Initial claims for unemployment insurance shot higher last week to 406,000. The latest level compared to an upwardly revised 372,000 during the prior week. It reached a level not seen since this past March which was the highest point since mid-2005. The latest weekly surge surpassed Consensus expectations for a rise to 380,000 claims.

As a result of the latest weekly jump in initial claims the four-week moving average increased, but just modestly, to 382,500 (23.1% y/y). During June claims averaged 391,000.

A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.

Initial claims claims for jobless insurance in California are up 34.7% y/y. They also are up 46.0% in New York and by 55.1% in Ohio. In Massachusetts the gain in claims moderated to 10.7% and in Michigan the rise fell to 8.2% after the doubling this past May. In Pennsylvania claims fell 12.1% from last year.

Continuing claims for unemployment insurance during the latest week fell by 9,000 following a little-revised 87,000 worker decline during the prior week. The four-week moving average of continuing claims slipped slightly but remained near the cycle high of 3,142,750. That was roughly a quarter higher than a year ago and the highest level since early 2004.

Continuing claims provide some indication of workers' ability to find employment and they lag the initial claims figures by one week.

The insured rate of unemployment was unchanged at 2.3%.

The Congressional Budget Office's Cost Estimate of the Foreclosure Prevention Act of 2008 can be found here.