell by more than expected in the week before the July 4th holiday but the four-week average remained fairly elevated at 466,000. Claims remain significantly above levels that we would normally associate with sustained job creation but are at odds with the low levels of layoff announcements. Unfortunately, due to the pattern of summer plant shutdowns over the next two weeks and the attempts to seasonally adjust them, the claims data will be more difficult than usual to interpret (GM, for example, is forgoing its normal two-week early-July shutdown because of low inventories). We believe that there may have been a shift in the claims-employment relationship (perhaps due to ease of filing via phone or internet relative to past cycles) but we would still like to see claims move down towards the 400,000 area to signal a stronger picture for the outlook for employment over the next few months and the layoff data suggest that this should happen. As an aside, the expiration of the legislation providing emergency federal benefits has resulted in a sharp decline in emergency continuing claims (down 586,000 in the two weeks ended June 19th).

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