Initial claims for unemployment insurance fell sharply last week and more than reversed the prior week's large increase. Claims for the week ending 8/30 fell 19,000 to 318,000. Consensus expectations were for 328,000 claims.

The prior week's rise of 12,000 had raised fears in the market that recent gains in the labor market would slow.

A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.

The four-week moving average of initial claims rose slightly to 325,750 (2.9% y/y), its highest level since April.

Continuing claims for unemployment insurance rose 25,000 after a downwardly revised 7,000 increase during the prior week. The continuing claims numbers lag the initial claims figures by one week.

The insured rate of unemployment increased to 2.0%.

The Fed's latest Beige Book covering regional economic activity is available here.