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Economy in Brief

Low U.S. Initial Claims for Jobless Insurance: Doubts About Hiring Slowdown
by Tom Moeller January 24, 2008

Initial claims for jobless insurance remained unexpectedly low last week. A 1,000 w/w decline followed sharp declines during the prior three weeks which now have totaled 15.7% since the high one month ago. The latest level was the lowest since September.

Initially, this drop in claims was doubted as genuine due to the difficulties of seasonal adjustment during the Holiday season. Those difficulties suggested that claims would bounce up last week. Indeed, a rise to 320,000 had been the Consensus expectation. No special factors were sighted by the Labor Department as having influenced last week's figure.

The four week moving average of initial claims, a measure which smoothes out most of the series' w/w volatility, fell sharply to 314,750 (+0.7% y/y). It was the lowest level since mid-October and may suggest that recent labor market weakening was not as great as earlier perceived. But in a wishy-washy spirit, the perception should not be wholly dismissed based on the new figures.

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.

Continuing claims for unemployment insurance dropped 75,000. It reversed a 59,000 increase during the prior week which was revised down slightly. The figure provides some indication of workers' ability to find employment but here again difficulties of seasonal adjustment this time of year are great.

The continuing claims numbers lag the initial claims figures by one week.

The insured rate of unemployment fell back to 2.0% from 2.1% during the prior week.

Monetary Policy Implementation Frameworks: A Comparative Analysis from the Federal Reserve Bank of New York is available here.

Unemployment Insurance (000s)  01/19/08 01/12/07 Y/Y 2006  2005 2004
Initial Claims  301 322 4.9% 313 331 343
Continuing Claims -- 2,751 11.3% 2,459 2,662 2,924
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