New jobless claims drop as private sector layoffs slowly drop

The number of U.S. workers filing new claims for jobless benefits slid last week to the lowest level in nearly two and a half years, indicating that labor-market conditions continue to improve. It seems like the labor market is picking up to greater than sustainability levels, but not enough to really make a lasting dent in the over all employment. 

This may actually lead to an increase in the unemployment rate as good news in the labor market has the side effect of taking people off the sidelines and back into the labor market, thus increasing unemployment. 

In what the government describes as a clean report, initial jobless claims fell a very steep and very surprising 34K in the Dec. 25 week to a suddenly sub-400K level of 388K (prior week revised 2K higher to 422K). Adjustments become a big factor during the shortened weeks of the holidays which focuses attention on the four-week average, and the average confirms improvement in the labor market, falling a steep 12,500 to 414K.

Results on the continuing-claims side are mixed. Slightly more received continuing benefits in the Dec. 18 week than the prior week and the unemployment rate for insured workers rose one tenth to 3.3%. A drop in the four-week average is the positive news, down slightly to 4.120 million and down more than 150K from the month-ago comparison.

The month-ago comparison for initial claims shows a dramatic 50K improvement with the four-week average showing a less flashy but meaningful decline of about 15K. The Labor Department's confidence that calendar and related adjustment factors are not at play gives today's report special importance. Yet declines in claims during November didn't add up to improvement for underlying payroll growth, that and yesterday's data on consumer confidence, where assessments of the jobs market deteriorated, will limit confidence that payroll growth has picked up this month.

Source Bloomberg


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